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Employee Benefits: Is It A New Era HRA, HSA and FSA Administration with a little Continuation of Coverage info thrown i

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Employee Benefits: Is It A New Era HRA, HSA and FSA Administration with a little Continuation of Coverage info thrown i

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    1. Employee Benefits: Is It A New Era? HRA, HSA and FSA Administration (with a little Continuation of Coverage info thrown in) Presented by: Trey Tompkins To: The Middle Georgia Association of Health Underwriters Thursday February 10, 2011 Macon, Georgia

    2. Employee Benefits: Is It A New Era?

    3. What’s New About It? PPACA ARRA and Georgia Continuation Medicare Secondary Payer Reporting The Extension of the Bush Tax Cuts DOL Enforcement Activity Under the Obama Administration

    4. PPACA Topics Section 125 Eligible Dependents FSA Eligible Expense Rules Health FSA Annual Limits Application of Section 105(h) Non-Discrimination Rules to Insured Plans Simple Cafeteria Plans HRA and HSA Outlook

    5. Section 125 Eligible Dependents Effective As of March 30, 2010 Coverage can be provided on a tax free basis for the employee’s child who is under the age of 27 as of the end of the taxable year (calendar year) Cafeteria Plan Documents may require amendments in order to allow this pre-tax treatment of premiums paid for coverage of these children Even if the child is not a tax dependent (no income or support limits apply)

    6. Section 125 Eligible Dependents This rule is different from the coverage mandate found in PPACA The coverage mandate is effective for Plan Years beginning on or after September 23, 2010 Coverage mandate only extends until 26th birthday Grandfathered plans are exempt from coverage mandate only for children who have other group coverage available through the child’s employer Extension to Health FSAs is made clear by IRS Notice 2010-38.Extension to Health FSAs is made clear by IRS Notice 2010-38.

    7. Health FSA Eligible Expense Rules Over-The-Counter Medications Reimbursement for Expenses of Children

    8. Over-The-Counter Medications Only medicines and drugs that are prescribed are reimbursable Effective January 1, 2011 Effect of New Rules on Debit Card Purchases Previously applicable limitations applicable to FSA reimbursements regarding medicines and drugs remain in effect

    9. New OTC Medication Rules Rule Only Applies To Medicines and Drugs – Not Other OTC Items A Medicine or Drug is Generally Something That a Person Eats, Drinks, or Rubs on Their Body (Trey’s Rule)

    10. Reimbursable OTC Items OTC Items That Are Not Medicines Or Drugs Bandages Contact Lens Cleaning Supplies Crutches Blood-Sugar Test Kits Reading Glasses Condoms

    11. Prescription Requirements A Written or Electronic Order That Satisfies the Legal Requirements For a Prescription in the State in Which the Expense is Incurred Must Be Issued by Someone Legally Authorized To Issue a Prescription In That State A General Recommendation From A Physician Is Not Sufficient

    12. Effective Date of New OTC Rules January 1, 2011 Effective Date of Rule Applies Regardless of FSA Plan Year Rule Applies Regardless of Plan’s Provisions For 2 ˝ Month (or Less) Grace Period OTC Expenses Incurred During 2010 But Not Claimed Until 2011 Can Be Reimbursed

    13. New OTC Rules and Their Effect on Debit Card Purchases The new OTC rules extend to FSA Debit Cards IRS provided 15 days of transitional grace at the beginning of 2011 for IIAS Systems The grace extension did not modify the general rule that OTC drugs are ineligible Beginning, January 16, IIAS Systems are required to decline all OTC drug purchases Cards are not required to reject OTC Drugs at qualifying pharmacies (90% of sales at location are for eligible items) but post transaction substantiation is required IRS Notice 2010-59IRS Notice 2010-59

    14. Other Limitations on FSA Reimbursements of OTC Drugs They Must Be Legally Procured Re-Importation Prohibited Medicinal Marijuana Prohibited Must Not Be A Toiletry or Cosmetic Toothpaste, Shaving Cream, Deodorant, Lotions Moisturizers, Lipsticks, Shampoos, Perfumes Mixed Use Cosmetic Items: Retin-A, Minoxidil Must Be Allowed Under Terms of the Plan Plans Can Exclude All OTC Drugs for Administrative Simplicity

    15. Extended Coverage For Non-Dependent Children the IRS has formally indicated that the exemption for health coverages provided to children under age 27 extends to FSAs This rule is not expressly found in PPACA or HCERA Plan Documents may require amendment in order for this benefit extension to be available The change does not apply to HSAs Extension to Health FSAs is made clear by IRS Notice 2010-38. Extension to Health FSAs is made clear by IRS Notice 2010-38.

    16. Health FSA Annual Limits $2,500 Annual Limit on Annual Salary Reduction Contributions to Health FSAs Effective January 1, 2013 (not a Plan Year rule) Indexed for Inflation (as measured by CPI-U)

    17. Section 105(h) Non-Discrimination Rules and Insured Plans The rules do not apply to grandfathered plans Section 105(h) prohibits discrimination in favor of Highly Compensated Individuals for self-insured medical plans Discrimination is prohibited with regards to eligibility and with regards to benefits

    18. Section 105(h) Penalties For self insured plans, the penalty is taxation of the benefits received by HCIs For fully insured plans, the employer is subject to a civil action to compel it to comply For each day it is out of compliance, the plan i is subject to a $100 penalty per individual discriminated against

    19. Section 105(h) Non-Discrimination Rules and Insured Plans Highly Compensated Individual are any employees that are: one of the five highest paid officers A shareholder who owns more than 10% of stock Among the highest paid 25% of all employees (other than excludable employees)

    20. Section 105(h) Eligibility Test In order to pass this test, the plan must benefit 70% of all employees, or 80% or more of all eligible employees if 70% are eligible to participate, or Employees belonging to a classification that is not considered discriminatory by the IRS

    21. Section 105(h) Eligibility Test Classifications that are not discriminatory if: The classification is reasonable (job categories, geography, nature of compensation), and Pass the objective Safe Harbor Percentage Test or a subjective Facts and Circumstances Test

    22. Section 105(h) Benefits Test In order to pass this test, the plan must Provide all of the same benefits to all non highly compensated participants as are provided to any highly compensated participant The required contribution for all participants must be the same Benefits can not vary based on age, years of service or compensation levels Disparate waiting periods are also prohibited

    23. Section 105(h) Non-Discrimination Rules and Insured Plans Enforcement of rule was indefinitely suspended by IRS and DOL pending issuance of formal regulations (12/22/2010) Most legal analysts do not expect regulations to be issued until 2012 and then not to be effective until 2013

    24. Executive Reimbursement Plans Executive Reimbursement Plans as they were marketed prior to PPACA appear to be dead Despite the enforcement delay Exec-U-Care (Lincoln Financial’s Product) is suspended indefinitely except for grandfathered plans Lincoln Financial is hoping to release a retooled program that is compliant with PPACA later this year Completely Gratuitous Disclaimer: Admin America is not affiliated with Lincoln Financial

    25. Simple Cafeteria Plans New kind of Cafeteria Plan for small employers that avoids most non-discrimination tests that have historically been problematic for those employers Available beginning January 1, 2011 Requires minimum employer contribution to all participants (except HCEs and Key Employees)

    26. Simple Cafeteria Plans Eligibility Available to employers with less than 100 employees Count includes affiliated entities No employees are excluded from count Count is based on average number of employees on business days in two prior years Employer can qualify by having less than 100 employees in either of the two prior years

    27. Simple Cafeteria Plans Eligibility Available to employers with less than 100 employees New employers base their counts on the average number of employees they reasonably expect to have on the business days during the current year Employers that were once eligible and grow remain eligible until the year after they average more than 200 employees

    28. Simple Cafeteria Plans Contributions Contributions can come in one of two types a uniform percentage (of at least 2% of the employee’s compensation for the plan year) an employer match that equals or exceeds the lesser of 6% of the employee’s compensation twice the employee’s salary reduction contributions The same method must be used for all participants If the first method is used, additional contributions can be made by employers (and this can be done in favor of HCEs)

    29. Simple Cafeteria Plans Eligibility Rules Employers can exclude certain types of employees from the plan Those with less than 1000 hours of service during the prior year Those under 21 years of age Those with less than one year of service Those covered under a collective bargaining agreement

    30. Simple Cafeteria Plans Benefits Employers utilizing Simple Cafeteria Plans are exempt from the following non-discrimination tests Section 105(h) tests for self funded plans 25% Key Employee Concentration Test Section 129 Dependent Care Benefit relate 55% average benefits test and 5% Owners Test Section 79 Group Term Life Insurance Tests

    31. ARRA and Georgia Continuation Topics Expiration of the Subsidy Georgia’s Changing Continuation Period Continuation for Individuals Over Age 60 Proposed State Legislation

    32. The End of the ARRA Subsidy ARRA’s 65 % COBRA premium subsidy was available to individuals who lost coverage due to involuntary termination of employment on or before May 31, 2010 The maximum length of the subsidy is 15 months Therefore, the subsidy should end for almost everyone no later than August 31, 2011

    33. The End of the ARRA Subsidy It is possible that terminations before May 31, 2010 that did not result in a loss of coverage until a later month could have coverage subsidized beyond August 31, 2011 Employers can claim the subsidy through their payroll tax returns (Form 941) as late as in their 4th Quarter 2011 filing (January 2012).

    34. Georgia’s Changing Continuation Period In the Spring of 2009, Georgia modified its continuation period to match the nine months of subsidy provided to involuntarily terminated employees by ARRA. When ARRA was extended to 15 months at the end of 2009, Georgia’s Continuation law automatically followed suit for subsidy eligible individuals

    35. Georgia’s Changing Continuation Period In June 2010, when eligibility for the Federal COBRA premium subsidy under ARRA expired, Georgia’s Continuation law reverted to its original three month period For almost everyone…

    36. Georgia Continuation for Individuals Over Age 60 Georgia law provides Continuation Coverage for individuals who lose coverage under the following circumstances after their 60th birthday until they are eligible for Medicare Coverage Involuntary Termination Not For Cause Retirement Due To Disability Death of an Employee (for the Surviving Spouse) Divorce from an Employee (for the ex-Spouse) Applicable Premium is 120% of Employer Cost

    37. Georgia Continuation for Individuals Over Age 60 In Cases Where the Employee Loses Coverage Due To Termination of Employment, the Employee Can Also Provide Coverage for His or Her Spouse The Spouse Does Not Have an Independent Right to Elect Continuation Coverage If The Employee Maintains Coverage This Apparently Applies Even If The Employee Loses Coverage Due to Medicare Eligibilty

    38. Proposed State Legislation House Bill 107 – Continuation for Dependents of State Employees Killed In The Line of Duty No set limit on continuation period For dependents covered at the date of death Sponsored by Speaker Ralston Passed the House unanimously on Monday (2/7/11)

    39. Medicare Secondary Payer Reporting Mandatory electronic quarterly reporting by health plans to CMS regarding coverages provided to individuals who might be eligible for Medicare Responsibility for filing is with the entity that adjudicates claims Penalty for non-compliance is $1,000 per day

    40. Medicare Secondary Payer Reporting Reporting requirement applies to health plans with 20 or more participants FSAs are exempt from reporting requirement HRAs are subject to reporting requirement CMS had deferred enforcement of reporting requirement several times Reporting is active for 2011 but further delays are possible – they reporting system is not working properly

    41. Bush Tax Cut Extension Topics ARRA’s Parity for Transit Related Benefit was extended for 2011 Employer Sponsored Transportation Fringe Benefit Plans Are Allowed To Provide Higher Benefit Levels for Mass Transit and Van Pooling Reimbursements ($230 per month) Parking Reimbursements are also capped at $230 per month (but were unaffected by the Bush Tax Cut Extension)

    42. Obama Administration Enforcement Topics Department of Labor Secretary Hilda Solis Organized Labor background Initial emphasis appears to be on wage and hour compliance ERISA Compliance Audits DOL is promising more enforcement Some audits are occuring where DOL is checking for compliance of SPDs of fully insured plans Issuing 10 Day Compliance Demands as Opposed to Fines for Non-Compliance

    43. Admin America Agent Resources Coming in March: the new and improved www.adminamerica.com Follow us on Facebook Our Pathways Quarterly Print Newsletter Toll Free: 1-800-366-2961 Johana Ramzanali

    44. Third Party Resource Recommendations www.nahu.org www.gahu.org www.ebia.com

    45. 2011 GAHU Annual Convention

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