Important Information Regarding the PPACA Summary of Benefits and Coverage Requirement

August 14th, 2012 | No Comments |
Category: CDHC, Cafeteria Plans, Compliance and Regulatory, DOL, ERISA, FSA, Flexible Spending, HRA, HSA, Health Care Reform, Health Reimbursement, IRS, PPACA, Uncategorized

Group health plans, which include HRAs, MERPs, and non-excepted FSAs, must provide a Summary of Benefits and Coverage (SBC) for all eligible plans to all eligible individuals, participants and beneficiaries.

When must the SBC be provided?

During initial enrollment with any written enrollment materials or, if no written enrollment materials, then the first day the individual is eligible to enroll;
During open enrollment for the coverage option in which a participant is currently enrolled;
Upon request, within 7 days; and
At least 60 days prior to a mid-year benefit change
How must the SBC be provided?

In written or electronic form
What is the penalty for noncompliance?

Up to $1,000 per failure
An excise tax of $100 per day per failure
The SBC requirement goes in effect for plans re-enrolling after September 23, 2012.

American Benefits is currently reviewing the requirements to determine if some or all of the required content can be pulled from the plan details, what the best delivery methods are, and if this requirement can be incorporated into the DataPath system. We are currently awaiting further guidance before we can fully determine if and how we could systemize the production of this document.

ECFC is requesting relief from the Department of Labor for HRA and MERP reporting by a delay or a modification of the SBC. We will keep you informed.

For more information, see the DOL site: http://webapps.dol.gov/FederalRegister/HtmlDisplay.aspx?DocId=25818&AgencyId=8&DocumentType=2

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IRS Releases Guidance Concerning the 2013 FSA Contribution Limit

May 30th, 2012 | No Comments |
Category: CDHC, Cafeteria Plans, Compliance and Regulatory, FSA, Flexible Spending, Health Care Reform, IRS, PPACA, Section 125 Plans, Taxes, Uncategorized

The IRS has released Notice 2012-40 which provides guidance on the effective date of the $2,500 contribution limit to health flexible spending arrangements (FSAs) under IRS Code Section 125(i) and on the deadline for amending plans to comply with the limit. The notice also provides relief for contributions that mistakenly exceed the $2,500 limit provided they are corrected in a timely manner.

Specifically, Notice 2012-40 states:

the $2,500 limit does not apply to plan years that begin before 2013;

in the case of a short plan year, the $2,500 limit must be prorated based on the number of months in the short plan year;

the term “taxable year” in Section 125(i) refers to the plan year of the cafeteria plan;

the $2,500 limit is applied on an employee by employee basis and is applied separately for each unrelated employer that an individual may be working for during the year;

plans may adopt the required amendments for each unrelated employer that an individual may be working for during the year;

plans may adopt the required amendments to reflect the $2,500 limit at any time through the end of the calendar year 2014;

in the case of a plan with a grace period, unused salary reduction contributions to the FSA for plan years beginning in 2012 or later that are carried into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year; and

relief is provided for certain salary reduction contributions exceeding the $2,500 limit that are due to a reasonable mistake and not willful neglect and that are corrected by the employer.

The IRS is also calling for comments related to the use of the use-it-or-lose-it rule. All of this is great news for administrators of FSAs. We will keep you apprised of any further information as it becomes available.

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Summary of Benefit Coverage Requirements for Health FSAs and HRAs

May 1st, 2012 | 5 Comments |
Category: Compliance and Regulatory, DOL, ERISA, FSA, Flexible Spending, HHS, HIPAA, HRA, Health Reimbursement, IRS, PPACA, Section 125 Plans, Uncategorized

Does an employer have to provide a copy of the Summary of Benefits and Coverage (“SBC”) to enrollees of Health Flexible Spending Accounts (“Health FSA”) or Health Reimbursement Arrangements (“HRA”)?

The SBC requirement applies to group health plans (both insured and self-insured) and insurers (as defined by applicable provisions of the PHSA, ERISA, or the Code) but not to certain “excepted benefits,” PHSA § 2715(a), as added by PPACA, Pub. L. No. 111-148 (2010). Grandfathered group health plans must comply with this mandate, as provided in PPACA, Pub. L. No. 111-148, § 1251(a)(3) (2010), as amended by PPACA, Pub. L. No. 111-148, § 10103(d)(1) (2010).

When is a Health FSA or a HRA considered an excepted benefit?

Health FSA:
A health FSA is considered an excepted benefit for a “class of participants” if the health FSA is a health FSA under Code Section 106(c)(2) and satisfies two conditions:
*Maximum Benefit Condition: The maximum benefit payable under the health FSA to any participant in the class for a year cannot exceed two times the employee’s salary reduction election under the health FSA for the year (or, if greater, the amount of the employee’s salary reduction election for the health FSA for the year, plus $500), as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(B);DOL Regulations Section 2590.732(c)(3)(v)(B);HHS Regulations Section 146.145(c)(3)(v)(B); and

*Availability Condition: Other nonexcepted group health plan coverage (e.g., major medical coverage) must be made available for the year to the class of participants by reason of their employment, as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(A);DOL Regulations Section §2590.732(c)(3)(v)(A); HHS Regulations Section146.145(c)(3)(v)(A).

Neither the regulations nor the preamble to the regulations explains what is meant by the term “class of participants.” The term appears to preclude a “participant-by-participant” approach to determining whether benefits under a health FSA are excepted benefits.

Examples of Health FSA Funding That Meet the Maximum Benefit Condition:

* A one-for-one employer match (employer $600, employee $600).
* An employer contribution of $500 or less (employer $500, employee $200).
Examples of Health FSA Funding That Do Not Meet the Maximum Benefit Condition:
* An employer contribution of more than $500, if employee contributes $500 or less (employer $600, employee $400).
* An employer contribution in excess of one-to-one match, if employee contributes more than $500 (employer contributes $700, employee contributes $600).

Remember: Health FSAs funded exclusively by employee salary reduction contributions (with annual coverage capped by the amount of the annual salary reduction election) will, by definition, satisfy the Maximum Benefit Condition.

HRA:

A 100% employer-paid stand-alone HRA with an annual limit less than or equal to $500 and no carryovers will be considered an excepted benefit if the employer makes major medical insurance available to all employees who are eligible for the HRA. This is the same requirements as provided above for Health FSAs. This is because such an HRA may be considered a health FSA and would qualify as an excepted benefit. Likewise, a retiree-only HRA or limited-purpose HRA (i.e., that provides only vision and dental benefits) would also be considered an excepted benefit .

The above HIPAA exceptions will not apply to most HRAs. HRAs that can be used for medical expenses generally and that permit carryovers or that provide an employer-funded benefit of more than $500 will not be considered excepted benefits.

American Benefits can create SBCs for non excepted FSAs and HRAs. Contact your benefits administrator or support@amben.com

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Are You Really Saving Money By Self Administering Your HRA?

February 23rd, 2012 | No Comments |
Category: CDHC, COBRA, Cafeteria Plans, Compliance and Regulatory, FSA, Flexible Spending, HIPAA, HRA, Health Care Reform, Health Reimbursement, Medicare, Taxes, Uncategorized
 
Posted by RENEE KUHS, Compliance Attorney

Do you think you’re saving money by administering your health reimbursement arrangement (HRA)?  In our experience, many employers that self-administer an HRA often overlook important compliance obligations that put them at financial risk.  Failure to comply with the following requirements is common and can be costly. 

 COBRA

 An HRA is a group health plan subject to COBRA.  Employees that experience a qualifying event are entitled to continue coverage under the employer’s HRA.  An employer that fails to extend COBRA coverage to HRA participants can be subject to substantial fines.  Employers can be fined up to $110 per day for failure to provide an initial notice or election notice.

 HIPAA Privacy

 An HRA is a self-funded health plan and governed by the HIPAA Privacy Rules.  Employers that offer a fully-insured health plan and sponsor an HRA often overlook their HIPAA Privacy obligations.  In order to administer an HRA, the entity processing the claims receives protected health information (PHI) which is protected by HIPAA.  Employers that offer a fully-insured health plan will rely on the insurance carrier to comply with the HIPAA Privacy Rules.  However, the HRA compliance obligations rest with the employer.  Employers that do not comply can be subject to civil penalties of up to $100 per violation.

 Medicare Reporting

 An HRA is a group health plan subject to Medicare Secondary Payer (MSP) provisions.  New reporting requirements went into effect in the fourth quarter of 2010.  Employers are required to provide HRA coverage information to the Centers for Medicare and Medicaid Services (CMS).  The information reported to CMS will allow better coordination of payer responsibilities between the group health plan and Medicare.  Failure to comply could result in fines of up to $1,000 per day.

 Plan Documents

 An HRA is an employee welfare plan under ERISA.  ERISA requires that every warfare plan be established and maintained pursuant to a written instrument.  The written instrument or plan document serves to define what expenses are eligible for reimbursement, the amount of employer contribution, and whether the funds may be rolled over from year to year.  Not only could an enforcement action be brought against an employer for failure to have a plan document, but it is difficult for the employer to prove plan terms and enforce its provisions.

If you are administering an HRA for your employees and are concerned about your compliance status, please feel free to contact support@amben.com  or rcummings@amben.com

 

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