by admin | Jun 20, 2022 | Blog
A health FSA cannot treat employees’ premium payments for other health coverage as reimbursable expenses. Thus, for example, a health FSA cannot reimburse premiums for COBRA coverage, accidental death and dismemberment insurance, long-term or short-term disability insurance, or coverage under a plan maintained by an employer of the employee or the employee’s spouse or dependent. This rule would also prohibit the reimbursement of Medicare premiums.
Some employers are surprised by the rule that health FSAs cannot reimburse insurance premiums. A health FSA can only reimburse expenses for medical care and premiums for health coverage fall within that definition. However, IRS regulations state that insurance premiums cannot be reimbursed under a health FSA, and the IRS has repeatedly reaffirmed this rule.
Likewise, monthly retainer or similar access fees (e.g., a monthly fee that is payable whether or not the patient visits the office, perhaps accompanied by a reduction or elimination of the fees for actual office visits) generally are not reimbursable. In our view, they are like insurance because they are payable whether or not medical care is provided. Thus, they fall under the “no reimbursement of insurance premiums” rule that applies to health FSAs and should not be reimbursed. In 2020, the IRS issued proposed regulations regarding the treatment of amounts paid for direct primary care arrangements, health care sharing ministries, and certain other medical care arrangements. The preamble to the proposed regulations clarifies that payments for such arrangements typically would be viewed as payments for insurance. As such, health FSAs would be prohibited from reimbursing these fees based on the “no reimbursement of insurance premiums” rule. Payments for health care sharing ministries would also be treated as payments for insurance under the proposed regulations.
In a variation on this type of arrangement, patients receive preferential “extras” from their doctors in exchange for a fee (e.g., priority when scheduling appointments, 24-hour telephone access to the doctor, less time in the waiting area before appointments, a special waiting room, etc.). Fees for such programs generally should not be reimbursed either, because the payments would not be for medical care. The same is true of a monthly fee that a patient must pay in addition to any copays, deductibles, or other charges for office visits.
Note that there could be variations on these access fee arrangements under which some services might be reimbursable, depending on how the program is structured (for example, a fee might include payments that can be separately allocated to services that are for medical care). Additionally, health FSA administrators should not put too much stock in the particular name given to the fee (retainer fee, concierge fee, direct primary care, etc.).
These terms may mean different things for different providers. Consequently, it is important to determine exactly what services are involved before deciding whether to reimburse part of a fee—it may be necessary to ask the participant for additional substantiation. Where a fee relates solely to a specific rendered service (such as a copay) rather than being a retainer, part or all of it might qualify for reimbursement as an eligible medical care expense. For example, the preamble to the 2020 proposed regulations indicates that payments for a direct primary care arrangement that provide solely for an annual physical exam or an “anticipated course of specified treatments of an identified condition” would not be treated as insurance.
Source: Thomson Reuters
by admin | Jun 14, 2022 | Blog
NueSynergy’s smart debit card is always included at no cost and provides a convenient method to pay out-of-pocket medical expenses for you, your spouse, and/or any dependents. The card is automatically issued to all Flexible Spending Account (FSA) and Health Savings Account (HSA) participants, as well as for Health Reimbursement Arrangement (HRA) plans (when compatible with the plan design).
Here’s how the smart debit card works:
- Funds are deposited into your benefit account in real time
- When you swipe your debit card, funds are pulled directly from your benefit account to pay the service provider on site. Since it’s a smart card, swiping to pay providers is thoughtless for the user, as the funds will automatically pull from the correct account.
Here are also two important details to know about NueSynergy’s debit card:
- Allows participants to auto substantiate 80% of claims
- Any out-of-pocket expenses that require reimbursement will be paid out via direct deposit or personal check
by admin | May 25, 2022 | Blog
As a general rule, an employer may not take a tax deduction for flexible spending account (FSA) benefits until the benefits are provided to employees. Thus, no deduction may be taken at the time of the employee’s salary reduction. Moreover, employers who transmit salary reduction amounts to a third-party administrator (TPA) for administration of claims should be careful not to base the timing of deductions on when the amounts are transmitted.
Likewise, the employer may not take a tax deduction when a forfeiture occurs. Rather, deductions will arise when benefits are provided, or amounts are applied against permissible administrative expenses. The timing of an employer’s deduction should not be confused with its accrual of liability from a financial accounting standpoint. For financial accounting purposes, the employer’s liability for health FSA benefits accrues as of the first day of the coverage period (e.g., the plan year), due to the application of the uniform coverage rule. For DCAPs, the liability accrues when the salary reductions occur.
Self-insured medical benefits are governed by similar rules. If not paid from a trust, an accrual-basis taxpayer can deduct them in the year in which the expenses are incurred, even if paid in a later year. In contrast, a cash-basis taxpayer would deduct only when the expenses are paid. Likewise, premiums for insured benefits are deductible when accrued or paid, depending on whether the employer is an accrual-basis or cash-basis taxpayer. The deduction rules for a self-insured health plan that pays benefits from a trust or other “welfare benefit fund” are more complicated and are subject to limitations to prevent excess prefunding.
Certain entities that do not pay corporate taxes, such as governmental employers and nonprofits, can sponsor cafeteria plans without worrying about deductions as such, although these entities may recognize the costs of their plans on a similar accrual or cash basis.
Source: Thomson Reuters
by admin | May 18, 2022 | Blog
As you may know, a Flexible Spending Account, or FSA, is an account for you to set aside pre-tax dollars to pay for eligible medical, dental, and vision expenses. But did you know there are different types of FSA plans? The first is a Dependent Care FSA, which is ideal to ensure dependent care costs are taken care for either a child under the age of 13 or if a spouse/dependent is unable to care of themselves.
This plan works as long as both spouses or custodial parents are employed. From there, you can contribute up to $5,000 pre-tax dollars per calendar year to pay for expenses such as: day care (child & adult), summer day camp (nursery school & preschool) plus before and after school programs.
The second plan to note is a Healthcare FSA, which is more straightforward. This plan allows you to contribute up to $2,850 annually to pay for eligible medical, dental, prescription, and vision expenses not covered by insurance. With the Healthcare FSA, the entire contribution election is available from day one. All payroll contributions throughout the year will go towards covering that individual’s election.
To familiarize yourself with the different types of FSA plans, check here.
by admin | May 2, 2022 | Blog
The IRS has released an information letter responding to an inquiry from a qualified transportation plan participant whose employer decided to let him work from home permanently due to the COVID-19 pandemic. To avoid losing compensation reduction amounts he had previously set aside for parking, the participant asked whether his unused compensation reductions could be transferred to a health FSA under a cafeteria plan.
The letter explains that unused compensation reduction amounts under an employer’s qualified transportation plan can be carried over to subsequent periods under the plan and used for future commuting expenses, so long as the employee does not receive benefits that exceed the maximum excludable amount in any month. But cash refunds are not permitted, even to employees whose compensation reduction amounts exceed their need for qualified transportation fringe benefits. Furthermore, the Code prohibits cafeteria plans from offering qualified transportation fringe benefits, and IRS rules do not permit unused compensation reduction amounts under a qualified transportation plan to be transferred to a health FSA under a cafeteria plan. The letter also notes that COVID-19-related relief for FSAs gives employers the discretion to amend their cafeteria plans to permit midyear health FSA election changes for plan years ending in 2021.
EBIA Comment: The qualified transportation rules have proven sufficiently flexible to handle most situations resulting from the COVID-19 emergency. Most employers permit benefit election changes at least monthly, and plans can allow current participants to carry over unused balances indefinitely. Compensation reductions set aside for one qualified transportation benefit (e.g., parking) can even be used for a different transportation benefit (e.g., transit) if the plan permits and the maximum monthly benefit is not exceeded. But—as this participant’s request to transfer parking compensation reductions to a health FSA suggests—those options are not always sufficient. Because some risk of loss due to changing circumstances is unavoidable, employers should clearly articulate that risk to employees before they make compensation reduction elections.
Source: Thomson Reuters
