All posts tagged FSAs

Entities such as employers with group health plans that provide prescription drug coverage to individuals that are eligible for Medicare Part D have two major disclosure requirements that they must meet at least annually:

  • Provide annual written notice to all Medicare eligible individuals (employees, spouses, dependents, retirees, COBRA participants, etc.) who are covered under the prescription drug plan.
  • Disclose to the Centers for Medicare and Medicaid Services (CMS) whether the coverage is “creditable prescription drug coverage.”

Because there is often ambiguity regarding who in a covered population is Medicare eligible, it is best practice for employers to provide the notice to all plan participants.

CMS provides guidance for disclosure of creditable coverage for both individuals and employers.

Who Must Disclose?

These disclosure requirements apply regardless of whether the plan is large or small, is self-funded or fully insured, or whether the group health plan pays primary or secondary to Medicare. Entities that provide prescription drug coverage through a group health plan must provide the disclosures. Group health plans include:

  • Group health plans under ERISA, including health reimbursement arrangements (HRAs), dental and vision plans, certain cancer policies, and employee assistance plans (EAPs) if they provide medical care
  • Group health plans sponsored for employees or retirees by a multiple employer welfare arrangement (MEWA)
  • Qualified prescription drug plans

Health flexible spending accounts (FSAs), Archer medical savings accounts, and health savings accounts (HSAs) do not have disclosure requirements. In contrast, the high deductible health plan (HDHP) offered in conjunction with the HSA would have disclosure requirements.

There are no exceptions for church plans or government plans.

By Danielle Capilla
Originally published by www.ubabenefits.com

Question: If an employee has a small health flexible spending account (FSA) balance with a carryover to the next year, and the employee chooses not to participate in the new FSA year, can the employer force the employee to use those funds so as not to incur additional administrative fees in the next plan year?

Answer: An employer can prevent “perpetual carryovers” by carefully drafting the cafeteria plan document with respect to carryover amounts. IRS guidance allows carryovers to be limited to individuals who have elected to participate in the health FSA in the next plan year. Health FSAs may also require that carryover amounts be forfeited if not used within a specified period of time, such as one year. Note that this plan design requires additional administration (to track the time limit for each carryover dollar, for instance) as well as ordering rules (e.g., will carryovers be used first?), so you will need to carefully review the cafeteria plan document. Under no circumstances are amounts returned to participants.

According to IRS guidance, a health FSA may limit the availability of the carryover of unused amounts (subject to the $500 limit) to individuals who have elected to participate in the health FSA in the next year, even if the ability to participate in that next year requires a minimum salary reduction election to the health FSA for that next year. For example, an employer sponsors a cafeteria plan offering a health FSA that permits up to $500 of unused health FSA amounts to be carried over to the next year in compliance with Notice 2013-71, but only if the employee participates in the health FSA during that next year. To participate in the health FSA, an employee must contribute a minimum of $60 ($5 per calendar month). As of December 31, 2016, Employee A and Employee B each have $25 remaining in their health FSA. Employee A elects to participate in the health FSA for 2017, making a $600 salary reduction election. Employee B elects not to participate in the health FSA for 2017. Employee A has $25 carried over to the health FSA for 2017, resulting in $625 available in the health FSA. Employee B forfeits the $25 as of December 31, 2016 and has no funds available in the health FSA thereafter. This arrangement is a permissible health FSA carryover feature under Notice 2013171. The IRS also clarifies that a health FSA may limit the ability to carry over unused amounts to a maximum period (subject to the $500 limit). For example, a health FSA can limit the ability to carry over unused amounts to one year. Thus, if an individual carried over $30 and did not elect any additional amounts for the next year, the health FSA may require forfeiture of any amount remaining at the end of that next year.

Originally published by www.thinkhr.com