Compliance Services

Cobra Compliance – COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

Eligible Benefits – Health care Plans, Medical Spending Accounts, Dental Plans, Vision Plans, Hearing Plans, Prescription Drug Plans, Alcohol and Substance Abuse Plans, Mental Health Plans

Non-Eligible Benefits – Life Insurance, Disability Insurance, Retirement Plans, Vacation Plans

New Hires

Covered employees and covered spouses must be notified of their initial COBRA rights when they first join the plan.

COBRA Event

Covered individuals must be notified of their election rights to continue coverage after a qualifying event occurs. Employers have 30 days to notify the plan administrator (NueSynergy) when a loss occurs for any of the reasons listed above, except for divorce and change of status by a dependent. In those two instances, you have 60 days to notify the administrator. NueSynergy then has 14 days after notice from the Employer to notify the person who is entitled to COBRA coverage.

Qualifying events are events that cause an individual to lose their group health coverage. The type of qualifying event determines who the qualified beneficiaries are and the period of time that a plan must offer continuation coverage.

Qualifying events for covered employees if they cause the covered employee to lose coverage:

  • Termination of the employee’s employment for any reason other than gross misconduct
  • Reduction in the number of hours of employment

Qualifying events for a spouse and/or dependent child of a covered employee if they cause the spouse or dependent child to lose coverage:

  • Termination of the covered employee’s employment for any reason other than gross misconduct
  • Reduction in the hours worked by the covered employee
  • Covered employee becomes entitled to Medicare
  • Divorce or legal separation of the spouse from the covered employee
  • Death of the covered employee

Qualifying event for a dependent child of a covered employee if it causes the child to lose coverage:

  • Loss of dependent child status under the plan rules. Under the Patient Protection and Affordable Care Act, plans that offer coverage to children on their parents’ plan must make the coverage available until the adult child reaches the age of 26.

Payment Process:

Payment Amount – The amount a COBRA participant or their qualified beneficiaries are charged will not exceed the total costs paid by the employee and the employer, plus an additional 2 percent for administrative costs. The COBRA participant is typically responsible for paying the costs associated with COBRA continuation coverage.

Payment Timeline – When electing continuation coverage, the COBRA participant is not required to send any payment with their election form. They are required, however, to make an initial premium payment to NueSynergy within 45 days after the date of their COBRA election (that is the mail date on the election form, if using first-class mail). Failure to make any payment within that period of time could cause the COBRA participant to lose all COBRA rights.

Payment Method – NueSynergy will send a payment booklet with set premium due dates for the remaining months within the plan year. The COBRA participant will make their monthly premium payments by mailing a check or online via ACH.

COBRA Renewal – When the current group plan renews, an open enrollment notice with new plan rates and new payment book is sent to the COBRA participant should they choose to remain on COBRA continuation coverage.

Note: Some employers may subsidize or pay the entire cost of health coverage, including COBRA coverage, for terminating employees and their families as part of a severance agreement. If you are receiving this type of severance benefit, talk to your plan administrator about how this impacts your COBRA coverage or your special enrollment rights.

Compliance

Section 125 “Cafeteria” Plan – If offering a Flexible Spending Account as part of a benefits program, employers will also need to have a Section 125 Plan Document in place. A Cafeteria Plan (includes Premium Only Plans and Flexible Spending Accounts) allows for the pre-taxing of qualified employee insurance premiums and the employees’ use of pre-tax funds to pay for eligible expenses related to medical, dependent care, adoption, and transportation. Funds contributed pre-tax through these plans are not subject to federal, state, or Socials Security taxes. Participants in these plans can save on average between $0.25 to $0.49 on dollar contributed.
Employers also benefit as a result of the pre-tax advantage of these plans. For every participating employee, the employer will see a tax savings from reduced FUTA, FICA, SUTA, and Worker’s Compensation taxes.

If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

Premium Only “POP” Plan – For employers wanting to allow employees to deduct their portion of a company sponsored insurance premium pre-tax, they will need to implement a Premium Only Plan or “POP”. The premiums for the following types of group coverage can be paid pre-tax using a POP plan: Medical, Dental, Vision, Disability, Term Life Insurance
Employers and employees both benefit by having a POP plan in place. Employers experience a reduction in payroll taxes, as well as savings of 7.65% on FICA taxes. Employees are able to reduce their taxable income and increase their take home pay.
If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

Section 105 Plan Document – A Section 105 Plan Document will need to be drafted if implementing an employer self-funded Health Reimbursement Arrangement (HRA) as part of a group benefits program. These plans offer a sponsoring employer a level of flexibility in design and reimbursement guidelines. As an employer self-funded plan, any reimbursement for eligible expenses are tax deductible for the employer. They’re also tax free for the employee. The following are several key components an employer should be aware of when ensuring an HRA plan is compliant: HIPAA Privacy Rules, COBRA Rules, ERISA Plan Rules, Medicare Secondary Payer (MSP) provisions, Affordable Care Act (ACA) Rules
If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

Discrimination Testing – As a plan sponsor of a Section 125 or Section 105 plan, an employer is required to perform discrimination testing each year on their plan. The IRS-required tests are designed to ensure that Key and Highly Compensated Employees within the company receive nontaxable benefits in balance with all employees.
In order to perform the discrimination testing, five separate tests are run on the plan:

Eligibility Test – At least some non-highly compensated employees must be eligible to participate in the plan.
Contributions Test – All employees should receive the same amount of employer contributions
Benefits Test – The eligibility rules should be the same for all employees, and the same benefits must be provided to all employees.
Key Employee Concentration Test – This test compares the non-taxable health benefits provided to Key Employees to the non-taxable benefit provided to all employees. The value of non-taxable benefits provided to Key Employees cannot exceed 25% of the total non-taxable benefits provided under the plan.
55% Average Benefit Test – This test looks only at the dependent care portion of the FSA plan. The average dollar amount of benefits elected by non‐highly compensated employees must be at least 55% of the average dollar amount of benefits elected by highly compensated employees.

Remember, 2% or more shareholders in a “S” Corp, LLC or Sole Proprietor cannot participate (nor can spouses and/or relatives of owners) in the company-sponsored Section 125 or Section 105 plan. This rule applies to any insurance premiums that may be pre-taxed.

If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review.

WRAP Documents

A WRAP Document is a document that “wraps” around the insurance policy, so that the plan sponsor maintains compliance with ERISA. All plan benefits continue to be governed by the insurance policy; however, the WRAP Document supplements the information together, so the documents are compliant with ERISA. WRAP Documents eliminate gaps between the other plans supplied by the carriers so that the employer complies with ERISA regulations applicable to Summary Plan Descriptions (SPDs).

If you have any questions about the compliance of your plan documents or need help implementing them, please Click Here for a free plan document review

COBRA

Eligible Individuals:

  • Be enrolled in a group health plan whose sponsoring employer has over 20 employees
  • Experience a qualifying event
  • Or must be a qualified beneficiary of the person experiencing the qualifying event

Qualified Beneficiary:

Anyone covered under a group health plan on the day before an event that causes loss of coverage including:

  • Participating employees, including part-time employees
  • Their spouses
  • Their dependents
  • Retirees (unless they are eligible for Medicare)
  • Partners in a partnership

Non-Eligible Individuals:

  • An employee who is not yet eligible for your group health plan
  • An eligible employee who declined to participate in your group health plan
  • An individual who is enrolled for benefits under Medicare

(Ref. United State Department of Labor)

Commuter Benefits

Cost Savings
Setting aside pre-tax dollars helps cover commuting costs and increase your actual take home pay. The following example illustrates these savings.

Without Commuter Savings Account With Commuter Savings Account
Monthly Gross $3,750.00 $3,750.00
Pre-tax Contribution for Parking – $0.00 $280.00
Pre-tax Contribution for Transit – $0.00 $280.00
Adjusted Gross $3,750.00 $3,190.00
Taxes (28%) $1,050.00 $893.20
Take Home Pay $2,700.00 $2,296.80
Less Parking Costs $280.00 – $0.00
Less Transit Costs $280.00 – $0.00
Income After Commuting Costs $2,140.00 $2,296.80

Savings: $156.80 per month or $1,881.60 a year

Who Is Eligible

For employee eligibility: as with the Flexible Spending Accounts, eligibility in the Commuter Savings Accounts (CSA), only requires that you are an otherwise eligible employee of an employer that offers these accounts as part of their benefits program. A unique feature of the CSA is that there is not an “annual enrollment period” for the program. Eligible employees may enroll in or make changes to their contributions at any time throughout the year.

Contribution Limits

IRS MANDATED PRE-TAX CONTRIBUTION LIMITS

2022
Transit Expenses $280
Parking Expenses $280

 

Flexible Spending Account

Cost Savings

An individual earns $45,000 annually and elects to contribute $2,850 annually to a Healthcare FSA to cover out-of-pocket medical costs.

YOUR ESTIMATED FSA COST SAVINGS EXAMPLE

Without FSA With FSA
Gross Earnings $45,000 $45,000
FSA Contributions -$0.00 $2,850
Adjusted Gross Pay = $45,000 $42,150
FICA, Fed/State Taxes -$6,750 $6,322.50
Out-of-Pocket Medical Expenses -$2,700 $2,700 (covered by FSA)
Total Take Home $35,600 $33,127.50

TOTAL SAVINGS WITH THE FSA: $427.50

Who Is Eligible

Employee Eligibility

In general, an individual must simply be employed by an employer who offers one and be otherwise eligible for benefits. Note: Even if the eligible employee chooses not to enroll in their company’s health insurance (for example, if an employee chooses to be on their spouse’s insurance plan instead) they can still sign up for the FSA. Owners of the company can participate in the FSA solely on their tax filing status. Below is a summary of those rules.

  1. C-Corporation Owners – May participate in an FSA and receive reimbursements tax free. C-Corp owners may use their FSA to reimburse their medical expenses, as well as those of their spouse and dependent.
  2. Sole Proprietors – Cannot receive reimbursements tax-free. However, if the sole proprietor is married, and their spouse is a W-2 employee, then the spouse can receive the tax-free benefit. In this case, the FSA is set up in the spouse’s name and the sole-proprietor is listed as a dependent.
  3. Partners – Cannot receive reimbursements tax-free. However, if the partner is married, and their spouse is a W-2 employee (but not a partner), then the spouse can receive the benefit tax-free. In this case, the FSA is set up in the spouse’s name and the partner is listed as a dependent
  4. S-Corporation Owners – That own >2% of the company’s shares and their spouse, parents, children, and grandchildren, cannot receive reimbursements tax-free (reimbursements are subject to federal income tax withholding).
  5. LLC’s – Owner participation varies based on the way the LLC files taxes (as a Partnership, S-Corp, or C-Corp).

Contribution Limit

Annual Contribution Limits

FSA Plan Type 2022
Health Care $2,750
Limited Purpose $2,750
Dependent Care

 $5,000 
  – If you are married, filing a joint return or you are head of a house

 $2,500
If you are single or married, but filing separate

Adoption Assistance

$14,080
  – Phase-out income thresholds: Begin at $211,160 and end at $251,160

 

Health Reimbursement Arrangement

Who Is Eligible

General Eligibility – Typically all benefit eligible employees can participate in an HRA.

Plan Eligibility – Employers can also set additional eligibility rules for the HRA plan such as:

  • Limiting eligibility to a particular health plan as long as they do not discriminate in favor of highly compensated employees.
  • Cover only employees or cover employees and their dependents, as well as domestic partners as long as they meet the IRS Section 152 definitions.
  • Provide coverage to retirees.

(Note: Partners in a business, members of LLCs, and shareholders who own 2% or more in S-corporations, however, are not eligible to participate in the HRA.)

Contribution Limits
Funding Limits – There is no limit on the amount of money your employer can contribute to the HRA. Each year your employer may set the HRA limits based on the overall strategy and goals of the group health plan. Additionally, based on plan design, the maximum reimbursement amount credited under the HRA each year could be increased or decreased by amounts not used during a previous plan year.

  • HRAs are funded solely by the employer.
  • Contributions are not included in the employee’s income.
  • No federal income taxes or employment taxes on amounts your employer contributes to the HRA.

Plan Designs

The Health Reimbursement Arrangement provides employers with enormous flexibility when determining the plan design that best fits their needs and budget. Below are just a few examples of plans designs an employer could implement for their group.

HRA Type HRA Description HRA Example
Employee Pay First The employee pays their employer-defined portion of the out-of-pocket expenses. Once met, the employer funded HRA is activated and used to pay the remaining portion of the health plan deductible.  

Employee: $400 | HRA: $800

Employer Pay First The employer funded HRA is used to pay the first portion of the health plan deductible, then the employee pays the remaining balance of deductible expenses. HRA: $200 | Employee: $600
Employer GAP HRA The HRA employer pays the first portion of deductible expenses up to a limit defined by the plan. Next, the employee pays the remaining portion of the deductible expenses. The HRA employer is reactivated to reimburse a defined amount of co-insurance expenses after which the employee is responsible for the remaining portion of their co-insurance up to the out-of-pocket maximum. Employee: $400 | HRA: $800 | Employee: $400 
Employee Gap HRA The employee pays the first portion of deductible expenses up to a limit defined by the plan. Next, the HRA employer pays the remaining portion of the deductible expenses. The employee is then responsible for a defined amount of their co-insurance expenses before the HRA is reactivated and can be used to reimburse the remaining portion of their co-insurance up to the out-of-pocket maximum. HRA: $400 | Employee: $800 | HRA: $400 
Percentage Based Reimbursement The employer HRA reimburses the employee a percentage of their out-of-pocket deductible costs up to the employer defined HRA maximum amount. Employee: $500 | HRA (75%) Employee (25%): $1,000 
Co-Pay Share The employer can set a specific dollar amount to reimburse for certain co-pays. Dr. Office: $25 | RX: $50 | ER Visit: $75 
Premium Reimbursement Employers with less than fifty (50) full time employees are able to provide reimbursement through the HRA up to $4,950 for individual plans and $10,000 for family plans per year to help their employees purchase individual health insurance plans that best fits their unique needs.

HRA (Individual) $4,950 | Employee (Individual): $1,050

Total Premium: $6,000

HRA (Family): $10,000 | Employee (Family): $2,000

Total Premium: $12,000

 

 

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