by admin | Jul 12, 2022 | Blog
As you may be aware, a Health Savings Account (HSA) is a great resource to help pay for medical expenses and premiums. But what happens to an HSA once someone enters retirement? Here is what you need to know.
- If you are enrolled in Medicare or Medicaid, you’re no longer eligible to contribute to an HSA.
- If you are Medicare eligible, but aren’t enrolled in Medicare, you can contribute to an HSA by enrolling in an HSA-qualified High Deductible Health Plan (HDHP). This type of health insurance plan has lower monthly premiums than traditional health insurance plans and can be combined with an HSA.
- If a distribution from an HSA is used for purposes other than a qualified medical expense, the amount withdrawn is subject to both income tax and a 20% penalty. However, once a person reaches the age of 65 years old or older, the amount withdrawn for non-medical purposes is treated as retirement income and is subject to normal income tax.
by admin | Jul 11, 2022 | Blog
The U.S. Supreme Court has rejected a challenge to the constitutionality of Mississippi’s Gestational Age Act, which prohibits performing or inducing an abortion after 15 weeks of pregnancy (as determined by probable gestational age) except in limited circumstances. Previously, a federal trial court and the Fifth Circuit appellate court had each ruled that the law was unenforceable based on the Court’s precedents establishing a constitutional right to abortion up to the point of fetal viability (primarily Roe v. Wade and Planned Parenthood of Southeastern Penn. v. Casey). The Court’s decision expressly overrules Roe and Casey, concluding that the Constitution “does not prohibit the citizens of each State from regulating or prohibiting abortion.” Explaining that, absent a fundamental constitutional right to abortion, abortion laws are analyzed like other state laws governing health and welfare and must be sustained if there is a rational basis on which the legislature could have thought that the law would serve legitimate state interests, the Court held that the Mississippi law met that test.
EBIA Comment: As a result of this ruling, many states’ laws (some of which have already taken effect) will prohibit abortion or impose greater restrictions than were permissible under Roe and Casey. This may raise a variety of issues for employee benefit plan sponsors. For instance, it is widely reported that employers have expressed an intent to assist employees in accessing abortion services, such as by covering employees’ expenses if they need to travel for an abortion. Among other considerations, these employers will need to weigh the effect of state laws that may seek to impose civil or criminal sanctions on anyone—including residents of another state—assisting an individual in obtaining an abortion.
Furthermore, employers will have to consider whether to provide such benefits on a tax-favored basis (which limits the type and amount of expenses that may be covered) and whether to use an existing plan or establish a separate arrangement. Each approach will raise different considerations, including compliance with otherwise applicable group health plan requirements; the need to amend existing plan terms, related insurance or administrative services contracts, and employee communications; and whether a separate arrangement would create a new plan independently subject to ERISA and other rules. Broader issues also loom for health plan benefits, such as whether existing coverages remain in compliance and whether any proposed changes comply with, for example, HIPAA (and other federal privacy laws) and mental health parity requirements (if travel benefits are provided for this medical procedure but not for mental health treatment), as well as potential preemption of the various state laws by ERISA or other federal laws. Employers should seek the advice of experienced employee benefits counsel as they consider their options.
Source: Thomson Reuters
by admin | Jun 30, 2022 | Blog
The IRS has announced a midyear increase in the standard mileage rates for business and medical use of an automobile, and for deducting moving expenses. For travel on or after July 1, 2022, the business standard mileage rate is 62.5 cents per mile (up from the original 2022 rate of 58.5 cents per mile). The rate when an automobile is used to obtain medical care is 22 cents per mile for travel on or after July 1, 2022 (up from 18 cents per mile). The rate for deducting automobile expenses that are moving expenses will also increase from 18 to 22 cents per mile for travel on or after July 1, 2022. 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. The rate for charitable use of an automobile will remain unchanged at 14 cents per mile.
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.)
EBIA Comment: Ordinarily, the IRS updates mileage rates only once a year, but occasionally it makes interim adjustments like this one, which reflects recent gasoline price increases. Transportation expenses that are deductible medical expenses generally can be reimbursed on a tax-free basis by a health FSA, HRA, or HSA. (To simplify administration, some employers’ health FSAs or HRAs exclude medical transportation expenses from the list of reimbursable items.)
Source: Thomson Reuters
by admin | Jun 20, 2022 | Blog
A flexible spending account (FSA) is a powerful tool to help save on health-care costs, tax-free. However, FSAs are often misunderstood. Here are four “fact or fiction” statements for current or future account holders to know about.
Fiction
- You have to be enrolled in a certain type of health plan to be eligible for an FSA.
- You can only spend up to the amount you have already contributed to your FSA.
- You will lose unused FSA dollars at the end of the plan year.
- You can only adjust your annual FSA election amount during open enrollment.
Fact
- In addition to medical expenses, FSA funds can also be used for vision, dental, and prescription expenses, as well as many additional eligible items such as first aid supplies.
- Your entire FSA election amount is available on the first day of the plan year.
- You can roll over up to $570 of unused dollars into the following plan year or receive a 2.5-month grace period after the plan year to use any remaining FSA dollars.
- You can make adjustments to FSA election amount in the case of a qualifying event such as marriage or birth of a child.
by admin | Jun 20, 2022 | Blog
A health FSA cannot treat employees’ premium payments for other health coverage as reimbursable expenses. Thus, for example, a health FSA cannot reimburse premiums for COBRA coverage, accidental death and dismemberment insurance, long-term or short-term disability insurance, or coverage under a plan maintained by an employer of the employee or the employee’s spouse or dependent. This rule would also prohibit the reimbursement of Medicare premiums.
Some employers are surprised by the rule that health FSAs cannot reimburse insurance premiums. A health FSA can only reimburse expenses for medical care and premiums for health coverage fall within that definition. However, IRS regulations state that insurance premiums cannot be reimbursed under a health FSA, and the IRS has repeatedly reaffirmed this rule.
Likewise, monthly retainer or similar access fees (e.g., a monthly fee that is payable whether or not the patient visits the office, perhaps accompanied by a reduction or elimination of the fees for actual office visits) generally are not reimbursable. In our view, they are like insurance because they are payable whether or not medical care is provided. Thus, they fall under the “no reimbursement of insurance premiums” rule that applies to health FSAs and should not be reimbursed. In 2020, the IRS issued proposed regulations regarding the treatment of amounts paid for direct primary care arrangements, health care sharing ministries, and certain other medical care arrangements. The preamble to the proposed regulations clarifies that payments for such arrangements typically would be viewed as payments for insurance. As such, health FSAs would be prohibited from reimbursing these fees based on the “no reimbursement of insurance premiums” rule. Payments for health care sharing ministries would also be treated as payments for insurance under the proposed regulations.
In a variation on this type of arrangement, patients receive preferential “extras” from their doctors in exchange for a fee (e.g., priority when scheduling appointments, 24-hour telephone access to the doctor, less time in the waiting area before appointments, a special waiting room, etc.). Fees for such programs generally should not be reimbursed either, because the payments would not be for medical care. The same is true of a monthly fee that a patient must pay in addition to any copays, deductibles, or other charges for office visits.
Note that there could be variations on these access fee arrangements under which some services might be reimbursable, depending on how the program is structured (for example, a fee might include payments that can be separately allocated to services that are for medical care). Additionally, health FSA administrators should not put too much stock in the particular name given to the fee (retainer fee, concierge fee, direct primary care, etc.).
These terms may mean different things for different providers. Consequently, it is important to determine exactly what services are involved before deciding whether to reimburse part of a fee—it may be necessary to ask the participant for additional substantiation. Where a fee relates solely to a specific rendered service (such as a copay) rather than being a retainer, part or all of it might qualify for reimbursement as an eligible medical care expense. For example, the preamble to the 2020 proposed regulations indicates that payments for a direct primary care arrangement that provide solely for an annual physical exam or an “anticipated course of specified treatments of an identified condition” would not be treated as insurance.
Source: Thomson Reuters
