Earned Income Tax Credit
By participating in a cafeteria plan, the participant will be lowering their income for the Earned Income Tax Credit (EITC). Check the new limits in IRS Publication 596 "Earned Income Credit" and for more information about this tax credit.
Social Security and Medicare Wage Base
For 2024, the Social Security wage base increased to $168,600 - up from $160,200 in 2023. The Social Security rate of 6.2% is applied to wages up to the maximum taxable amount for the year; the Medicare portion of 1.45% applies to all wages - unchanged from 2023.
401(k) Plans
In 2024, the maximum for elective deferrals is $23,000 for employee contributions, and $69,000 for the combined employee and employer contributions. The catch-up contribution for those 50 or older increased to $7,500, raising your employee contribution limit to $30,500, for your 401(k) plan.
| 2023 | 2024 | |
|---|---|---|
| For a qualified long-term care insurance policy, the maximum non-taxable daily amount. | $420/day | $410/day |
The iPhone® and Android® App is now available.
Need to check your balance, file a claim or submit an itemized statement/EOB? Now you can, with our new apps for the iPhone® and Android®. They're FREE! Just search for "MyFlex" at the iTunes® App Store or Google Play. To log in, use the same ID and password as you do for the MyFlexOnline website.
Maybe, you'd like to get a text when your claim is processed. Well, now you can! Just log into MyFlexOnline and go to "Settings" / "Manage E-mail and Text Notifications". You can also find this option by clicking on "MyFlex Mobile Alerts" under "Go Mobile". Once you sign-up you are on your way to receiving a text message when:
Everyone who has a MyFlexOnline email will receive email notifications. If you wish to opt for the text notification as well, you must sign up for this by following the above steps. You may change this option at any time.
Upload your itemized statement/EOB to request reimbursement or substantiate debit card charges simply from your Mobile App or your MyFlexOnline account. No more faxing/mailing.
So employers and employees can take advantage of the health insurance Exchanges starting January 1, 2014, regulators issued some exceptions to the permitted election changes rule for cafeteria plans.
Beginning in October 2013 individuals will have the opportunity to enroll in State Exchanges throughout the country for coverage starting January 1, 2014. These dates coincide with a large number of employers' benefit plans who offer health insurance coverage. Their health plan years end December 31 and employees may enroll at an Exchange for the 2014 plan year. However, because of the cafeteria plan change of election rules, it would not be easy for employers who run their benefits on fiscal plan years.
When participants enroll in a cafeteria plan, even just for taking health insurance premiums pretax, the election is irrevocable unless they sustain a qualified reason to change their election. The availability of health coverage through an Exchange does not constitute a change in status. Participants in cafeteria plans that do not end on December 31 would be unable to change their salary reduction elections in the middle of their cafeteria plan year and purchase coverage through an Exchange.
In January 2013, the IRS published their latest Affordable Care Act (ACA) proposed rule entitled "Shared Responsibility for Employers Regarding Health Coverage." This publication also included instructions for employers whose benefit plans operate on a fiscal year.
To help employees who participate in fiscal cafeteria plan years, the Treasury Department and the IRS will allow a one-time transition period whereby participants may change from employer-sponsored health insurance to a State Exchange plan for applicable large employers whose benefit plans are on a plan year that does not start on January 1.
Affected large employers may, at their discretion, amend their written cafeteria plans to permit either or both of the following changes in salary reduction elections.
Why is it so important to allow employees to seek coverage on the Exchange? First, ACA was written to assure that employees and individuals could purchase insurance coverage through State Exchanges. And secondly, employers want what's best for themselves and their employees. For instance, if an employee is not enrolled in health insurance, they need to get coverage. However, employers can be penalized if one employee chooses coverage from the Exchange and receives premium credits. This is call "Shared Responsibility." Employers would prefer to allow all their employees the opportunity to choose coverage at the same time.
Shared Responsibility for applicable large employers means they are subject to a specific "assessable payment" starting January 2, 2014 if they either:
An applicable large employer is an employer that employed an average of at least 50 full-time employees, or full-time equivalents based on hours of service, on business days during the preceding calendar year.
This is welcome clarification and remediation for employers with fiscal year cafeteria plans; however it is not mandatory that employers offer this option to their employees. This proposed rule also included an expanded timeframe for adopting this one-time change in status amendment to cafeteria plans. Cafeteria plans may be amended retroactively to implement these transition rules. The retroactive amendment must be made by December 31, 2014, and can be retroactive to the date of the first day of the 2013 cafeteria plan year.
This amendment is only for accident and health coverage offered through a cafeteria fiscal year plan beginning in 2013 and does not apply to any other qualified benefits offered through the cafeteria plan, such as health flexible spending accounts. It is also temporary and only applicable to cafeteria plans that began in 2013.
Details are in the Federal Register dated January 2, 2013, available at: Click Here
Questions may be directed to your Insurance Broker.
The Durbin amendment, Section 1075, of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 called for the U.S. Federal Reserve Board (FRB) to develop regulatory provisions that affect debit interchange rates, network exclusivity arrangements and transaction routing restrictions. The final regulations were issued on June 29, 2011.
The final rules related to network exclusivity prohibits all debit card issuers and networks from restricting the number of networks over which electronic debit transactions may be processed to less than two unaffiliated networks without regard to the authorized method. Meaning, one signature based network and one unaffiliated PIN based network. The effective date for issuers of certain health-related and other benefit cards is April 1, 2013.
No, a personal identification number (PIN) is not required to use your flex debit card. To pay for purchases at merchants accepting debit cards, you can use the Card as you would a credit card, by selecting the "credit" payment option. If you would like to request an optional personal identification number (PIN), you can use your card as you would a debit card, by selecting "debit" payment option and entering the PIN at the merchant. The PIN cannot be used to give cash access at ATMs or cash back at the merchants.
You may request your optional personal identification number (PIN), by contacting toll free: 866.679.7649. You will also use this hotline number if you lose/misplace your PIN number.
Effective Immediately, CPN has put into place a new policy for taking incoming calls from spouses/dependents of your Participants (Account Holder).
Any calls into CPN's customer service MUST be from the Participant/Account Holder, not the spouse or dependent. If a spouse or dependent calls to request a card, CPN will direct them to the MyFlexOnline that is available for the participant who holds the account.
If the participant/account holder gives their spouse/dependent access to their MyFlexOnline account, there they can request a card for themselves. Otherwise, the participant/account holder can call CPN's customer service department and request one in their name.
CPN apologizes for any inconvenience this may cause, but it is the in the best interest of the Participant. We appreciate your understanding. This same policy is also honored by VISA's lost/stolen hotline. Only the participant may call in to report a card lost/stolen for security reasons. CPN values and upholds the same type of security to protect all participants' accounts.
Thank you,
CPN Management
During the last week of March, the Supreme Court heard an unprecedented three days of oral argument on the question of the constitutionality of the Affordable Care Act (the "ACA"). On June 28, 2012, the Court announced that it finds the entire ACA to be constitutional.
As a result, it's full steam ahead on meeting near-term requirements, such as the need to issue a summary of benefits and coverage or "SBC" document in connection with open enrollment.
In addition, outlined below is a snapshot of how this decision affects Consumer-Directed Benefit Accounts, such as Health Care Flexible Spending Accounts ("FSAs"), Health Reimbursement Arrangements ("HRAs") and Health Savings Accounts ("HSAs"):
The Court's complete set of opinions can be found here.
Many of our clients offer Health Reimbursement Arrangements ("HRAs") to help their employees manage health care expenses. HRAs are considered "group health plans" and, as a result, are subject to certain insurance market reforms imposed by the Patient Protection and Affordable Care Act ("PPACA").
Recently, the IRS issued proposed regulations regarding several changes to HRAs under PPACA. CPN has reviewed the proposed regulations and has issued this Compliance Alert to provide our clients with information on several of these proposed changes in order to help our clients prepare for and maintain compliant plans.
PPACA requires that plan sponsors and health insurers pay a fee to be attributed to the Patient-Centered Outcomes Research Trust Fund. The fund will establish a nonprofit corporation to conduct clinical effectiveness research to evaluate risks and benefits of medical treatments, services, procedures and drugs.
Newly proposed regulations address comments received in response to the original IRS Notice 2011-35 that was released in June 2011 and include clarification on if and how the fee would be imposed on HRAs, and how to calculate and submit the fee.
Who must comply: Under the proposed regulations, many HRAs will be required to pay the fee. The proposed regulations state that multiple self-insured arrangements maintained by the same employer with the same plan year are subject to a single fee. In other words, an HRA is not subject to the fee if it is integrated with a self-insured health plan. If, however, the HRA is integrated with a fully-insured health plan, the insurance company and the plan sponsor of the self-insured HRA are each required to pay the fee.
Calculating the fee: The initial annual fee is $1.00 per average covered life. The fee increases to $2.00 in 2013, and then to an amount indexed to national health expenditures for each year through 2019, after which the fee ends. The fee will be based on the average number of covered lives under the plan. For HRAs not integrated with a self-insured health plan, the proposed regulations clarify that each participant can be treated as a single life when determining the fee, regardless of the number of dependents on the plan. For example, if an employer has, on average, 25 employees who participate in the HRA for the year, the fee for 2012 would be $25.00.
Effective Dates: These proposed regulations are intended to apply to policy and plan years that end on or after October 1, 2012, and before October 1, 2019. The proposed regulations request comments to be submitted by July 30, 2012.
Next Steps: CPN will submit comments on the proposed regulations, specifically in regard to a requested exemption of all HRAs. We will continue to provide you with any new information that becomes available, and will be working to develop resources to help plan sponsors calculate and submit the fee.
PPACA requires that a Summary of Benefits and Coverage ("SBC") be provided to plan participants prior to enrollment or re-enrollment in a plan. The purpose of the SBC is to provide consumers with clear and concise information about their benefit options.
Who must comply: The proposed regulations state that the SBC requirement does not apply to "excepted benefits" (i.e., most Flexible Spending Accounts ("FSAs") and certain HRAs, such as retiree-only HRAs, as well as limited purpose HRAs that cover only dental and vision expenses). The proposed regulations also state that HRAs that do not constitute excepted benefits and are integrated with other major medical coverage can be addressed within the major medical SBC. But a separate SBC must be provided for any stand-alone HRA or HRAs for which the major medical coverage does not include the appropriate information within the SBC.
Since the SBC was designed primarily to address major medical coverage, the proposed regulations clarify that, to the extent a plan's terms cannot be described in a manner consistent with the SBC template and instructions, the plan must describe the HRA plan terms using its "best efforts" in a manner that is as consistent with the instructions and template format as reasonably possible.
Required coverage examples: The SBC must include coverage examples of specific medical situations and outline exactly how much the insurance carrier and the consumer must each pay for the service. Coverage examples must be formatted in a manner similar to a Nutrition Facts label, and are intended to help consumers understand the cost of services under a specific health plan.
Uniform glossary of coverage and terms: Part of the SBC requirement is that health insurers must provide and make available a uniform glossary to help consumers understand terms and concepts commonly used in health coverage plans, such as "co-pay" and "deductible." The Department of Labor ("DOL") and Department of Health and Human Services ("HHS") have drafted a uniform glossary for this purpose, available on the DOL and HHS websites, which must be provided to consumers in the format authorized by these agencies. A plan or insurer can satisfy this disclosure requirement simply by providing consumers with the website address where the uniform glossary can be found.
Effective Dates: The SBC rules have two different effective dates, depending on the type of enrollment period. The SBC rules are effective on the first day of the first annual enrollment period beginning on or after September 23, 2012, for participants and beneficiaries who enroll during an annual enrollment period. For newly eligible individuals and special enrollees who enroll at a time other than during annual enrollment, the SBC rules are first effective for any enrollment that occurs on or after the plan year that begins on or after September 23, 2012.
Example 1. Employer A sponsors a health plan with a calendar plan year. Each year, the annual enrollment period for the following plan year begins on October 1. Employer A must comply with the SBC rule regarding individuals who enroll during the annual enrollment period that begins October 1, 2012. Thereafter, the SBC rules will apply to all initial and special enrollments that occur on or after January 1, 2013.
Example 2. Employer Z sponsors a health plan with a calendar plan year. Each year, the annual enrollment for the following plan year begins on September 1. For Employer Z, the first annual enrollment period to which the SBC rule will apply is the annual enrollment period that begins September 1, 2013 (for the 2014 plan year). However, the SBC rules will still apply to all initial and special enrollments that occur on or after January 1, 2013.
Next Steps: CPN is currently working with legal counsel and industry experts to create an SBC template that can be applied to the various benefits provided under stand-alone health FSAs and HRAs that are subject to the SBC requirements. We will continue to update you on any advancement and will provide further information prior to the effective date of September 23, 2012.
PPACA prohibits lifetime limits on essential benefits and allows only restricted annual limits on essential benefits until 2014. After 2014, no annual limits on essential benefits will be permitted.
Who must comply: Many industry experts have questioned whether and how these new rules might apply to HRAs. Certain HRAs will not be subject to the new rules – including HRAs that are part of an integrated group health plan (that complies with the lifetime and annual limit restrictions), retiree-only HRAs, limited purpose HRAs and, possibly, HRAs that meet a special exception for health FSAs. Therefore, it appears that only stand-alone HRAs that cannot satisfy any other exception may be subject to the annual limit restrictions. In addition, HHS released guidance on August 19, 2011, which states that HRAs that are subject to the annual limit requirements, which took effect on September 23, 2010, do not have to apply for a waiver and exempts all HRAs, as a class, from the obligation to apply individually for an annual limit waiver for plan years that begin before January 1, 2014.
Next Steps: It is CPN' position that all HRAs should be exempt from the lifetime and annual limit rules, and CPN is working with other industry leaders to obtain favorable guidance from the regulators on this issue. We will continue to update you on any further developments on this issue.
One point of continued uncertainty is what constitutes an "integrated" HRA. Currently, the IRS has not formally provided guidance on this issue. Absent this guidance, a more conservative interpretation of the term "integrated" would mean a situation where the HRA and major medical plan are documented and reported under ERISA as one plan that has identical participants, and the HRA only reimburses expenses not covered by the major medical plan (e.g., deductibles or co-pays). A more lenient interpretation of this term would mean that the HRA must be offered in conjunction with a major medical plan that is already subject to and operating in compliance with the final regulations.
Next Steps: Further guidance that clarifies when an HRA is sufficiently "integrated" would be welcome. CPN is currently working with other industry experts to submit comments on this topic of concern. We will continue to update you on any further developments on this issue.
The 1.125-4 Regulations give a two-pronged approach to determining when a change may be made to an existing cafeteria plan election:
1) a change in status or a change in cost or coverage occurs, and
2) the election change satisfies the consistency rule. So first, we'll look at the conditions for change and then discuss the consistency rule.
Conditions for Change
Seven circumstances apply to accident or health plans (including health FSAs), disability, group-term life insurance plans, dependent care assistance, and adoption assistance plans:
Special Enrollment Rights Under HIPAA (Health Insurance Portability and Accountability Act). Allows for election changes on a prospective basis in the event of marriage (a HIPAA event). Election changes on a retroactive basis can be made for the HIPAA events of birth, adoption or placement for adoption if the change is requested within 30 days of the event. There is a new special enrollment right for the gain or loss of Medicaid or state children's health insurance program (SCHIP) coverage. Coverage in the cafeteria plan can be retroactive if elected within 60 days of the event. The was effective April 1, 2009.
Change in Status Events.
Change in legal marital status, i.e., marriage, death of spouse, divorce, legal separation and annulment.
Change in number of dependents, i.e., birth, death, adoption, and placement for adoption.
Change in employment status, i.e., any of the following events that change the employment status of the employee, the employee's spouse, or the employee dependent: termination or commencement of employment, a strike or lockout, commencement of or return from an unpaid leave of absence, or a change in work site. If the employee, spouse, or dependent becomes (or ceases to be) eligible under the cafeteria plan or other employee benefit plan of the employer of the employee, spouse or dependent, that event is considered a change in employment status.
Dependent satisfies or ceases to satisfy eligibility requirements, i.e., this change can occur because of attainment of age, student status or any similar circumstance.
Change in residence, e.g., an employee, spouse or dependent moves in or out of a health maintenance organization (HMO) coverage area.
Adoption i.e., proceedings begin or terminate under an adoption assistance program.
Judgments, Decrees, or Orders. A conforming election change can be made that result from a divorce, legal separation, annulment, or change in legal custody (including a qualified medical child support order). Such a change would allow an increase to the election if the order were to provide coverage or it would allow the participant to cancel coverage if the order required another to provide coverage and it was, in fact, provided by another.
Entitlement to Medicare or Medicaid. Gain or loss of eligibility would allow the participant to decrease or increase an election under an accident or health plan.
Significant Cost or Coverage Changes. There are four events that apply to accident or health plans (not including health FSAs), disability plans, group-term life insurance plans, dependent care assistance plans, and adoption assistance plans.
Cost changes such as automatic increases or decreases in a qualified plan or significant cost changes. If the cost charged to an employee increases significantly, the employee may revoke an election and change to coverage under another benefit package option or drop coverage under the accident and health plan if no other benefit package option is offered. On the other hand, if the cost charged to an employee decreases significantly, an employee may commerce participation in the cafeteria plan for the option with a decrease in cost.
Coverage changes such as a significant curtailment of coverage under a plan allow participants to revoke their election and, on a prospective basis, receive coverage under another benefit package option that provides similar coverage. A loss of coverage permits participants to revoke their election and elect coverage under another benefit package option or drop coverage under the accident and health plan if no other benefit package option is offered. (A loss of coverage means a complete loss of coverage including the elimination of a benefits packet option, an HMO ceasing to be available in the area, by reaching an overall lifetime or annual limitation, a substantial decrease in the availability of medical care providers, a reduction in benefits for a specific type of medical condition or treatment, or any other similar fundamental loss of coverage.)
A coverage change that adds to or improves an existing benefit package option allows eligible employees to revoke their election under the cafeteria plan and elect coverage under a new or improved benefit package. This includes employees who had made no previous election under the cafeteria plan. A coverage change is made under another employer plan. This includes changes made during an open enrollment period or a valid change of status of spouse or dependent.
A loss of coverage for the employee, spouse or dependent under any group health coverage sponsored by a governmental or educational institution, including: a state's children's health insurance program (SCHIP), a medical care program of an Indian Tribal government, the Indian Health Service, a tribal organization, a state health benefits risk pool, or a foreign government group health plan.
These costs of coverage events would include situations in which an employee switches between fulltime and part-time employment, an employer changes the percentage of premium that an employee must pay, or a new benefit option is added. The cost to an employee is the key factor in determining whether a cost change has occurred.
Family and Medical Leave Act (FMLA). Employees may revoke an existing election for group health plan coverage and make another election for the remaining portion of the period of coverage as provided under the FMLA.
401(k) Plans. Elections may be modified or revoked in accordance with 401(k) plan regulations.
Consistency Rule for Accident or Health Coverage
The second part of the equation deals with whether the election change satisfied the consistency rule. The consistency rule applies to each employee, spouse or dependent separately and basically requires that the election change be on account of and corresponds with a change in status that affects eligibility under an employer's plan. This includes an increase or decrease in the number of an employee's family members or dependents who may benefit from application under the plan.
There in an exception to the "employer's plan" rule: If the employee, spouse or dependent becomes eligible for COBRA under the group health plan of the employee's employer, the plan may permit the employee to increase payments under the employer's cafeteria plan.
More "Stuff" to Remember
Keep in mind that under these rules, the change occurs when an employee, spouse or dependent gains or loses coverage eligibility for accident or health coverage and group-term life insurance. So, a spouse that goes on an unpaid leave of absence, in which no eligibility change took place, would not constitute a reason for the participant to change insurance elections.
When a participant gains coverage under another employer's plan and revokes his election, a certification that coverage was actually selected should be obtained from the employee.
While the regulations allow a participant to revoke their election and, on a prospective basis, receive coverage under another benefit package option that provides similar coverage, such coverage need not be provided by the participant's employer. A plan may treat coverage by another employer (e.g., a spouse's or dependent's employer) as similar coverage.
In addition, the "significant cost or coverage changes" sections of the regulations don't apply to health FSAs (the unreimbursed medical portion of a cafeteria plan). Employees may only change their election to a health FSA if a valid "condition for change" occurs and the resulting election change satisfied the consistency rule.
So how can you make sure you are following all the rules? By selecting one item from Column A and one item from Column B. That is to say – Column A: The IRS list of qualifying events for a change in status or change in cost or coverage events are exhaustive. The event must fit into one of the changes outlined in the final regulations. And Column B – The election change is on account of and corresponds with a change in status that affects eligibility for coverage. This is the consistency rule.
The information contained in this article is not intended to be legal, accounting or other professional advice. We assume no liability in connection with its use, nor are these communications directed to specific situations.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (Healthcare Reform Act) extended certain rights and tax exclusions for expenses paid by taxpayers for their adult children. Group health plans and health insurance issuers must offer dependent coverage for an adult child up to age 26. The Healthcare Reform Act also provides favorable tax treatment for employer-provided healthcare coverage or medial expense reimbursements for employee's adult children. Unfortunately, the definition of an adult child differs from one section to another.
Internal Revenue Service (IRS) Notice 2010-38 refines and amplifies the language of the Healthcare Reform Act, and answers a multitude of questions pertaining to effective dates, IRS Code Section changes, plans affected and plan amendments. The Notice contains welcome details for sponsors of cafeteria plans, flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), voluntary employees' beneficiary associations (VEBAs), certain retiree health accounts in pension plans, and deductions by self-employed individuals for medical care insurance.
What is the definition of an Adult Child?
The definition is quite simple:
The IRS Code Section 152 definition of a dependent has not been amended or changed, rather the definition of an Adult Child has been, or will be, inserted into different Sections of the IRS Code.
What is the effective date of coverage for an Adult Child?
The definition takes effect retroactively to March 30, 2010. Any amendments to IRS Code Sections that have not been published will be retroactive to March 30, 2010. The Healthcare Reform Act requires plans that cover dependent children to provide for coverage of children until age 26 beginning with the plan year starting on or after September 23, 2010. There is no requirement to cover children of covered dependent children, and the requirement is applicable even if the child is married or is not a tax dependent. Until January 1, 2014, grandfathered plans do not have to extend coverage if the child is eligible for other employer coverage. While extending this coverage is required beginning with the plan year starting on or after September 23, 2010, the Department of Health and Human Services (DHHS0 is encouraging coverage to be extended as soon as possible.
Cafeteria Plans, Flexible Spending Arrangements, and Health Reimbursement Arrangements
The exclusion from gross income for expenses paid for health insurance coverage and reimbursements of medical expenses under IRS Code Sections 106 and 105(b) for an employee's Adult Child carries forward automatically to the definition of qualified benefits for cafeteria plans, including health FSAs.
IRS Regulation 1.125-4, which stipulates permitted election changes for a cafeteria plan, will be retroactively amended to include change in status events affecting nondependent children under age 27, including becoming newly eligible for coverage or eligible for coverage beyond the date on which the child otherwise would have lost coverage.
The same rules apply for health reimbursement arrangements.
Transition Rule for Cafeteria Plan Amendments
Although amendments to cafeteria plans may only be effective prospectively, in this case, employers may permit employees to immediately make pre-tax salary reduction contributions for accident or health benefits under a cafeteria plan (including a health FSA) for children under age 27, even if the cafeteria plan has not been amended to cover these individuals. However, a retroactive amendment for this purpose must be made no later than December 31, 2010 and must be effective retroactively for any date on or after March 30, 2010.
FICA, FUTA, RRTA and Income Tax Withholdings
For tax purposes, coverage and reimbursements paid by the taxpayer for their Adult Children are excluded from wages for Federal Insurance Contribution Act (FICA), Federal Unemployment Tax Act (FUTA) and the Railroad Retirement Tax Act (RRTA).
The information contained in this article is not intended to be legal, accounting or other professional advice. We assume no liability in connection with its use, nor are these communications directed to specific situations.
Swipe and go. That was the understanding of plan participants when healthcare debit cards were first introduced. No more claim forms or receipts. But that was not the reality. Also, employers heard horror stories about participants using debit cards at gas stations or to buy fishing boats.
That was then and this is now. However, doubts still exist for some employers and they are hesitant to allow debit cards for healthcare purchases. Kind of like handing over the car keys to your teenager for the first time. Scary, but necessary if you are going to progress in life. Not to say that debit cards are necessary, but employees are asking for the convenience and security that debit cards provide.
Here are some talking points for your next conversation about debit cards.
Convenience
With a debit card employees don't have to "pay twice." Once by payroll deduction to the plan and a second time at the store. Without debit cards they must turn in a claim form and itemized statement to their plan administrator and wait for payment.
Here's how a couple of Internal Revenue Service (IRS) rules for debit cards lessen the employer's liability of erroneous card swipes and keep employees happy and on the right track. One rule is called the Inventory Information Approval System (IIAS). The other rule is the ability to auto substantiates insurance co-payments and multiple co-payment amounts that come through on one card swipe.
The IIAS substantiates card swipes at the point-of-sale by matching inventory information with a list of eligible medical expenses. The IRS introduced this method in 2006. Within a year, every vendor wanted to be the healthcare debit cards best friend, and programming was done in record time to implement the IIAS. Vendors knew that this was the wave of the future and they needed to catch on or be left out.
IIAS technology is already working at over 35,000 locations nationwide. Industry experts predict that within 18 months, 90% of flexible spending account (FSA) and other consumer-directed healthcare (CDH) account transactions will be paid with the flex benefits card, making these accounts significantly easier to use and more attractive to employers and their employees.
Because flex benefits cards are now smart enough to approve only qualified items, plan participants will not be asked to submit receipts for prescriptions made at IIAS certified retailers. Employers can be more comfortable that the debit cards are being used for qualified expenses at qualified locations.
Auto substantiation of co-payments and multiple co-payment amounts adds the extra layer of convenience that completes the picture. The "Debit Card Transactions" chart below categorizes where healthcare debit cards are typically used.
Debit Card Transactions
| % of Card Swipes | Type of Expenses |
| 57% | Pharmacy and Over-the-Counter (with RX provided) |
| 32% | Doctors' Offices |
| 7% | Vision |
| 5% | Dental |
| 2% | Commuter |
Security
Most participants in FSA plans do not want to purchase items that are not allowed. They know it will eventually catch up with them and they will have to pay back to the plan. But sometimes they don't really know whether their purchase is considered "medically necessary" and accepted by the plan. That's where the security of the debit card comes into play.
The IIAS and co-payment components of auto substantiation are completed at the point of sale or immediately afterward. By leaving the substantiation of claims to automated systems, the process is quick, accurate, and reliable.
The Special Interest Group for IIAS Standards (SIGIS) controls the list of items that may be auto substantiated at the point of sale. They have methods and certifications by vendors in place to accept card swipes for eligible expenses.
A card swipe also includes a check of the employee's account balance. The card swipe will not be completed if the account balance is insufficient. Safeguards are also in place to ensure that the purchase was made while the employee was covered by the plan.
Consumer-Directed Health Plans
Consumer-directed healthcare plan (CDHP) accounts include FSA, Health Reimbursement Arrangement (HRA), and Health Savings Account (HSA) plans.
According to study by BearingPoint (a global management and technology consulting company), there were 12 million employer-sponsored CDHP accounts in 2006. Currently FSAs make up about 75% of all accounts. With the growing popularity of CDHP accounts, BearingPoint estimates that the number of accounts will grow to 42 million by 2012.
Clearly, the marketplace is adopting CDHP accounts at a very rapid rate. And, there is no longer any reason for employers not to offer the convenience and security of debit cards for healthcare accounts.
More Savings for Employers and Employees
The last word. When employees' participant in flex plans, employers save money – lots of money. And when debit cards are included in flex benefit programs, more employees' participant in the plan and put away more salary redirection. This results in more tax savings for employers and their employees.
Over-The-Counter Drugs and Debit Cards
Beginning January 1, 2011 participants must obtain a prescription from their physician in order to pay for over-the-counter (OTC) drugs or medicines through their flex plans. The prescription may be filled through the pharmacy, or the participant may turn in a claim to their TPA with a detailed receipt for the item and a copy of their prescription attached to the form. This element of law has not changed.
It was reported that participants could use their health care debit cards to purchase OTC drugs or medicines. This part of the law has changed with IRS Notice 2001-5 which allows the continued use of Health Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA and Health Savings Account (HSA) debit cards for the purchase of OTC drugs and medicines if:
Get a prescription for Claritin? Yes, that's what "The Act" requires. And, in order for the card to work, you must present the prescription to the pharmacist who will fill and dispense the OTC drug just like they do for drugs that are only available by prescription, such as an antibiotic.
How does the debit card know the difference between and OTC and an Rx for an antibiotic? The answer is – it doesn't have to.
Both are prescriptions, delivered through the pharmacy and will automatically be coded as an Rx.
Want more information? Go to http://www.irs.gov/pub/irs-drop/n-11-05.pdf to view the entire Notice.
Who is subject to COBRA? Most employers sponsoring group health plans and/or health FSAs through flexible benefits plans are subject to COBRA. Generally, employers with less than 20 employees on at least half of the typical business days in the last calendar year, plus certain church and government plans, are exempt from the COBRA law.
COBRA must be offered to participants and their spouses and dependents in health FSAs and HRAs that lose coverage as a result of a qualifying event. Complete losses of coverage, like termination of employment or a divorce, are a couple of examples where COBRA continuation may need to be offered.
However, existing regulations limit the circumstances in which COBRA must be offered to a participant in a health FSA. COBRA need not be offered for the balance of the plan year in which the qualifying event occurs if: the FSA is exempt from HIPAA certification requirements, i.e.,
COBRA need not be offered in a subsequent year if: the health FSA is exempt from HIPAA, and contributions for the plan year equal or exceed the annual election amount. By plan design, this could always be the case.
The regulations also emphasize that health FSAs required to offer COBRA must abide by all other COBRA requirements applicable to group health plans.
The information contained in this article is not intended to be legal, accounting or other professional advice. We assume no liability in connection with its use, nor are these communications directed to specific situations.
The third significant component of the HIPAA administrative simplification requirements, applicable to health plans as covered entities, will take effect April 21, 2005 for large plans; small plans with fewer than $5 million in premiums have until April, 2006 to comply. The first two legs of the administrative simplification stool were the privacy rules and the electronic data interchange rules.
The HIPAA security rules specifically apply to electronic protected health information (e-PHI). For purposes of these rules, protected health information generally has the same meaning as it does under the HIPAA privacy rules, i.e., PHI is any individually identifiable medical information that:
e-PHI is any PHI that is created, received, maintained, or transmitted electronically, such as through the internet, CD, magnetic tape, etc. It generally does not apply to paper faxes or voice-to-voice response system, though, it would apply to computer-based faxes or computer based automated voice systems.
In summary, the HIPAA security rules require that administrative, physical, and technical safeguards be established to ensure the security of such information.
The security rules set out two types of standards. They are: mandatory standards (those that must be followed), and addressable standards. Addressable standards are those that either:
The Centers for Medicare and Medicaid Services (CMS) is issuing a series of papers to assist covered entities in complying with these standards at this Website: https://www.cms.gov/ Of particular note is the Security Standards Matrix included in the first educational paper entitled, HIPAA Security 101 for Covered Entities, which details all of the mandatory and addressable standards.
What should covered entities, including employers on behalf of their plans, be doing now?
Many of these tasks could have already been accomplished through the efforts to ensure compliance with the HIPAA privacy rules. Most of the analyses should result in assurances that the security rules are being complied with, or that certain changes need to be made, given the unique nature of electronic information.
The information contained in this article is not intended to be legal, accounting or other professional advice. We assume no liability in connection with its use, nor are these communications directed to specific situations.
CPN, Inc. recognizes the importance of effective communication to insure a successful plan experience. There are some very specific and important policies that are essential in order to avoid the suspension of a participant's take care® card and they require that each participant maintain their personal FSA and/or HRA account. Following these procedures will keep the participant from receiving notice stating they are responsible for paying out of their own personal pocket a non-allowed charge that was made with their take care card.
Below are reminders to help avoid this from happening in the future. These seem to be the most over looked instances CPN comes across every plan year. We will continue to provide such information in hopes to diminish these occurrences in the future.
HELPFUL REMINDERS:
~ Participants must not use their current take care card to pay for previous plan year dates of services.
(Example: John Doe takes his 2011 take care card and swipes it on March 29th to pay a medical bill for 2010 dates of service. Rather it was paid from his FSA or HRA plan, once CPN receives the proper documentation for substantiation, the amount charged must therefore be adjusted and a letter is generated to the participant stating they are now responsible for paying CPN this amount.)
How can the participant prevent this?
The participant may avoid this by simply double checking what bills they are paying using their take care card. Most companies allow a specific grace period at the end of their previous plan year in order to claim such dates of service. Participants may check with their Benefits/HR department for their company's end of plan year grace period for their FSA and/or HRA plan year.
~ Proper documentation needed for expenses paid using their take care card against an FSA and/or HRA plan.
What happens when a balance due is created?
Keep in mind, if balance dues (any adjusted charge amount that requires a participant to pay back to CPN) are not paid within a timely manner, this will cause the participant's card to be put on a temporary suspended status until payment has been made. Participants have several options of paying back their balance due.
CPN
PO Box 1748
Cordova, TN 38088
Attn: Debit Card Repayment
What occurs when a balance due's not paid?
CPN allows ample time for a participant to pay back their balance due. After the end of a Plan Year, CPN will notify the main contact person for the client and will give them an option to try and contact their employee and collect the balance due before further action is required. A client may view at any time from their company EFlexOnline account a list of participants who currently have an outstanding balance due and may address this with their employee(s) at their discretion. CPN does provided the initial letter to the participant's home address with details on the participant's balance due information.
CPN does not like to suspend take care cards at any time. CPN does provide detailed information such as their company's Poicy and Procedures with information for each participant to help maintain their account activity throughout their plan year.
As mentioned in the Policy and Procedures, each participant may create their personal MyFlexOnline account which supplies their current account balance as well as which charges they have made that require a follow up document as described above.
For those who do not have internet access and still opt for the take care card have the option of calling into CPN's customer service, Monday-Friday (8am-4pm, CST) to inquire if they have any charges that require follow-up documentation.
~ CPN Customer Service: 901.756.8244 (toll free 800.737.0125)
If any participant needs a copy of their company's FSA and/or HRA policy and procedures, they may contact their Benefits/HR department.
In the race between all types of consumer-directed health plans it looks like Heath Savings Accounts (HSAs) are becoming a real contender. Since first making its appearance in 2004 – HSAs were at first impossible to set up because the qualified High-Deductible Health Plan (HDHP) described by the Internal Revenue Service (IRS) did not exist.
Secondly, employers did not know they could offer Health Flexible Spending Accounts (HFSAs) and Health Reimbursement Arrangements (HRAs) along with an HSA.
Depending on employers’ goals and objectives, they may desire to offer an HFSA plan or an HRA. This article will answer the question: How can an employer offer an HSA, a Health FSA and an HRA program and still comply with every law surrounding these benefits?
HSAs are individually-owned healthcare payment accounts that allow the participant to contribute untaxed dollars. Interest or dividends accumulate tax-free; and when an individual pays for qualified medical expenses, there will be no additional tax consequences.
In order to have an HSA, individuals must be covered by a qualified HDHP. The HDHP must satisfy minimum deduction amounts with certain out-of-pocket maximums. Account holders may not be covered by any other insurance plan that is not a general-purpose Health FSA or HRA. And a spouse’s coverage by general-purpose Health FSA or HRA can also bar a participant from contributing to an HSA. But participants may obtain narrowly-defined "permitted insurance" or "permitted coverage" products, such as policies that provide dental, vision, accident, disability, and long-term care benefits. The HDHP, for non-grandfathered plans, also provide "preventive care" reimbursements that are below the minimum deductible amount or without a deductible.
This is a discussion of "other" insurance coverage. Specifically – health coverage provided through a Section 125 HFSA or an HRA and Limited-Purpose HFSAs and HRAs, Suspended HRAs, Post-Deductible HFSAs and HRAs and Retirement HRAs.
Limited-Purpose HFSA and HRA
In this program the HFSA and the HRA are limited to payment of only permitted coverage items like vision and dental expenses until the statutory minimum annual deductible is met. The limited-purpose HRA could also compensate for permitted insurance plans that cover a specific disease or illness or that provides a fixed amount per day of hospitalization.
This range of benefits does not breach the "no other insurance" rule of HSAs. It should also be noted that the limited-purpose programs could pay for preventive care before the statutory minimum annual deductible is satisfied. The definition of preventive care was described in IRS Notice 2004-23.
Suspended HRA
A suspended HRA is an employer-funded HRA that pays all qualified healthcare expenses for eligible employees. For an otherwise HSA – eligible employee, an election is made before the beginning of the HRA coverage period to forgo, or suspend, all payments from the plan that are not for permitted coverage, permitted insurance or preventive care expenses. Thus, barring reimbursement at any time of otherwise eligible expenses from the HRA and retaining entitlement to make tax-free contributions to the HSA.
The employer would continue to "fund" this employee’s HRA account although; the employee has elected to suspend full usage of the arrangement. When the employee ends the suspension period, they would no longer be eligible to make HSA contributions, because they are free to receive reimbursement of all healthcare expenses from the HRA.
Post-Deductible HFSA or HRA
With these benefits, the HFSA and HRA are also considered to be high-deductible insurance products. Remember the rule about no other insurance coverage? These HFSA/HRA plans won’t kickoff until after the minimum deductible is met. Participant reimbursement from the HFSA or HRA doesn’t have to wait until the HDHP’s deductible amount is met, but the "minimum" deductible standard must be met.
In addition, although the deductibles of the HDHP and the other coverage may be satisfied independently by separate expenses, no benefits may be paid before the minimum annual deductible is met, which is $1,200 for single coverage and $2,400 for family coverage in 2011.
Retirement HRA
The retirement HRA can accumulate funds during an employee’s working years and make those dollars available to the individual upon retirement. It may not reimburse any healthcare expenses, except for permitted coverage, permitted insurance and preventive care expenses during an individual’s period of employment. When the retirement HRA begins to make reimbursements, the participant is ineligible to make further contributions to their HSA.
Mix and Match
Combinations of the above plans can also work. For instance, an employee could be covered by a limited-purpose HFSA and a retirement HRA and still be eligible to make contributions to an individual HSA arrangement.
Yes – you can have it all. Employers sometimes don’t understand that they can and should have a general-purpose HFSA along with a limited-purpose HFSA and an HSA. Why would they want to do that? Some employees simply don’t want to establish and maintain an HSA. They are familiar with how the HFSA works – it pays their large expenses even before they have made all their contributions for the year, unlike Health Savings Accounts, which limit distributions to amounts already accumulated. There are also extra tax forms to complete. So make sure your employers include the full range of benefits in their cafeteria plan, including a general-purpose HFSA and dependent care assistance account.
Contributions vs. Disbursements
Don’t confuse being "eligible to make contributions" to an HSA with "eligible for receive payments" from the HSA. The HSA can pay for the qualified medical expenses of the account holder and his or her spouse, and dependents even though the account holder is no longer eligible to make contributions to the HSA. Another note – the spouse and dependents do not need to be covered by the underlying HDHP in order to have their healthcare expenses reimbursed from the HSA.
Employee Education
Employee education is a must when blending benefits with so many special rules. Start with the basic information about the employer’s plans, and try to keep educational materials simple and to the point.
The information contained in this article is not intended to be legal, accounting or other professional advice. We assume no liability in connection with its use, nor are these communications directed to specific situations.
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