by admin | Nov 24, 2025 | Blog
If your business has fewer than 20 employees, you may qualify for COBRA’s small employer exception—but only if you count employees correctly. Missteps can lead to penalties and unexpected COBRA obligations.
Who Should You Count?
- All Employees, Not Just Plan Participants
Include everyone working for all employers maintaining the plan.
- Only Common-Law Employees
Exclude independent contractors and board members unless they meet IRS common-law criteria.
- Part-Time Employees as Fractions
Count based on hours worked compared to full-time status.
- Employees of Related Entities
Controlled group rules require counting employees of related companies and successors.
- Employees Outside the U.S.
Foreign entities and overseas employees count if part of the controlled group.
Why It Matters
Incorrectly applying the exception can result in lawsuits, penalties, and COBRA coverage obligations. When in doubt, consult a benefits expert.
Tip: Use a consistent counting method for the entire year and verify controlled group relationships.
Source: Thomson Reuters
by admin | Sep 4, 2025 | Blog
Under ERISA, plan administrators must provide requested plan documents—like the Summary Plan Description—within 30 days of a written request from a participant or beneficiary. If they fail to do so, a court may impose a penalty of up to $110 per day, starting on day 31.
How This Affects FSAs, HRAs, HSAs, and Other Benefits
Many employers don’t realize that Health FSAs, HRAs, and some HSAs are considered ERISA-covered welfare benefit plans. That means they are subject to the same documentation and disclosure rules as other ERISA plans. If a participant requests plan documents for one of these benefits and the employer fails to respond within 30 days, the same $110/day penalty could apply.
Even though HSAs are typically owned by the employee, employer-sponsored HSAs may still trigger ERISA obligations if the employer is too involved in managing the account.
Does the Penalty Increase Over Time?
No. While some ERISA penalties are adjusted annually for inflation, the $110/day penalty for failing to provide plan documents is not subject to automatic inflation adjustments. It has remained unchanged since it was last increased from $100 in 1997.
Tips to Stay Compliant
- Ensure all ERISA-covered plans—including FSAs, HRAs, and HSAs—have up-to-date plan documents and SPDs.
- Respond to participant requests in writing and within the 30-day window.
- Train HR and benefits staff on ERISA disclosure rules.
- Keep documentation organized and easily accessible.
Source: Thomson Reuters
by admin | Jul 31, 2025 | Blog
When a COBRA election notice is returned as undeliverable, it can create uncertainty and potential legal risk for employers and plan administrators. While COBRA regulations require that notices be sent to the qualified beneficiary’s last-known address, a returned notice may signal that further action is needed.
Confirm the Address Used
Start by verifying that the notice was sent to the correct last-known address on file. Mistakes in data entry or outdated records can easily lead to delivery issues.
Cross-Check with Other Sources
If the address appears correct, consider checking with:
- Your insurer or third-party administrator (TPA): They may have a more recent address from recent claims or correspondence.
- Other internal departments: Payroll, HR, or pension administrators may have updated contact information.
- Phone records: Try calling the last known home or mobile number provided by the qualified beneficiary.
- Former coworkers: If the qualifying event was a termination, colleagues may know if the individual has moved.
Attempt to Re-Send the Notice
If you obtain a new address, promptly resend the COBRA election notice. If the qualified beneficiary contacts you directly, use that opportunity to update their contact information and reissue the notice.
Document Every Step
To protect your organization from potential COBRA-related lawsuits:
- Keep a written record of all actions taken.
- Save copies of returned mail, emails, and internal memos.
- Note any phone calls or inquiries made in pursuit of updated contact information.
Proactively Communicate Address Update Policies
Ensure your Summary Plan Description (SPD), COBRA initial notices, and termination letters clearly instruct beneficiaries to notify you of any address changes. Include easy-to-follow steps for updating contact information.
Why This Matters
Courts have occasionally held plan administrators to a higher standard under fiduciary duty or inquiry notice principles. If you know—or should know—that a notice wasn’t received, taking no further action could expose your company to legal risk.
While COBRA only requires that notices be mailed to the last-known address, taking reasonable steps to ensure delivery demonstrates good faith and can help mitigate legal exposure. When in doubt, document your efforts and seek legal counsel if necessary.
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
