Compliance Buzz

Transportation Plans

Fri, 11 May 2012 21:28:00 GMT

Qualified transportation fringe benefit plans allow employers to provide employees with qualified parking, transit passes, vanpooling and bicycle commuter benefits on a tax-free basis.

All benefits provided to an employee by his or her employer result in taxable income to the employee unless the Internal Revenue Code (Code) specifically excludes the benefit from taxation. Under Code §132, employers are permitted to give the following transportation fringe benefits to employees on a tax-free basis:

qualified parking;
transit passes;
vanpooling; and
qualified bicycle commuting reimbursement.

Qualified parking is parking provided to an employee near the business of the employer or at a location from which the employee commutes to work. Parking is “provided to an employee” if the employer pays for or provides the parking on premises that it owns or leases. The statutory limit for parking expenses is $240 per month for 2012, subject to cost-of-living adjustments for future years.

A transit pass is a token, farecard, voucher or similar item that entitles a person to transportation on mass-transit (bus, ferry, rail, subway, etc.). The statutory limit for transit pass and vanpooling expenses combined is $125 per month for 2012, subject to cost-of-living adjustments for future years.

Vanpooling is transportation between an employee’s residence and place of employment in a “commuter highway vehicle.” A commuter highway vehicle is a highway vehicle with a seating capacity of 6 or more adults (not including the driver) where at least 80% of the mileage use for a year comes from transporting employees between residences and places of employment and on trips where the seating capacity is half full. The statutory limit for transit pass and vanpooling expenses combined is $125 per month for 2012, subject to cost-of-living adjustments for future years.

A qualified bicycle commuting reimbursement is any employer reimbursement that is for reasonable expenses incurred for the purchase, improvement, repair or storage of a bicycle that is regularly used for commuting between the employee’s residence and place of employment. Unlike other qualified transportation fringe benefits, the limit for bicycle benefits is calculated on an annual, calendar-year basis. The annual limit is determined by multiplying $20 times the number of qualified bicycle commuting months the employee has during the calendar year.

Finally, qualified transportation fringe benefits cannot be offered through a Code §125 cafeteria plan. Thus, the transportation benefit is offered as a stand-alone benefit.

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Tags: Transportation Benefits

Category: Benefits in General

IRS Releases 2013 HSA and HDHP Limits

Tue, 01 May 2012 15:55:00 GMT

On April 27, 2012, the IRS announced the 2013 inflation adjusted annual contribution limits for Health Savings Accounts (HSA) and the deductible amounts and out-of-pocket limits for the high deductible health plans (HDHP) to which HSAs are linked.

A quick refresher. An HSA is a portable, tax favored medical reimbursement account (at a bank or other financial institution) funded by the employee and/or employer, but owned and controlled by the employee. HSAs are governed by Internal Revenue Code § 223.

To be eligible to contribute to an HSA, the individual must not be another individual’s tax dependent, must not be enrolled in Medicare, must have current coverage under a HDHP, and must not be covered by any other health plan that provides coverage for a benefit prior to satisfying the regulatory minimum annual HDHP deductible unless it is permitted coverage. Permitted coverage includes coverage provided for preventative care, dental or vision services (whether through an insurance plan or not) or coverage provided through specified disease insurance (e.g., a cancer care policy), accident or disability insurance, workers’ compensation, liability insurance, or automobile insurance.

The limits are as follows:

Individual Coverage

· Maximum annual HSA contribution (employer and employee): 2012: $3,100 / 2013: $3,250

· Minimum annual HDHP deductible: 2012: $1,200 / 2013: $1,250

· Maximum annual HDHP out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums): 2012: $6,050 / 2013: $6,250

Family Coverage

· Maximum annual HSA contribution (employer and employee): 2012: $6,250 / 2013: $6,450

· Minimum annual HDHP deductible: 2012: $2,400 / 2013: $2,500

· Maximum annual HDHP out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums): 2012: $12,100 / 2013: $12,500

Catch-up Contributions

Individuals age 55 and older who participate in a HDHP and make contributions to an HSA are allowed to make additional contributions above the limit. Catch up contributions are not indexed for inflation and thus remain at $1,000 for 2013. This amount will change only if the statute is amended.

Access the IRS guidance here: http://www.irs.gov/pub/irs-drop/rp-12-26.pdf

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Tags: HSA

Category: Benefits in General

Patient-Centered Outcomes Research Fee

Thu, 26 Apr 2012 16:19:00 GMT

This month the IRS released proposed regulations implementing health care reform’s requirement that issuers of certain health insurance policies and plan sponsors of certain self-insured group health plans pay excise taxes (i.e., a Patient-Centered Outcomes Research (PCOR) fee, sometimes referred to as the Comparative Effectiveness Research (CER) fee) to fund the Patient-Centered Outcomes Research Institute.

Background

Health care reform contains numerous provisions that promote research to evaluate and compare health outcomes and the clinical effectiveness, risks, and benefits of medical treatments, services, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury. One of these provisions establishes a private, nonprofit corporation, the Patient-Centered Outcomes Research Institute that will conduct such research. The Institute will focus on advancing the quality and relevance of evidence-based medicine via comparative clinical effectiveness research findings. The Institute’s work will be supported by the PCOR fee.

Who

Who pays the fee depends on how the underlying health plan is funded. The insurer pays the fee for insured group health plans and individual health insurance policies. The plan sponsor (i.e., generally the employer) pays the fee for self-insured group health plans.

What

The PCOR fee applies to medical plans that are not “excepted benefits.” An excepted benefit is a benefit that is not required to comply with most of the HIPAA portability requirements or health care reform mandates.

The following plans are subject to the PCOR fee:

· Medical plans

· Prescription drug plans

· Self-insured dental or vision plans, if provided without a separate election or premium charge

· Health Reimbursement Arrangements (HRAs)

· A few health Flexible Spending Accounts (FSAs)

· Retiree-only health plans of the types listed above

· Health plans of the types listed above provided by governmental employers for their employees

The following plans are exempt from the PCOR fee:

· Separately insured dental or vision plans

· Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions

· Expatriate coverage primarily for employees who work and reside outside of the U.S.

· Health Savings Accounts (HSAs)

· Most FSAs

· Employee Assistance Programs, wellness programs, and disease management programs that do not provide “significant benefits in the nature of medical care or treatment”

A note on FSAs. An FSA is an excepted benefit and the PCOR fee will not apply if (1) the maximum reimbursement available for the plan year does not exceed the greater of (a) two times the employee’s annual election or, if greater, (b) the employee’s annual election plus $500, and (2) the employee is eligible for other group major medical coverage maintained by the employer.

When

Insurers and plan sponsors will have to pay the fee for seven years – the PCOR fee applies to plan years ending after October 1, 2012 and before October 1, 2019.

How

Insurers and plan sponsors must use IRS Form 720 to report the fee and must pay the fee annually by July 31 for all plan years ending in the preceding calendar year.

For the first year the fee is one dollar times the average number of covered individuals under the policy or plan. The fee will then adjust to two dollars and is subject to increases based on changes in per capita National Health Expenditures as reported by Treasury.

There are four ways to determine the “average number of covered individuals.” Insurers and plan sponsors must pick one method for all coverage reported for a plan year, but can change the method for future plan years. Insurers cannot use the Form 5500 method.

The methods are as follows:

1. Actual count method – count the number of covered individuals on each day of the plan year and divide by the number of days in that year.

2. Snapshot count method

a. count the number of covered individuals on one day in each quarter of the plan year and divide by four; or

b. count the number of individuals enrolled in single coverage on one day in each quarter of the plan year, add to the actual number of individuals enrolled in coverage that includes at least one family member and multiply by 2.35. Divide the total by four.

3. Form 5500 method – if the plan offers family coverage, add the number of participants at the beginning of the year and the end of the year. If the plan does not offer family coverage, divide the total by 2.

A note on FSAs and HRAs subject to the PCOR fee. Enrollment in either type of plan is always considered single coverage even though the plans reimburse medical expenses incurred by family members.

The proposed regulations are available here: http://www.gpo.gov/fdsys/pkg/FR-2012-04-17/pdf/2012-9173.pdf

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Tags: PCOR Fee

Category: Health Care Reform

HIPAA Update

Thu, 19 Apr 2012 15:51:00 GMT

Final HIPAA/HITECH rules are in sight! Last month, the rules reached the White House Office of Management and Budget (OMB), the final stop in the federal internal review process.

The rules will modify HIPAA Privacy, Security, Enforcement, and Breach Notification Rules as necessary to implement the privacy, security, enforcement, and breach notification provisions of the Health Information Technology for Economic and Clinical Health Act (HITECH), and will modify the HIPAA Privacy Rule as required by the Genetic Information Nondiscrimination Act of 2008 (GINA).

Generally, HITECH requires that covered entities under HIPAA notify affected individuals of a breach of unsecured protected health information, as well as the Secretary of the Department of Health and Human Services (HHS) and the media if a breach affects more than 500 individuals. If a breach affects fewer than 500 individuals, the breach must be reported to HHS on an annual basis. Additionally, HITECH mandates that business associates of covered entities report breaches directly to the covered entity. HITECH also strengthens civil and criminal enforcement of HIPAA rules in a number of ways, e.g., by establishing tiered ranges of increasing minimum penalty amounts and by not allowing covered entities to escape penalties by claiming that the violation was unknown unless the covered entity corrects the violation within 30 days of discovery.

GINA modifies the HIPAA Privacy Rule by clarifying that genetic information is health information and as such prohibits the use and disclosure of genetic information by covered health plans for underwriting purposes.

The OMB has 90 days to review the final rules, which will be published in the Federal Register.

In other HIPAA news, HHS announced a proposed rule in early April to implement several administrative simplification provisions required under Health Care Reform.

First, the proposed rule requires health plans to establish a unique health plan identifier of a standard length and format. Currently, when health plans and TPAs bill providers, they are identified in a non-standard format. This process is very time-consuming for providers and results in a number of errors. By requiring health plans to establish a unique identifier, HHS hopes that providers will be able to automate and simplify their transactional processes, resulting in costs savings for providers and health plans.

Second, the proposed rule delays the effective date for ICD-10 codes from October 1, 2013, to October 1, 2014. ICD-10 codes are the International Classification of Diseases, 10^th Edition diagnosis and procedure codes. The updated set of codes contains new procedures and diagnoses and will improve the information available for quality improvement efforts and payment.

Comments on the proposed rule are due 30 days after publication in the Federal Register.

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Tags: HIPAA

Category: Health Care Reform

Correcting Cafeteria Plan Election Mistakes

Fri, 13 Apr 2012 17:51:00 GMT

Guest Contributor: Peter Antonie

An election for a cafeteria plan benefit can be corrected during the plan year in the context of a mistake if an employer can verify and confirm that a mistake was made in the election, either by the employer or employee.

Treasury Regulation 1.125-2 provides that a cafeteria plan election must be made in advance of the plan year, or eligibility date, and is irrevocable during the plan year. Treasury Regulation 1.125-4 provides 14 Permitted Election Change events for which an irrevocable election can be changed mid-year so long as the requested change is on account of the event and consistent with that event. Making a mistake in the election made is not a recognized Permitted Election Change event. However, IRS officials have offered guidance that, where there is clear and convincing evidence that an individual has made a mistake in an election or that the employer has made an administrative mistake in recording that election, the election can be undone, even retroactively.

Determining that an employer made a mistake is fairly straightforward – the employer would determine whether a clerical or administrative error occurred and go back to the time of the election and correct it. Examples of employer errors and the recommended correction would include:

Entering the individual’s election in the wrong account – correct the mistake during the plan year by transferring the election to the correct account and closing the incorrect account
Deducting too much or too little for the correct election – correct the mistake during the plan year by increasing the deduction to catch-up amounts not deducted or decreasing the deduction to “refund” dollars deducted in excess

Determining that an employee made a mistake is less straightforward. The employer would need to determine that an “impossible” election occurred or that a good faith mistake was made. Most often the request to correct the employee’s mistake involves an election for the wrong FSA.

An example of an impossible election would be an employee who elected the Dependent Care FSA but has no children that qualify for Dependent Care FSA reimbursement and there is no expectation that the funds would/could be used at anytime during the plan year. If the employee has no children, the employer would likely determine that this was an impossible election, especially if the employee has always had a Health Care FSA in the past. The correction would be transfer of the election from one account to the other and revoke the incorrect account.

But, what if the employee has children or is expecting a child that would qualify for reimbursement of day care expenses at sometime in the year. For example, an employee who made an election for the Dependent Care FSA at the start of the year in anticipation of the birth of a child or placement of a child in day care later in the year and then determines that the child will not be placed in day care did not make a “mistake.” In this case there is no correction warranted. The employee made an election in anticipation of a future expense, just like anticipating an expense in the Health Care FSA that does not materialize. Unless a Permitted Election Change event occurs allowing a change in the election, the employee is likely to forfeit money at the end of the plan year.

An example of a good faith mistake would be an employee who elects the Dependent Care FSA, did not have a Dependent Care FSA in the past but had a Health Care FSA election in the past and requests the employer transfer the election to the Health Care FSA due to filling out the election incorrectly. The correction is to transfer the funds from the Dependent Care FSA to the Health Care FSA and revoke (close) the DC FSA retroactive to the start of the plan year.

Another example of a good faith mistake would be an employee who has no children who qualify or could qualify for day care expense reimbursement and thought the Dependent Care FSA was for the medical expenses of the dependents. This good faith mistake can be corrected by transferring the election to the Health Care FSA.

Finally, correcting a mistake for the Health Care FSA is even more problematic, since it is unlikely that an employee made an impossible election – the funds can be used by at least the employee. More likely, the employee anticipated some medical expense that now won’t be incurred. However, the employee could have made a good faith mistake, such as electing the wrong FSA – has always had a DC FSA and no HC FSA in the past. Or, made an election for $2,000 and had a HC FSA of $200 in the past or vice versa . Again, if the employer determines that a mistake was made, the funds could be transferred from one account to the other or the HC FSA account election could be reduced or increased.

The Bottom Line: Unless the employer determines that a mistake was made in an election and corrects the mistake during the plan year, the employee must experience a Permitted Election Change event and request a change in the election at that time that is on account of the event and consistent with the event. Otherwise, no change in the election is allowed.

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Tags: Mistakes

Category: Benefits in General

Autism: Health Care Reform, Health Care FSAs, and HRAs

Fri, 06 Apr 2012 17:30:00 GMT

April is National Autism Awareness Month. Autism is a complex developmental disability that typically appears during the first three years of life and affects a person’s communication and social interaction abilities. The disorder occurs on a spectrum, in that it affects individuals differently and to varying degrees. The prevalence of autism has risen to 1 in every 110 births in the United States and almost 1 in 70 boys.

Did you know that health care reform contains important provisions for individuals with autism? The law prohibits insurers from denying coverage for children with autism or other pre-existing conditions and prohibits lifetime dollar limits on coverage. Additionally, new plans must cover autism screening at no cost to parents and young adults without employer-provided insurance may stay on their parents’ insurance until they turn 26. Starting in 2014, individuals with autism will have expanded access to affordable insurance options under the insurance exchanges and Medicaid.

Autism expenses may be eligible for reimbursement under a Health Care FSA or Health Reimbursement Arrangement (HRA) (depending on the plan design). Internal Revenue Code (IRC) section 105(b) regulates what type of expenses may be reimbursed through a Health Care FSA and HRA. Reimbursable expenses are medical care expenses, as defined in IRC section 213(d). Section 213(d) defines “medical care” expenses as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the human body.

The costs of education expenses are not medical care. However, a child’s tutoring, on a doctor’s recommendation, by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments are medical expenses because the care mitigates the disease. Thus, expenses associated with learning for children with autism, autism spectrum disorder, and Asperger’s Syndrome may be eligible for reimbursement under a Health Care FSA or HRA.

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Category: Health Care Reform

Category: Benefits in General

IRS Health Care Reform Tax Provisions

Wed, 04 Apr 2012 14:25:00 GMT

The IRS has provided a helpful list of tax provisions stemming from the Affordable Care Act – or health care reform – that are now in effect. The IRS will update this page as more provisions go into effect over the coming years.

http://www.irs.gov/newsroom/article/0,,id=220809,00.html

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Category: Health Care Reform

Supreme Court Sends Signals With Questioning

Wed, 28 Mar 2012 16:38:00 GMT

Today marks the 3^rd day of oral arguments before the Supreme Court in the health care reform case – and what a week it’s been!

On Monday, the Court heard arguments on whether the Anti-Injunction Act prevents the Court from considering the individual mandate provision until its actual effective date in 2014. The 145-year-old Act prevents federal courts from deciding cases in which taxpayers are trying to prevent the government from collecting taxes. The tax has to be actually due, and then the courts can hear the case.

Eight of the justices fired questions at the attorneys during the oral argument (Justice Thomas continued his six year trend of silence during oral arguments). Although it's impossible to predict the outcome based on questions, the line of questioning appears to indicate that the Court is leaning towards ruling that the Anti-Injunction Act will not apply – which means they can decide the larger issue of whether the individual mandate is constitutional now.

Tuesday took us to the heart of health care reform – the individual mandate. The individual mandate requires that most people obtain health insurance or face a penalty. It appears that the conservative justices (Thomas (silent, but prior writings indicate he is not in favor of the mandate), Scalia, and Alito) believe that the mandate is unconstitutional, while most of the liberal justices believe the mandate is constitutional (Breyer, Ginsburg, Sotomayor, and Kagan). Justice Kennedy, who often casts the deciding vote, seemed to favor the administration’s position that the mandate is constitutional, but indicated that the administration faces a very heavy burden here. Chief Justice Roberts, normally one of the conservative Justices, indicated that his vote could be in question as well.

Overall, signals indicate that the individual mandate will be upheld only if the key Justices believe that they are not giving Congress broad new powers over our lives.

Today, the Justices are considering whether the individual mandate – if found to be unconstitutional – can be severed from the rest of the health care reform law and whether the federal government has coerced states by ordering the expansion of Medicaid.

We can expect a decision by the end of June.

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Category: Health Care Reform

Senate Passes Parking – Mass Transit Parity

Tue, 27 Mar 2012 14:49:00 GMT

On Wednesday, March 14^th the Senate passed a bill (S. 1813) that authorizes Federal-aid highway and highway safety construction programs, and for other purposes, including a provision that restores parity for exclusion from income for employer-provided mass transit and parking benefits.

Last year, Congress failed to extend parity between the two benefits and the mass transit benefit reverted from $230 to $125. This bill increases the monthly amount that individuals may elect pre-tax for mass transit from $125 to $240, to match the parking benefit that began in 2012.

Currently, the bill awaits consideration in the House of Representatives.

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Tags: Transportation Benefits

Category: Benefits in General

SBC FAQs

Mon, 26 Mar 2012 18:05:00 GMT

The Departments of Labor, Health and Human Services, and Treasury have issued a set of 24 FAQs on the summary of benefits and coverage (SBC) requirement under health care reform. The FAQs attempt to answer some of the questions raised to date.

Agencies have been fond of releasing guidance in the form of FAQs lately, probably in response to the volume of legislation churning out of health care reform. FAQs provide a timely means for agencies to provide information to the public. It’s unclear the weight that a court would give an FAQ, but in this rapidly changing regulatory landscape they are a welcome source of additional guidance.

The Departments’ basic approach to health care reform implementation is to assist plans and insurers into coming into compliance with the new requirements. Notably, the FAQs do not provide for an extension of the effective date of open enrollment periods on or after September 23, 2012 for participants and beneficiaries and plan years beginning on or after September 23, 2012 for enrollments outside of open enrollment. However, no penalties will apply during the first year for plans that are working diligently and in good faith to provide the SBC. See Q/A-2.

Clarification on when to provide the SBC can be found in Q/A-9. The final regulations require an SBC to be provided in several instances: upon application, by the first day of coverage (if there are any changes), to special enrollees, upon renewal, and upon request.

Upon application means that the plan, including self-insured group health plans must provide SBCs with other written enrollment materials. If the plan does not distribute written materials, then the SBC must be provided no later than the first date on which the participant is eligible to enroll in coverage. If there are changes in the SBC between enrollment and the first day of coverage, then a current SBC must be provided no later than the first day of coverage. An SBC must be provided to special enrollees no later than 90 days from enrollment. If a plan holds open enrollment, the plan must provide an SBC at the same time it distributes other open enrollment materials. If there is no enrollment, but rather elections renew automatically, then the SBC must be provided no later than 30 days prior to the first day of the new plan year. An SBC must be provided upon request – i.e., as soon as practicable – but no later than seven business days following receipt of request. See Q/A-10.

The FAQs also address the ability to combine information for different coverage tiers and note add-ons to major medical coverage (like health FSAs and HRAs) in one SBC, as long as the appearance is understandable. See Q/A-3, 4, and 6.

One area of confusion that the FAQs attempt to clear up is in what situations an SBC may be provided electronically. For eligible participants and beneficiaries who not enrolled, an SBC can be provided electronically, if: the format is readily accessible, the SBC is provided in paper form free of charge upon request; and if the SBC is provided via an Internet posting, plans or insurers timely notify individuals (via e-card or postcard). FAQ Q/A-12 provides model language for this e-card or postcard. An SBC may be provided electronically for participants or beneficiaries who are covered under the plan only of the DOL’s disclosure requirements are met. See 29 CFR 2520.104b-1 and FAQ Q/A-10, 12.

Foreign language requirements are addressed in FAQ Q/A-13, which provides that if an SBC is sent to an address where 10% or more of the population is literate only in Spanish, Tagalog, Chinese, or Navajo, then the SBC must contain a statement in the applicable non-English language clearly indicating how to access the language services provided by the plan or issuer. Such language services include: oral language services and providing the SBC in the non-English language. See Q/A-13-14.

Additional highlights addressed in the FAQs include: cross references to SPDs and other documents, and allocating contractual responsibility.

The Departments indicate that more FAQs will be forthcoming.

Find the FAQs here: http://www.dol.gov/ebsa/faqs/faq-aca8.html

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Tags: SBC

Category: Health Care Reform