by Lexi Garcia | Dec 28, 2023 | Blog
QUESTION: Our company will soon begin offering coverage under our group health plan to employees’ domestic partners. What rights do domestic partners have under COBRA? May terminating employees elect to continue coverage for their domestic partners?
ANSWER: A terminating employee who elects to continue group health plan coverage under COBRA may also elect coverage for a domestic partner who was covered under the plan immediately before the employee’s termination. The domestic partner’s COBRA coverage will be contingent on the employee’s, meaning that the domestic partner will be entitled to coverage until the employee’s COBRA coverage ends (e.g., for failure to pay required premiums or at the end of the maximum coverage period). This is based on the general principle that COBRA coverage must ordinarily be the same coverage that the qualified beneficiary (in this case, the terminating employee) had on the day before a qualifying event. In addition, under general principles, a qualified beneficiary receiving COBRA coverage under a plan that provides domestic partner benefits would have the right to add an otherwise eligible domestic partner to his or her COBRA coverage at open enrollment if active employees are permitted to do the same.
That being said, domestic partners—unlike spouses—do not qualify as qualified beneficiaries under COBRA and, therefore, do not have independent COBRA rights. But if you wish to provide continuation coverage rights like those provided to spouses, you may do so through plan design. Many employers choose to extend “COBRA-like” rights to domestic partners, including the right to make continuation coverage elections independent of the employee (e.g., upon the employee’s termination of employment or upon termination of the domestic partnership). In general, sponsors of self-insured plans may have more flexibility in this area than sponsors of insured plans, who must obtain agreement from their insurers before they can provide fully equivalent continuation coverage rights. As you implement domestic partner coverage, you will want to consult with your insurer or stop-loss carrier, as applicable, and confirm that your plan document and summary plan description explicitly address COBRA and other continuation coverage rights and any notice requirements that will be imposed (such as the requirement to notify the plan within a specified period that a domestic partnership has terminated).
Source: Thomson Reuters
by Lexi Garcia | Dec 28, 2023 | Blog
The IRS has announced the optional 2024 standard mileage rates for business, medical, and other uses of an automobile, and the 2024 vehicle values that limit the application of certain rules for valuing an automobile’s use. For 2024, the business standard mileage rate is 67 cents per mile (up from the 65.5-cent rate that applied during 2023). The rate when an automobile is used to obtain medical care—which may be deductible if it is primarily for, and essential to, the medical care—is 21 cents per mile for 2024 (down from the 22-cent rate that was in effect during 2023). The same 21-cent rate will apply for deducting automobile expenses that are moving expenses. For taxable years beginning after 2018 and before 2026, however, the moving expense deduction is available only for certain moves by members of the Armed Forces on active duty (see our article). The 2024 rate for charitable use of an automobile is 14 cents per mile (unchanged from 2023).
Standard mileage rates can be used instead of calculating the actual expenses that are deductible. For example, the business standard mileage rate can be used instead of determining the amount of fixed expenses (e.g., depreciation, lease payments, and license and registration fees) and variable expenses (e.g., gas and oil) that are deductible as business expenses. Only variable expenses are deductible as medical or moving expenses, so the medical and moving rate is lower. Parking fees and tolls related to use of an automobile for medical or moving expense purposes may be deductible as separate items. Fixed costs (e.g., depreciation, lease payments, insurance, and license and registration fees) are not deductible for these purposes and are not reflected in the standard mileage rate for medical care and moving expenses. These and other details about using the standard mileage rate can be found in Revenue Procedure 2019-46.
The Notice also sets the maximum vehicle values that determine whether the cents-per-mile rule or the fleet-average valuation rule are available to value the personal use of an employer-provided vehicle. The cents-per-mile rule determines the value of personal use by multiplying the business standard mileage rate by the number of miles driven for personal purposes. The fleet-average rule allows employers operating a fleet of 20 or more qualifying automobiles to use an average annual lease value for every qualifying vehicle in the fleet when applying the automobile annual lease valuation rule. For vehicles (including vans and trucks) first made available to employees for personal use in calendar year 2024, the maximum vehicle value under both rules will increase to $62,000 (up from $60,800 in 2023). That amount will also be the maximum standard automobile cost for setting reimbursement allowances under a fixed and variable rate (FAVR) plan—an alternative to the business standard mileage rate that bases payments on data derived from the geographic area where an employee generally pays or incurs the costs of driving an automobile in performing services as an employee.
Source: Thomson Reuters
by Lexi Garcia | Dec 7, 2023 | Blog
QUESTION: We are wondering if our company’s medical plan might qualify for an exemption from the federal mental health parity requirements. What exemptions are available?
ANSWER: The federal mental health parity requirements apply to most employer-sponsored group health plans, but there are a few exceptions. As a reminder, the mental health parity rules under the Mental Health Parity Act (MHPA) and the Mental Health Parity and Addiction Equity Act (MHPAEA) require parity between medical/surgical benefits and mental health or substance use disorder benefits in the application of annual and lifetime dollar limits, financial requirements (such as deductibles, copayments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (such as number of treatments, visits, or days of coverage), and nonquantitative treatment limitations (such as medical management standards). However, some exceptions apply:
- Small Employer and Small Plan Exemptions. An exception is available for small employers that employed an average of at least two (one in the case of an employer residing in a state that permits small groups to include a single individual) but no more than 50 employees (100 or fewer employees for certain non-federal governmental plans) on business days during the preceding calendar year. When determining whether an employer qualifies as a small employer, certain related employers (including members of a controlled group or an affiliated service group) are treated as one employer. An employer not in existence throughout the preceding calendar year will determine whether it is a small employer based on the average number of employees that it reasonably expects to employ on business days during the current calendar year. There is also an exception for plans with fewer than two participants who were current employees on the first day of the plan year (including retiree-only plans). Note that if an employer provides coverage through a group policy purchased in the small group insurance market, that group policy will be required to cover mental health and substance use disorder services in a manner that complies with the mental health parity requirements.
- Increased Cost Exemption. An increased cost exemption is available for plans that make changes to comply with the mental health parity rules and incur an increased cost of at least 2% in the first year that the MHPAEA applies to the plan (generally, the first plan year beginning on or after October 3, 2009, unless a later date applies, e.g., because the plan ceased to qualify for an exemption) or at least 1% in any subsequent plan year. Plans that comply with the parity requirements for one full plan year and satisfy the conditions for the increased cost exemption are exempt from the parity requirements for the following plan year (i.e., the exemption lasts for one plan year). After that year ends, the plan must again comply with the parity requirements for a full year before it may (potentially) qualify for the exemption again. Given the complexity of administering coverage with an every-other-year exemption, use of the increased cost exemption may be impractical.
- Excepted Benefits. The federal mental health parity requirements do not apply to group health plans that provide only excepted benefits (e.g., certain limited-scope dental or vision plans and most health FSAs).
Self-insured non-federal governmental plans could previously opt out of the requirements, but the Consolidated Appropriations Act, 2023 eliminated that right as of December 29, 2022. No new mental health parity opt-out elections may be made on or after that date and opt-out elections expiring on or after June 27, 2023, may not be renewed.
Source: Thomson Reuters
by Lexi Garcia | Nov 30, 2023 | Blog
QUESTION: How does the general contribution limit for HSAs work? It is often stated as an annual limit, but isn’t it really monthly? Our company is thinking about changing to HDHP coverage that would allow our employees to make HSA contributions. If we decide to facilitate those HSA contributions or to make employer contributions, would we need to limit the amount of contributions made each month, or only annually?
ANSWER: The general contribution limit for HSAs is an annual limit determined by the number of months of HSA eligibility. The HSA of an individual who is HSA-eligible for the entire year can receive contributions (from any source) up to the full annual limit. If an individual is only HSA-eligible for a portion of the year, the annual limit is prorated based on the number of months of HSA eligibility. A special rule that can change this outcome is noted below.
For example, if Ana, a 40-year-old calendar-year taxpayer, is HSA-eligible for all of 2023 and has self-only HDHP coverage, her HSA can receive contributions of up to the maximum of $3,850 for 2023. (For coverage other than self-only coverage, the maximum for 2023 is $7,750.) If Ana were only HSA-eligible for April through September, however, her annual limit would be 6/12ths of the full annual limit, or $1,925. That $1,925 could be contributed in one month, or in any number of payments made on or after January 1, 2023, and on or before the filing due date (without extensions) for Ana’s 2023 federal tax return. Some or all of the permitted amount could be contributed during a month in which Ana is not HSA-eligible, based on her prior or anticipated months of HSA eligibility. (Of course, contributions could not be made until Ana’s HSA is established, if it wasn’t established by January 1st.) A similar proration rule applies to HSA catch-up contributions, which increase the general contribution limit for HSA-eligible individuals who have attained age 55 by the end of the taxable year. Thus, if Ana were at least age 55 by the end of 2023, and she were HSA-eligible for the entire year, her limit would be increased by $1,000. But if she were HSA-eligible for only 6 months of 2023, her catch-up contribution limit would be only $500.
Employers that facilitate employee contributions or make their own contributions to employees’ HSAs need not limit the amount actually contributed in each month, but they do have to track their employees’ HSA eligibility on a monthly basis so they can determine any prorated limit amount. Employers are only responsible for knowing how their own benefit programs affect HSA eligibility and whether an employee is eligible for catch-up contributions. They need not determine whether employees have disqualifying coverage from other sources or how much has been contributed to employees’ HSAs by other means.
As noted above, special contribution rules can apply when determining a particular employee’s limit. One of these is the “full contribution rule,” which allows calendar-year taxpayers to be treated as HSA-eligible for the entire year if they are HSA-eligible on December 1st, subject to certain conditions that include remaining HSA-eligible for at least a 13-month testing period. There is also a special rule for married individuals if either spouse has family HDHP coverage.
Source: Thomson Reuters
by Lexi Garcia | Nov 21, 2023 | Blog
A DOL, HHS, and IRS request for information (RFI) is seeking input about how the preventive health services mandate applies to over-the-counter (OTC) preventive items and services, including the potential benefits and costs of requiring plans and insurers to cover these items at no cost without a provider’s prescription. Agency guidance has previously advised that OTC items and services generally must be covered without cost-sharing only when prescribed by a provider.
The RFI seeks information on current access to and utilization of OTC preventive products, as well as operational challenges for plans, insurers, third-party administrators, and pharmacy benefit managers. For instance, the request asks about operational challenges that may be associated with using telepharmacies and mail orders within and across states or localities. The agencies are also interested in “lessons learned” from providing coverage for OTC COVID-19 diagnostic tests during the COVID-19 public health emergency. The RFI explains that the agencies are particularly focused on OTC preventive care items that can be purchased without a prescription now or in the future, such as contraceptives, tobacco-cessation products, folic acid during pregnancy, and breastfeeding supplies.
Click here for the full request.
Source: Thomson Reuters
by Lexi Garcia | Nov 10, 2023 | Blog
The IRS announced 2024 contribution limits for all Flexible Spending Account (FSA) plans. Below is an overview of the limit increases across all the types of FSAs except for Dependent Care FSAs, which remain the same at $5,000 per year.
Health Flexible Spending Account
The Health FSA, which provides employees the ability to set aside money on a pre-tax basis to pay for eligible medical, dental, and vision expenses will have an increase to its contribution maximum from $3,050 to $3,200 for 2024. The new contribution limit will also apply to the Limited Purpose FSA which reimburses eligible dental and vision expenses. Limited Purpose FSA
limits will also increase from $3,050 to $3,200 for 2024.
Carryover Limit
The FSA Carryover limit provides employers the option to transfer a maximum amount 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. The carryover limits for this account will increase from $610 to $640 for 2024.
Commuter Benefits
Commuter Benefits help employees pay for certain parking, mass transit and/or vanpooling expenses with pre-tax dollars. The contribution limits for this account will increase from $300 to $315 for 2024.
Adoption Assistance
The Adoption Assistance FSA helps employees pay eligible adoption expenses such as agency fees and court costs by contributing to the account with pre-tax money from their paycheck. The contribution limits for this account will increase from $15,950 to $16,810 for 2024.
For more information about this major change and how it may impact you, read our latest handout.
