by admin | May 29, 2025 | Blog
As healthcare costs continue to rise, many large employers are reevaluating their group health plan offerings. A common cost-saving strategy is to exclude spousal coverage. But does this decision expose employers to penalties under the Affordable Care Act (ACA)? Let’s break down what the 2025 ACA employer shared responsibility rules say about spousal coverage, and how FSAs, HRAs, and HSAs fit into the compliance picture.
ACA Employer Shared Responsibility: The Basics
Under the ACA, Applicable Large Employers (ALEs)—those with 50 or more full-time employees—must offer minimum essential coverage to at least 95% of their full-time employees and their dependents to avoid penalties
- Dependents are defined as biological and adopted children under age 26.
- Spouses are not considered dependents under ACA rules, so employers are not required to offer coverage to spouses to avoid penalties.
Spousal Coverage and ACA Penalties
If an employer excludes spouses from its health plan:
- No penalty applies, even if the spouse obtains subsidized coverage through the Exchange.
- Penalties are only triggered if a full-time employee receives a premium tax credit due to the employer failing to offer affordable, minimum-value coverage.
2025 ACA Penalty Amounts
- 4980H(a) Penalty: $2,900 per full-time employee (minus the first 30), if coverage is not offered to 95% of full-time employees and their dependents.
- 4980H(b) Penalty: $4,350 per full-time employee who receives subsidized Exchange coverage because the offered coverage was unaffordable or did not meet minimum value.
How FSAs, HRAs, and HSAs Impact ACA Compliance
While FSAs (Flexible Spending Accounts), HRAs (Health Reimbursement Arrangements), and HSAs (Health Savings Accounts) are not substitutes for minimum essential coverage, they can play a supporting role in ACA compliance:
1. FSAs (Flexible Spending Accounts)
- FSAs are employee-funded accounts used for out-of-pocket medical expenses.
- They do not count as minimum essential coverage but can help reduce employees’ healthcare costs.
- Employers offering limited-purpose FSAs alongside HDHPs (High Deductible Health Plans) must ensure the HDHP meets ACA affordability and minimum value standards.
2. HRAs (Health Reimbursement Arrangements)
- ICHRA (Individual Coverage HRA) can be used by employers to reimburse employees for individual market premiums.
- If structured properly, an ICHRA can satisfy ACA employer mandate requirements, provided the reimbursement amount is sufficient to make individual coverage affordable.
3. HSAs (Health Savings Accounts)
- HSAs are paired with HDHPs and are employee-owned.
- While HSAs themselves don’t satisfy ACA requirements, the HDHP must meet minimum value and affordability standards.
- Employer contributions to HSAs can help reduce the net cost of coverage, improving affordability calculations.
Excluding spouses from your group health plan does not violate ACA rules and will not result in employer shared responsibility penalties, even if those spouses seek subsidized coverage elsewhere. However, employers must ensure that full-time employees and their dependent children are offered affordable, minimum-value coverage.
FSAs, HRAs, and HSAs can enhance your benefits strategy and support ACA compliance, but they must be used in conjunction with a compliant health plan—not as a replacement.
Source: Thomson Reuters
by admin | May 22, 2025 | Blog
As employers prepare to offer health flexible spending accounts (FSAs), a common question arises: Are health FSAs administered by third-party administrators (TPAs) subject to HIPAA’s privacy and security rules? The short answer is yes—and here’s why that matters.
Understanding HIPAA’s Scope for Health FSAs
Under HIPAA, a health FSA is considered a group health plan, which makes it a covered entity subject to HIPAA’s privacy and security rules. The only exception is for self-administered FSAs with fewer than 50 participants—a rare scenario for most employers.
If your company uses a TPA to manage FSA claims, this exception does not apply. That means your health FSA must comply with HIPAA’s full privacy and security requirements.
Why Fully Insured Plans Are Different
Employers with fully insured major medical plans often take a “hands-off” approach to protected health information (PHI), receiving only summary or enrollment data. This limits their HIPAA obligations because the insurer, not the employer, handles PHI.
However, most health FSAs are self-insured, and the “hands-off” exception doesn’t apply. Even if a TPA handles the day-to-day administration, your company is still responsible for HIPAA compliance.
What Employers Must Do
To comply with HIPAA when offering a TPA-administered health FSA, employers should:
- Enter into a Business Associate Agreement (BAA) with the TPA, outlining how PHI will be handled.
- Implement privacy and security policies for the health FSA.
- Limit internal access to PHI to only those who need it for plan administration.
- Train staff who may come into contact with PHI.
- Ensure electronic PHI (ePHI) is protected under HIPAA’s security rule.
Minimizing Risk and Burden
While you can’t avoid HIPAA obligations entirely, you can minimize your exposure by delegating as much as possible to the TPA. This reduces the amount of PHI your company accesses and simplifies compliance.
If your company is offering a health FSA administered by a TPA, you are subject to HIPAA’s privacy and security rules. Taking proactive steps to comply—especially by working closely with your TPA—will help protect employee data and reduce legal risk.
Source: Thomson Reuters
by admin | Apr 17, 2025 | Blog
HIPAA special enrollment rights allow eligible employees to enroll in health plans outside the regular enrollment period due to specific life events. These rights also impact Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs), and Flexible Spending Accounts (FSAs).
When and Who Receives the Notice?
Notices must be provided to all eligible employees at or before the time they are first offered the opportunity to enroll. This includes employees who:
- Decline coverage due to other health insurance and later lose eligibility.
- Become eligible for state premium assistance under Medicaid or CHIP.
- Acquire a new spouse or dependent by marriage, birth, adoption, or placement for adoption.
What Should the Notice Include?
The notice must describe special midyear enrollment opportunities and inform participants about deadlines for enrollment requests—30 days for most events, 60 days for Medicaid or CHIP-related events.
Distribution Methods
Include the notice with plan enrollment materials and, if conditions are met, distribute it electronically.
Impact on HRAs, HSAs, and FSAs
Special enrollment rights can affect contributions and usage of HRAs, HSAs, and FSAs:
- HRAs: Adjust contributions or usage to align with new coverage.
- HSAs: Review HSA contributions and ensure compliance with IRS rules.
- FSAs: Update FSA elections to reflect changes in coverage or dependent status.
Consequences of Non-Compliance
Failing to provide the notice timely can lead to enrollment issues and potential penalties from the Department of Labor (DOL).
Providing HIPAA special enrollment notices is essential for compliance and helps employees make informed decisions about their health coverage and financial accounts. Understanding the impact on HRAs, HSAs, and FSAs ensures that employees can effectively manage their health-related financial accounts in conjunction with their health plan enrollment.
Source: Thomson Reuters
by admin | Apr 10, 2025 | Blog
If your company sponsors a self-insured health plan, you might be wondering whether you still need to pay Patient-Centered Outcomes Research Institute (PCORI) fees. These fees, which fund research on patient-centered outcomes, have been a requirement for several years. However, there have been changes to the legislation that you should be aware of. In this post, we’ll clarify the current requirements for PCORI fees and what you need to do to stay compliant.
What Are PCORI Fees?
PCORI fees are paid by health insurers and sponsors of self-insured health plans. The funds collected are used to support research that helps patients, clinicians, purchasers, and policymakers make informed health decisions.
Legislative Background
Initially, PCORI fees were required for plan and policy years ending before October 1, 2019. For calendar-year plans, this meant that the 2018 plan year was supposed to be the last year for which these fees applied. However, budget legislation passed in 2019 reinstated the PCORI provision, extending the fee requirements through plan years ending before October 1, 2029.
Current Requirements
As of now, if your self-insured health plan’s policy year ends on December 31, 2024, you are required to pay the PCORI fee. This fee is considered an excise tax under the Internal Revenue Code and must be reported on IRS Form 720. Although Form 720 is filed quarterly for other federal excise taxes, the PCORI fee reporting and payment are only required annually. The deadline for filing Form 720 for the 2024 plan year is July 31, 2025.
Record-Keeping
The instructions for Form 720 advise taxpayers to keep their tax returns, records, and supporting documentation for at least four years from the latest of the date the tax became due or the date the tax was paid. This is crucial for ensuring compliance and being prepared for any potential audits.
Conclusion
In summary, PCORI fees are still required for self-insured health plans through plan years ending before October 1, 2029. Make sure to file IRS Form 720 by July 31, 2025, for the 2024 plan year, and keep all related documentation for at least four years. Staying informed and compliant will help your company avoid any penalties and contribute to valuable health outcomes research.
Source: Thomson Reuters
by admin | Mar 20, 2025 | Blog
Navigating the requirements for Summary Plan Descriptions (SPDs) under ERISA health and welfare plans can be complex. Ensuring compliance is crucial for plan administrators, especially for COBRA qualified beneficiaries. This guide will help you understand who must receive SPDs and the specific considerations for COBRA compliance.
Who Must Receive SPDs?
Plan administrators must automatically furnish SPDs to all participants covered under ERISA health and welfare plans. This includes current employees, former employees who are or may become eligible for benefits, and their beneficiaries.
COBRA Qualified Beneficiaries
COBRA qualified beneficiaries are a key group that must receive SPDs. These individuals have the right to continue their health coverage under the plan after certain qualifying events, such as termination of employment or reduction in hours. Here are the specific considerations:
- Automatic Provision of SPDs: COBRA qualified beneficiaries must receive SPDs automatically.
- Single SPD for Same Address: Separate SPDs are generally not required for qualified beneficiaries living at the same address.
Other Categories of Individuals Who Must Receive SPDs
In addition to COBRA qualified beneficiaries, the following categories must also receive SPDs:
- Employees or Former Employees Covered Under the Plan: Current plan participants and former employees, such as retirees, who remain covered under the plan.
- Alternate Recipients Under QMCSOs: Typically furnished to the child’s custodial parent or guardian.
- Spouses or Dependents of Deceased Participants: Those who continue to receive benefits under the plan.
- Representatives or Guardians of Incapacitated Persons: Sent to the individual’s representative or guardian.
Triggering Events for Automatic SPDs
ERISA specifies the events that trigger the requirement to automatically furnish SPDs. Additionally, SPDs must be provided to plan participants and beneficiaries who request them.
Understanding who must receive SPDs and the specific requirements for COBRA qualified beneficiaries is essential for compliance with ERISA health and welfare plans. By following these guidelines, plan administrators can ensure they meet their obligations and provide necessary information to all eligible participants.
Source: Thomson Reuters
