by admin | Oct 12, 2022 | Blog
Two months ago, NueSynergy wrote about when carryover funds are available for new FSA members. Now, we are here to provide a more detailed look into what a carryover is, how it works and any questions you may have.
What it is and how it works
Starting on October 31, 2013, the U.S. Department of Treasury adjusted the “Use It or Lose It” rule, providing employers the option to offer a carryover plan to their employees. This option allows up to $570 of remaining FSA balances at a plan year’s end to carryover for use during the next plan year. This is available with Healthcare and Limited Purpose FSAs only.
Funds carried over into the following plan year will be available on the first day of the year unless enrolled in a Health Savings Account (HSA). If that’s the case, then those funds must be carried over into a Limited Purpose FSA.
Keep in mind, carryover funds are non-transferable. This means that if employees with a carryover are terminated mid-year, funds will be treated as any normal election and will be forfeited if COBRA is not elected.
Questions to consider
What happens if a participant has a carryover balance, but does not re-elect a Healthcare FSA?
Employers can choose to allow participants who do not enroll in the new plan year to either forfeit their previous plan year balance or default their carryover into an FSA for the new plan year.
What is the difference between a Healthcare FSA and a Limited Purpose FSA?
A Limited Purpose FSA can only be used for vision and dental expenses. It is intended to work in conjunction with an HSA. A Healthcare FSA covers all eligible medical expenses.
Is additional time offered to participants following the end of the plan year to incur expenses against the previous plan year?
Yes. This is called the grace period. It allows employees additional time, usually 2.5 months, to use remaining funds. If the carryover option is elected, it will replace the grace period option.
Can employers give participants the option of both a carryover and a grace period?
No. An employer can only provide one option within the same plan year.
by admin | Oct 11, 2022 | Blog
Several months ago, NueSynergy wrote about what happens to Flexible Spending Accounts (FSAs) when employment ends and what happens to Health Savings Accounts (HSAs) when retirement starts. Now, it’s time to talk about HSAs following the loss of employment. Here is what you need to know.
- Since HSAs are owned by participants and not employers, HSAs remain available even after employee termination. This means that HSAs can continue to be used for qualified expenses. However, the ability to continue contributing to this account depends on if a participant is enrolled in an HSA Qualified Health Insurance Plan either through an employer or an individual policy.
- All future salary redirections from HSAs will end.
- Any admin fees previously covered by employer will be withdrawn directly from HSA on the 1st of each month.
- Current NueSynergy HSA debit card will be turned off while a new one will automatically be issued at the physical address associated with account.
- Account and routing numbers associated with HSA will remain the same.
For further information about this topic, read here.
by admin | Oct 10, 2022 | Blog
The IRS has issued a draft version of the 2022 Form 8941 (Credit for Small Employer Health Insurance Premiums). The draft 2022 instructions have not yet been released. Form 8941 is used by small businesses and tax-exempt organizations to calculate the small business health care tax credit when they file their 2022 income tax returns.
Background knowledge
The form was added by the 2010 Patient Protection and Affordable Care Act, which provides a sliding scale income tax credit to small employers with fewer than 25 employees. To qualify for the credit, an employer must pay at least 50% of the cost of health care coverage for its workers at the premium rate for an employee who has single coverage (as opposed to family coverage). Because the eligibility formula is based in part on the number of full-time equivalent employees (FTEs), not the number of employees, many businesses will qualify for the credit even if they employ more than 25 individual workers. In addition, the credit is applied against an employer’s income tax liability, rather than its employment tax liability. An employer may not reduce employment tax payments (i.e., withheld income tax, Social Security tax, and Medicare tax) during the year in anticipation of the credit.
The credit is computed on IRS Form 8941. Both small businesses and tax-exempt organizations will use the form to calculate the credit. Afterwards, small business will then include the amount of the credit as part of the general business credit on its income tax return.
Draft changes
One of the three requirements for a small employer to be eligible for the tax credit is the average annual wage paid per FTE. The draft notes that for 2022, the average annual wage paid per FTE must be less than $58,000 (increased from $56,000 in 2021). Line 3 of Form 8941 is where an eligible small employer should enter the average annual wages paid for the tax year (from Worksheet 3, line 3), which must be a multiple of $1,000.
The draft also notes that if an eligible small employer had more than 10 FTEs and average annual wages of more than $27,000, the FTE and average annual wage limitations will separately reduce the employer’s credit. This may reduce the employer’s credit to zero even if the employer had fewer than 25 FTEs and average annual wages of less than $58,000.
Source: Thomson Reuters
by admin | Sep 28, 2022 | Blog
A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows account holders to set aside pre-tax dollars into an account to be used for eligible medical expenses. An FSA can help save money in the short-term and in the future. Below are five FSA facts you may not know:
Fact #1: FSA election amounts can be changed mid-year
If a participant experiences a change in status as defined by IRS regulations, such as marriage, divorce, birth, or death in the immediate family they may change election amounts at any time throughout the plan year.
Fact #2: An FSA is terminated if an account holder’s employment ends
While post-termination claim timelines can differ from plan to plan, a participant’s expenses incurred prior to their date of termination would be eligible for reimbursement. Any funds remaining at the end of the contribution run-out period would be subject to forfeiture.
Fact #3: There is no deadline for submitting claims
Depending on the employee’s plan design, claims can be submitted for reimbursement at any time during the same plan year that expenses are incurred. Also, participants may utilize either a grace period or carryover after the end of the plan year. Claims can be submitted for reimbursement at any time during the plan year in which expenses are incurred.
Fact #4: Over-the-counter (OTC) medications are eligible for reimbursement
This is true. In addition, OTC medications no longer need to be accompanied with a doctor’s prescription. Now, a participant must only submit a claim with the receipt for the OTC medicine.
Fact #5: A benefits debit card and claim filing are two ways to take funds out of an FSA
A simple swipe of the NueSynergy smart debit card is the most common way to use an FSA. Filing a claim through the NueSynergy participant portal, mobile app, or by email works too – however a detailed receipt is required. The receipt should include the provider’s name, service/item, amount, and the date of service. Once submitted and approved, reimbursement would be issued.
by admin | Sep 26, 2022 | Blog
The IRS has updated Notice 931 (Deposit Requirements for Employment Taxes) to include the tax deposit rules for the 2023 year.
The deposit schedule employers must use (i.e., monthly or semi-weekly) is based on the total tax liability they reported during the lookback period. For employers filing Form 941 (Employer’s Quarterly Federal Tax Return), an employer’s deposit schedule for 2023 is based on the lookback period beginning July 1, 2021 and ending June 30, 2022. An employer reporting $50,000 or less of Form 941 taxes for the lookback period is a monthly depositor, and an employer reporting more than $50,000 of Form 941 taxes is a semiweekly depositor.
An employer with a Form 941 tax liability of less than $2,500 during the current or preceding quarter, who does not incur a $100,000 next-day deposit obligation during the current quarter, is not required to make monthly or semiweekly deposits if the taxes are paid in full with a timely filed return. An employer accumulating a tax liability of $100,000 or more on any day during a deposit period must deposit the tax by the next “business day,” regardless of whether the employer is a monthly or semiweekly depositor. A “business day” is any day other than a Saturday, Sunday, or a “legal holiday.” The term “legal holiday” means any legal holiday in the District of Columbia.
The IRS considers a new employer’s tax liability to be zero, which makes a new employer a monthly depositor for the first year of business.
The lookback period for annual return filers (Forms 943, 944, 945, or CT-1) is the calendar year preceding the previous year. The lookback period for 2023 tax deposits is the 2020 tax year.
Adjustments: The lookback period is based on the tax liability as originally reported. If an employer subsequently files Form 941-X, 943-X, 944-X, 945-X, or CT-1X to correct errors on the original return, the corrections are not taken into consideration for purposes of the lookback period computation.
Source: Thomson Reuters
by admin | Sep 22, 2022 | Blog
Managing and reconciling premiums across multiple insurance carriers has become a tiresome and difficult act for many employers. As a result, employers have either limited employee benefits or have stopped performing audits entirely. NueSynergy offers a Combined Billing system that saves time and eliminates the stress employers often have when monitoring, reconciling, and submitting payments for their benefit carrier bills. Here’s how employers can utilize our service, plus the steps involved.
How Combined Billing helps employers
- Avoids managing premiums from multiple carriers
- Monitors their carrier bills for accuracy
- Reconciles their carrier bills and avoids overpayment of premiums
- Consolidates all carrier premiums
- Only submits one payment for all of their carriers
Steps taken
Step 1: NueSynergy receives initial and ongoing enrollment information from your benefits administration system into our proprietary software.
Step 2: Monthly statements from each carrier are pulled and audited using our software.
Step 3: The employer receives a single bill for all carriers along with a detailed report that includes enrolled employees, their benefit elections, individual premium amounts, and any identified discrepancy.
Step 4: NueSynergy will initiate one ACH debit to all carriers and remit payments in the amount due to each carrier.
