Compliance Services

by | Sep 13, 2021

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

What designates an IRS “Change in Status”?

by | Sep 13, 2021

  • Change in legal marital status (marriage, death of spouse, divorce, legal separation, annulment)
  • Change in number of tax dependents (birth, death of dependent, adoption or placement for adoption)
  • Change in dependent’s eligibility
  • Change in employment status of employee, spouse or dependents
  • Other changes that may permit an election change under the Dependent Care FSA are:
    • Change of dependent care provider
    • Change of rate charged by unrelated dependent care provider
    • Child attaining age 13
  • Election changes must be consistent with the event. If you experience a Change in Status, please review your Summary Plan Description, as it will provide you with important information on the deadline for reporting this event.

What is “pre-tax”?

by | Sep 13, 2021

When you participate in a payroll deduction program through your employer, deductions can be taken from your payroll before calculating your taxable federal income, FICA (Social Security and Medicare) tax and for most states, taxable state income. By taking deductions pre-tax, you reduce the dollars on which you are taxed and, as a result, reduce your total tax bill.

What happens to your HSA when you die?

What happens to your HSA when you die?

by | Oct 26, 2018

When you set up a Health Savings Account with NueSynergy, we ask you to select a beneficiary. You should choose carefully because this will determine what happens to your HSA when you pass away. The rules are explained in IRS publication 969 (page 9).

If your spouse is the designated beneficiary

If your spouse is the designated beneficiary of your HSA, the account will be treated as your spouse’s HSA after your death. This means that your spouse will be able to use the funds for eligible medical expenses even if he or she does not have an HSA-qualified health plan. Of course, only eligible individuals can contribute to an HSA, but anyone with an HSA, including your spouse after your death, can spend the funds whether they’re eligible or not.

If your spouse is not the designated beneficiary

The account stops being an HSA, and the fair market value of the HSA becomes taxable to the beneficiary in the year in which you die.
If your estate is the beneficiary, the value is included on your final income tax return.
The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death.

What happens to your HSA when you die?

A quick and easy guide to ensure COBRA compliance

by | Aug 8, 2018

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a complex and detailed law protecting employees and qualified beneficiaries once they have been removed from their group health coverage due to a qualifying event. Despite its complexity, employers, employees and plan administrators are still accountable for staying in compliance with it.

One important aspect of staying compliant is awareness of the law’s key requirements and deadlines. With several various requirements and each requirement having a specific time span, saying it can be difficult to follow is an understatement. This a quick and easy guide to some basic COBRA compliancy requirements you may have overlooked.

First and foremost, we have listed qualifying events and which entity is responsible for notifying the plan administrator in each circumstance:

The employer is responsible for notifying the plan administrator within 30 days if the qualifying event is employee death, termination, reduction of hours, eligibility for Medicare or bankruptcy of a private-sector employer.

OR

The qualified beneficiary is responsible for notifying the plan administrator if the qualifying event is divorce, legal separation, or a change in dependent status. The time limit for this notice is determined by the plan administrator, but must be at least 60 days.

Furthermore, we have outlined 5 additional key requirements and their deadlines to make your COBRA compliancy as easy as possible.

After being notified of the qualifying event, the plan administrator has 14 days to provide participants with an election notice.
You must provide the covered employee and their spouse a general notice informing them of their COBRA rights within the first 90 days of the coverage.
The plan must provide a Summary Plan Description to the employee within 90 days of them participating in the plan.
The qualified beneficiaries must have a minimum of 60 days to choose to elect COBRA or not.
COBRA offers a maximum coverage time of 18 months, 29 months, or 36 months depending on the qualifying event. Special circumstances, like disability or a second qualifying event, can extend an 18 month coverage.
Outside of meeting deadlines, there are other specific standards that must be met for continuation coverage. For example:

The provided coverage must be identical to the plan the qualified beneficiaries were covered under prior to COBRA.
In the case the employee is required to pay for the continuation coverage, the cost can only be 102% of the full cost of the plan. The additional 2% may be charged as an administration fee.
If the coverage is terminated early, the plan must give notice to the plan participant as soon as possible and the notice must provide more detailed information on the termination like when it will be terminated and why.
Now you have the basics to start ensuring COBRA compliancy in your business practices. For more specific information or further questions, the Department of Labor produced a guide for employers dealing with COBRA that you can find here.