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 Mistakes in data entry or outdated records can easily lead to delivery issues.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
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
