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 24, 2025 | Blog
Navigating the complexities of the Family and Medical Leave Act (FMLA) can be challenging, especially when it comes to maintaining health coverage for employees on unpaid leave. This guide will help you understand what to do when an employee on FMLA leave fails to pay their health insurance premiums on time, and how it affects Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs), and COBRA.
Employer Obligations
Under FMLA, employers must maintain health coverage for employees on leave as if they were still working. This obligation ends if the premium payment is over 30 days late, unless your company policy allows a longer grace period.
Steps Before Dropping Coverage
Before dropping an employee’s health coverage, provide written notice at least 15 days before coverage ends, specifying the termination date if payment isn’t received. Send the notice at least 15 days before the end of the grace period.
Termination of Coverage
Coverage can be terminated retroactively if your company policy allows, otherwise, it ends prospectively at the grace period’s end.
Impact on FSAs, HRAs, and HSAs
- FSAs: Employees can choose to continue or revoke their FSA coverage during unpaid FMLA leave. Payment options include pre-pay, pay-as-you-go, and catch-up contributions.
- HRAs: Employers must extend COBRA rights to HRAs. Employees can use their HRA balance during COBRA coverage, and employers should calculate a reasonable premium for the HRA.
- HSAs: Employees can continue contributing to their HSA during COBRA coverage and use HSA funds to pay for COBRA premiums.
COBRA and ACA Rules
A COBRA election notice isn’t required for coverage loss due to nonpayment. However, failure to return to work after FMLA leave is a COBRA qualifying event. ACA allows cancellation for nonpayment, but stricter state laws may apply.
Restoring Coverage
If an employee returns from FMLA leave after coverage was dropped, their health coverage must be restored.
Managing health coverage for employees on FMLA leave requires careful attention to legal requirements and company policies. By following these steps, you can ensure compliance and support your employees during their leave.
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 | Feb 20, 2025 | Blog
Administering a Health Flexible Spending Account (FSA) can be challenging, especially when employees request midyear changes to their elections due to unforeseen medical circumstances. This blog post aims to clarify the rules surrounding midyear election changes and provide practical tips for employers to manage these situations effectively.
Can Employees Change Health FSA Elections Midyear?
Question: Can employees reduce their Health FSA contributions if they are prevented from receiving anticipated medical care after enrollment?
Answer: No, employees cannot change their Health FSA elections under these circumstances. According to IRS regulations, an employee’s Health FSA election is irrevocable during a plan year unless an event occurs that fits within one of the exceptions available under IRS regulations or other guidance. Changes in medical condition or a provider’s recommendation do not qualify as changes in status and do not fall within the other exceptions applicable to Health FSAs.
Examples of Non-Qualifying Situations
- Pregnancy and Laser Eye Surgery: If a doctor refuses to perform laser eye surgery on an employee who is pregnant, the employee cannot change their Health FSA election.
- Dental Work Changes: If an employee’s spouse does not undergo planned dental work because the dentist’s recommendation changed, the employee cannot adjust their Health FSA contributions.
These situations do not qualify as “mistakes” that would allow an election change. The IRS’s 2007 proposed cafeteria plan regulations include an example where an employee elects Health FSA salary reductions for the next plan year in anticipation of eye surgery. If the surgery cannot be performed after the plan year starts, the employee must forfeit the remaining balance under the use-or-lose rule if their other eligible medical expenses are less than the amount contributed.
Minimizing Employee Relations Issues
While election changes are not allowed under these circumstances, employers can take steps to minimize employee relations issues:
- Clear Communication: Ensure that enrollment and other materials clearly explain the limited reasons for midyear election changes. Including real-life examples can be helpful.
- Remind Employees of Eligible Expenses: Employees may still use the funds by submitting other eligible expenses for reimbursement.
- Plan Amendments: Consider amending your plan to allow Health FSA carryovers of up to $660 to the next plan year. The maximum carryover amount is indexed, so stay updated on the latest limits.
- Grace Period: Adopt a grace period to give employees extra time to use up remaining funds.
By proactively addressing these issues, employers can help employees better understand their Health FSA options and reduce frustration related to midyear election changes.
Source: Thomson Reuters
by admin | Feb 6, 2025 | Blog
Navigating the intricacies of Dependent Care Assistance Programs (DCAP) can be challenging, especially when it comes to understanding what expenses qualify for reimbursement. One common question that arises is whether application fees, deposits, and similar expenses can be reimbursed. Here, we break down the IRS regulations and provide clarity on this topic.
What Are Indirect Expenses?
Indirect expenses are costs that are not directly for care but are necessary to obtain care. Examples include application fees and deposits paid to day-care centers or preschools. According to IRS regulations, these expenses may qualify for reimbursement under a DCAP if they meet specific criteria.
Criteria for Reimbursement
To be eligible for reimbursement, indirect expenses must:
- Be Required for Care: The employee must be required to pay these expenses to obtain related care.
- Meet DCAP Rules: The expenses must comply with DCAP rules and the plan document.
- Relate to Provided Care: The care to which these expenses relate must actually be provided.
Examples of Reimbursable and Non-Reimbursable Expenses
- Reimbursable: If a DCAP participant pays a $100 application fee to secure a spot at a new day-care provider, this fee can be reimbursed once the care is provided.
- Non-Reimbursable: If a participant pays a $100 deposit to a preschool but later decides not to enroll the child, the deposit is not reimbursable since the care was not provided.
Timing of Reimbursement
The IRS does not specify whether indirect expenses can be reimbursed in full once care commences or if they must be reimbursed proportionately over the duration of the care agreement. To err on the side of caution, it is advisable to prorate the reimbursement over the agreement’s duration. For instance, if the agreement is month-to-month, the entire fee might be reimbursed after the first month of care. For longer agreements, the fee should be prorated accordingly.
Conclusion
Understanding the nuances of DCAP reimbursements for indirect expenses like application fees and deposits is crucial for both employers and employees. By ensuring these expenses meet the necessary criteria and timing the reimbursements appropriately, you can navigate the DCAP rules effectively and make the most of your benefits.
Source: Thomson Reuters
