What is Nondiscrimination Testing?
Nondiscrimination Testing is a series of tests that are required by the IRS to verify that the BESTflexSM Plan and EBC HRASM is not set up in favor of key employees or highly compensated employees.
The testing for the BESTflex Plan is generally completed at the end of the plan year. While we perform the testing for the BESTflex Plan, you must first provide us with the necessary information by completing a Nondiscrimination Census Worksheet. Each year, Employee Benefits Corporation will send an email requesting this information to the primary contact on the account.
Unlike the nondiscrimination testing for the BESTflex Plan, you are responsible for completing the testing for the EBC HRA, unless you contract with us for this service for an additional fee. Employee Benefits Corporation provides the worksheet and a workbook on your “Forms & Reports” page for you to complete the nondiscrimination testing each plan year.
What are the Centers for Medicare & Medicaid Services (CMS) requirements for the EBC HRA?
Medicare is federally administered health coverage primarily for the elderly (age 65 and older); however, Medicare is also available for totally disabled individuals or for individuals with end-stage renal disease (ESRD). In an effort to manage Medicare expenses, the government has established rules for when Medicare is primary and when it is secondary payment of health claims. Employee Benefits Corporation must provide CMS with a report on all individuals covered by the EBC HRA that fall into any of the categories where Medicare would be secondary.
Employers must report the size of the company as part of the CMS Medicare Reporting process. To determine the number of employees correctly, first the employer must determine if they are a single employer, an employer that is part of a controlled group or an employer that participates in a multi-employer health plan.
For single employers, count all employees including full-time and part-time employees.
If the employer is part of a multi-employer/multiple employer health plan, the number is based on the largest employer in the multi-employer health plan. Count full-time and part-time employees.
If the employer is part of a controlled group, count all employees of all the employers, not just the subsidiary that is being reported. If the controlled group has foreign subsidiaries, count the foreign subsidiaries also. Count all full-time and part-time employees.
If the employer’s size changes, it is the employer’s responsibility to notify Employee Benefits Corporation. Changes causing an employer to drop below or go above 20 employees and changes below or above 100 employees will cause a reporting change.
Inactive individuals should not be reported. This includes those who are receiving coverage but are not employed such as retirees or COBRA participants.
Employee Benefits Corporation submits the required data on your behalf to CMS. The necessary participant information is collected during the enrollment process.
Under what conditions may a participant make a change to their BESTflex Plan election?
The regulations support allowing mid-year election changes under very specific situations that are defined by the IRS. These are referred to as the Permitted Election Change Rules. Employee Benefits Corporation refers to them as Qualifying Events.
Employers are not required by regulation to allow mid-year election changes. However, the regulations do allow the employer’s plan to provide exceptions to the irrevocability rule and allow mid-year changes that comply with the permitted election change events. The 14 permitted election change events (Qualifying Events) that allow a mid-year election change are:
Change in Status events, cost changes with automatic increases/decreases in elective contributions, significant cost changes, significant coverage curtailment (with or without loss of coverage), addition or significant improvement of a benefit package option, changes under other employer’s plan, loss of health coverage under a governmental or education institution, 401(k) election changes, HIPAA special enrollment rights, COBRA events, judgments, decrees and court orders, Medicare of Medicaid entitlement, FMLA leaves of absence, and Pre-tax HSA contributions. Changes to elections must be made prior to, or no later than 30 days after the event.