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 | Aug 21, 2025 | Blog
Qualified transportation fringe benefits are a popular way for employers to support commuting costs while offering tax advantages. But what happens to unused balances when an employee leaves the company? If you’re considering implementing a qualified transportation plan, it’s crucial to understand the IRS rules governing these benefits—especially regarding terminations.
Key IRS Rules for Transportation Plans
Two primary IRS rules shape how balances are treated upon termination:
- No-Former-Employees Rule
Qualified transportation plans cannot reimburse expenses incurred after employment ends. This means terminated employees are ineligible for post-employment transit reimbursements.
- No-Refunds Rule
Unused balances—whether from employer contributions or pre-tax salary reductions—cannot be refunded to the employee. These funds must remain within the plan.
What Can Terminated Employees Do?
Employees who leave the company can still submit reimbursement requests for qualified transportation expenses incurred during employment, as long as they do so within the plan’s run-out period—a grace period for submitting claims after coverage ends.
However, if they:
- Don’t have enough eligible expenses,
- Miss the run-out deadline, or
- Have excess contributions,
…those unused funds are forfeited.
Minimizing Forfeiture Risk Through Plan Design
Employers can reduce forfeiture risk by designing the plan thoughtfully. For example:
- Limit monthly contributions to the cost of a transit pass.
- Send regular reminders to employees about their balances and deadlines.
- Allow election changes to avoid over-contributing.
What Happens to Forfeited Funds?
Your plan document should clearly state how forfeited balances are handled. Options include:
- Retaining funds to cover plan administration costs.
- Redistributing funds to other participants (within IRS limits).
- Complying with state escheat laws, especially if the plan is “funded” (i.e., money held in separate accounts).
Qualified transportation plans offer great benefits, but they come with strict IRS rules. By understanding the limitations and designing your plan carefully, you can support your employees while minimizing forfeitures and compliance risks.
by admin | Aug 12, 2025 | Blog
A new federal law—formerly known as the “One Big Beautiful Bill”—has introduced significant changes to employee benefits. These updates impact everything from dependent care, health savings accounts to Transportation benefits. Here’s a breakdown of the most important changes employers should prepare for.
Dependent Care Benefits Expanded
- DCAP Limit Increased: Starting in 2026, the maximum tax-free amount employees can receive through a Dependent Care Assistance Program (DCAP) increases from $5,000 to $7,500 (or from $2,500 to $3,750 for married individuals filing separately).
- Employer Childcare Credit Enhanced: Employers offering childcare services will benefit from a more generous tax credit, encouraging workplace-supported childcare solutions.
Health Savings Accounts (HSAs) Strengthened
- Telehealth Coverage Made Permanent: High-deductible health plans (HDHPs) can now permanently cover telehealth services before the deductible is met, without affecting HSA eligibility.
- New HSA-Compatible Plans: Starting in 2026, bronze and catastrophic Exchange plans will qualify as HDHPs.
- Direct Primary Care Allowed: These arrangements will not disqualify HSA eligibility if they meet specific criteria. Fees for such services are now considered qualified medical expenses.
Transportation Benefits Updated
- Bicycle Commuting Reimbursements Eliminated: Starting in tax years after 2025, reimbursements for bicycle commuting expenses will no longer qualify as tax-free transportation fringe benefits. This change makes permanent the suspension that has been in place since 2018.
- Inflation Adjustments Modified: Minor updates have been made to how exclusion limits for other qualified transportation benefits—such as transit passes and parking—are adjusted for inflation.
The new federal legislation significantly enhances several core employee benefits including HSAs and DCAPs. These updates not only expand eligibility and contribution limits but also provide permanent tax advantages for both employers and employees. By aligning benefit strategies with these changes, organizations can strengthen their offerings, improve employee satisfaction, and ensure compliance with growing federal standards.
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 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
