All posts tagged HRA

2018 Amounts for HSAs; Retroactive Medicare Coverage Effect on Contributions | Ohio Benefit Advisors

Categories: Benefits, Blog, Employee Communication, Employees, HRA, HSA, UBA News
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IRS Releases 2018 Amounts for HSAs

The IRS released Revenue Procedure 2017-37 that sets the dollar limits for health savings accounts (HSAs) and high-deductible health plans (HDHPs) for 2018.

For calendar year 2018, the annual contribution limit for an individual with self-only coverage under an HDHP is $3,450, and the annual contribution limit for an individual with family coverage under an HDHP is $6,900. How much should an employer contribute to an HSA? Read our latest news release for information on modest contribution strategies that are still driving enrollment in HSA and HRA plans.

For calendar year 2018, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage.

Retroactive Medicare Coverage Effect on HSA Contributions

The Internal Revenue Service (IRS) recently released a letter regarding retroactive Medicare coverage and health savings account (HSA) contributions.

As background, Medicare Part A coverage begins the month an individual turns age 65, provided the individual files an application for Medicare Part A (or for Social Security or Railroad Retirement Board benefits) within six months of the month in which the individual turns age 65. If the individual files an application more than six months after turning age 65, Medicare Part A coverage will be retroactive for six months.

Individuals who delayed applying for Medicare and were later covered by Medicare retroactively to the month they turned 65 (or six months, if later) cannot make contributions to the HSA for the period of retroactive coverage. There are no exceptions to this rule.

However, if they contributed to an HSA during the months that were retroactively covered by Medicare and, as a result, had contributions in excess of the annual limitation, they may withdraw the excess contributions (and any net income attributable to the excess contribution) from the HSA.

They can make the withdrawal without penalty if they do so by the due date for the return (with extensions). Further, an individual generally may withdraw amounts from an HSA after reaching Medicare eligibility age without penalty. (However, the individual must include both types of withdrawals in income for federal tax purposes to the extent the amounts were previously excluded from taxable income.)

If an excess contribution is not withdrawn by the due date of the federal tax return for the taxable year, it is subject to an excise tax under the Internal Revenue Code. This tax is intended to recapture the benefits of any tax-free earning on the excess contribution.

By Danielle Capilla
Originally Posted By www.ubabenefits.com

Qualified Small Employer Health Reimbursement Arrangements and ERISA | Ohio Benefit Advisors

Categories: Benefits, Blog, ERISA, HRA, Small Employer
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Certain small employers have the option to reimburse individual health coverage premiums up to a dollar limit through Qualified Small Employer Health Reimbursement Arrangements (QSE HRAs) under the 21st Century Cures Act (Cures Act).

The Cures Act amends the Employee Retirement Income Security Act of 1974 (ERISA) to exclude QSE HRAs from the ERISA definition of group health plan; however, the Cures Act does not specifically exclude QSE HRAs from the rest of ERISA.

Small employers that plan to offer QSE HRAs should be cautious before presuming that ERISA would not apply to a reimbursement arrangement. Because QSE HRAs are new, the issue of whether the remainder of ERISA applies to QSE HRAs remains undetermined by an administrative agency or court. In consideration of the limited ERISA group health definition exclusion and the law’s legislative history, a risk-averse small employer should treat a QSE HRA as an employee welfare benefit plan covered under ERISA and comply with applicable ERISA requirements such as having a written plan document and summary plan description as well as following ERISA’s fiduciary and other rules.

Request UBA’s Compliance Advisor, “Qualified Small Employer Health Reimbursement Arrangements and ERISA for a discussion of ERISA’s definitions of “group health plan,” as well as the law’s legislative history governing exclusions. A small employer who intends to offer a QSE HRA without complying with ERISA’s employee welfare benefit plan requirements should consult with its attorney before proceeding.

By Danielle Capilla
Originally Posted By www.ubabenefits.com

In a world of insurance and acronyms, the term “HRA” is thrown around a lot, but it has a variety of meanings.

HRA can mean health reimbursement account, heath reimbursement arrangement, or health risk assessment, and all of those mean something different. I want to be clear that in the following article I am going to be discussing the use of health reimbursement accounts with fully-insured health plans. We can leave the other meanings of HRA for another time.

An HRA can be “wrapped” with a high-deductible, fully-insured health plan and this can lead to savings for an employer over offering a traditional health plan with a lower deductible.

Offering a high-deductible health plan and self-funding, the first $2,000, or $3,000, in claims on behalf of the employees can translate to significant savings because the employer is taking on that initial risk instead of the insurance carrier. Unlike a consumer-driven health plan (CDHP) that has a high deductible and can be paired with a health savings account (HSA) where an employer can contribute funds to an employee’s HSA account that can be used to pay for qualified medical expenses, an employer only has to pay out of the HRA if there is a claim.

With an HSA that is funded by the employer, the money goes into the HSA for their employees and then those funds are “owned” by the employee. The employer never sees it again. Under an HRA, if there are no claims, or not a high number of claims, the employer keeps those unused dollars in their pocket.

An HRA component to a health plan is subject to ERISA and non-discrimination rules, meaning everyone that is eligible should be offered the plan, and the benefits under the HRA should be the same for everyone enrolled. It is advisable that an HRA be administered by a third-party that pays the claims to the providers, or reimburse plan enrollees under the terms of the plan, in order to keep employees’ and their dependents’ medical information private from the employer as to avoid potential discrimination.

The HRA component of a health plan is essentially self-funded by the employer, which gives the employer a lot of flexibility and can be tailored to their specific needs or desired outcomes. The employer can choose to fund claims after the employee pays the first few hundred dollars of their deductible instead of the employer paying the claims that are initially subject to the high deductible. An employer can have a step arrangement, for example, the employer pays the first $500, the employee the second $500, the employer pays the next $500, and the employee pays the final $500 of a $2,000 deductible.

If an employer has a young population that is healthy, they may want to use the HRA to pay for emergency room visits and hospital in-patient stays, but not office visits so they can help protect their employees from having to pay those “large ticket items,” but not blow their budget. While an employer with a more seasoned staff, or diverse population, may want to include prescription drugs as a covered benefit under the HRA, as well as office visits, hospital in-patient stays, outpatient surgery, etc. Or, if an employer needs to look at cost-saving measures, they may want to exclude prescriptions from being eligible under the HRA.

Keep in mind, all of these services are essential health benefits and would be covered by the insurance carrier under the terms of the contract, but an employer can choose not to allow the HRA to be used to pay for such services, leaving the enrollee to pay their portion of the claims. In any case, the parameters of what is eligible for reimbursement from the HRA is decided and outlined at the beginning of the plan year and cannot be changed prior to the end of the plan year.

If you are thinking about implementing a high-deductible health plan with an HRA for your employees, be sure you are doing it as a long-term strategy. As is the case with self-funding, you are going to have good years and bad years. On average, a company will experience a bad, or high claims, year out of every four to five years. So, if you implement your new plan and you have a bad year on the first go-round, don’t give up. Chances are the next year will be better, and you will see savings over your traditional low-deductible plan options.

With an HRA, you cap the amount you are going to potentially spend for each enrollee, per year. So, you know your worst-case scenario. While it is extremely unlikely that every one of your employees will use the entire amount allotted to them, it is recommended that you can absorb or handle the worst case scenario. Don’t bite off more than you can chew!

HRA administrators usually charge a monthly rate per enrollee for their services, and this should be accounted for in the budgeting process. Different HRA third-party administrators have different claims processes, online platforms, debit cards, and business hours. Be sure to use one that offers the services that you want and are on budget.

Another aspect of offering a high-deductible plan with an HRA that is often overlooked is communication. If an employee does not know how to utilize their plan, it can create confusion and anger, which can hurt the overall company morale. The plan has to be laid out and explained in a way that is clear, concise, and easy to understand.

In some cases, the HRA is administered by someone other than the insurance carrier, and the plan administrator has to make sure they enroll all plan enrollees with the carrier and the third-party administrator.

The COBRA administrator also has to offer the HRA as part of the COBRA package, and the third-party administrator must communicate the appropriate premium for the HRA under COBRA. Most COBRA enrollees will not choose to enroll in the HRA with their medical plan, as they are essentially self-funding their deductible and plan costs through the HRA instead of paying them out of their pocket, but many plan administrators make the mistake of not offering the HRA under COBRA, as it is mandated by law.

Offering a high-deductible plan with an HRA is a way for small employers to save over offering a low-deductible health plan, and can be a way for an employer to “test the waters” to see if they may want to move to a self-funded plan, or level-funded plan, in the future.

By Elizabeth Kay
Originally Posted By www.ubabenefits.com

Employers Ask: What Prevents Me from Reimbursing Individual Health Insurance Policies? | Ohio Employee Benefits

Categories: ACA, General News, Health Care Reform, Health Insurance, HRA, IRS, Team K Blog
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0511In serving 36,000 employers and 5 million employees, our UBA Partners get this question frequently: What federal guidance prohibits employers from reimbursing individual health insurance policies?

Answer: The IRS has issued extensive guidance prohibiting employers from reimbursing health insurance policies on an individual basis. It issued two notices in 2015 that addressed this issue.

In February 2015, the IRS provided greater detail on the issue when it issued Notice 2015-17, which addresses employer payment or reimbursement of individual premiums in light of the requirements of the Affordable Care Act (ACA). For many years, employers were permitted to reimburse premiums paid for individual coverage on a tax-favored basis, and many smaller employers adopted this type of an arrangement instead of sponsoring a group health plan. However, these “employer payment plans” frequently are unable to meet all of the ACA requirements that took effect in 2014, and in a series of Notices and frequently asked questions (FAQs) the IRS has made it clear that an employer may not either directly pay premiums for individual policies or reimburse employees for individual premiums on either an after-tax or pre-tax basis. This is the case whether payment or reimbursement is done through a health reimbursement arrangement (HRA), a Section 125 plan, a Section 105 plan, or another mechanism.

The notice reiterates this position. It also clearly states that an employer may increase an employee’s taxable wages to help cover the cost of health coverage if it chooses not to offer coverage, but the employer may not require an employee to purchase health insurance or certify that he or she has coverage in order to receive the bonus or other wage increase. If the bonus or increase is specifically designated as a premium reimbursement or if it must be used for premiums, this would be an impermissible employer payment plan.

Under these rules, if the employer reimburses or directly pays premiums for individual coverage, on either a pre-tax or after-tax basis, it has created a noncompliant group health plan and the $100 per day per employee penalty would apply. Reimbursement and payment of group health premiums is still allowed.

Most recently, in December 2015, in Notice 2015-87, the IRS restated that employer arrangements that reimburse the cost of individual market coverage under a cafeteria plan will not be integrated with the individual market coverage and that these arrangements will be unable to comply with the ACA’s annual dollar limit prohibitions or the preventive service requirements and will fail to satisfy market reforms. Practically speaking, these arrangements are prohibited regardless of how they are structured.

In addition to penalties for non-compliance with employer shared responsibility rules, the ACA has introduced a multitude of new fees that employers must pay. These dollar amounts change annually, as does the percentage amount used to calculate affordability in relation to the ACA. Download UBA’s “Reference Chart on ACA Fees and Penalties” for information on the applicable 2015 and 2016 percentages and dollar amounts to help employers understand the indexed penalty and updated fee amounts.

Originally published by United Benefit Advisors – Read More

PCORI Fee Due July 31, 2013 For Plan Years Ending October 1, 2012 – December 31, 2012

Categories: Compliance News, Health Care Reform, Team K Blog
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By July 31, 2013, most issuers of health insurance policies and plan sponsors of self-insured health plans must pay a fee of $1 per covered life as a result of new provisions in PPACA Read more