by admin | Oct 30, 2025 | Blog
Under COBRA rules, group health plans may terminate coverage early if a qualified beneficiary becomes entitled to Medicare after electing COBRA. But it’s important to understand what “entitled” really means.
Entitlement vs. Eligibility:
- Eligible means the person qualifies for Medicare (e.g., due to age or disability).
- Entitled means they’ve enrolled in Medicare and are receiving benefits.
Someone who is eligible but hasn’t enrolled yet is not considered entitled—and their COBRA coverage should continue.
When Does Entitlement Begin?
- For Medicare Part A, entitlement is automatic if the person is already receiving Social Security or Railroad Retirement benefits. Otherwise, they must apply.
- Medicare Part B entitlement typically begins when Part A does, or during a later enrollment period.
Important:
Only the individual who becomes entitled to Medicare can have their COBRA coverage terminated early. Other family members on COBRA—like a spouse or dependents—can continue their coverage.
Before ending COBRA early, confirm that the individual is enrolled in Medicare—not just eligible.
Source: Thomson Reuters
by admin | Oct 20, 2025 | Blog
New 2026 limit provides greater savings flexibility for working families
Effective January 2026, the annual contribution limit for Dependent Care FSAs will increase from $5,000 to $7,500 per household. For those married filing separately, the limit rises from $2,500 to $3,750. This is the first permanent increase since the benefit was established in 1986, intended to help working families manage rising childcare costs.
This change was introduced as part of the One Big Beautiful Bill Act, signed into law on July 4, 2025. The bill includes sweeping updates to employee benefits, aiming to provide greater financial flexibility for working families
A Dependent Care Flexible Spending Account (DCA or Dependent Care FSA) is a pre-tax benefit account that allows employees to set aside money to pay for eligible child or adult dependent care expenses. These can include daycare, preschool, before- and after-school programs, and elder care services—provided the care enables the employee (and spouse, if applicable) to work or look for work.
Key Considerations for Employers
- Plan updates required: Employers must revise Section 125 cafeteria plan documents to reflect the new limits.
- Nondiscrimination Testing still applies: Plans must pass IRS rules to ensure fairness across income levels.
- Clear communication is essential: Employees need to understand the new limits, deadlines, and use-it-or-lose-it rules.
- Employers should connect with their HRIS partners/vendors to update system configurations accordingly.
- Employers with non–calendar-year plans may adopt the higher limit effective January 1, 2026, provided their plan documents are amended accordingly. Employers must also ensure no employee exceeds the annual $7,500 contribution limit for the 2026 tax year.
Employers may adopt the increased limit with their next plan renewal. If adopted, be sure to update payroll systems, plan documents, and employee communications before the start of the plan year.
by admin | Oct 9, 2025 | Blog
When managing a health Flexible Spending Account (FSA) under a cafeteria plan, employers often face questions about reimbursement eligibility—especially when employees incur medical expenses before officially enrolling. A common scenario involves new hires who want to submit claims for services received prior to their start date. So, can a health FSA reimburse expenses incurred before a participant’s enrollment?
Short Answer: No.
According to IRS regulations, a participant must be actively enrolled in the health FSA at the time the medical service is provided for the expense to qualify for reimbursement. This rule applies regardless of when the participant is billed or pays for the service.
Key IRS Guidelines on Health FSA Reimbursements
- Coverage Timing Matters:
Expenses must be incurred while the employee is covered under the health FSA. Coverage begins on the enrollment date—not retroactively.
- Date of Service Is Key:
The IRS defines the “incurred date” as the date the medical care is provided, not when payment is made or billed.
- No Retroactive Claims:
Services received before enrollment (even within the same plan year) are not eligible for reimbursement.
Example Scenario
Let’s say your company has a calendar-year cafeteria plan. An employee is hired in June and enrolls in the health FSA at that time. They later request reimbursement for dental services received in March. Since the services occurred before their enrollment, those expenses cannot be reimbursed under IRS rules.
What About DCAPs (Dependent Care Assistance Programs)?
The same rules apply. DCAPs also require that dependent care services be provided while the participant is enrolled in the plan. Claims for services before enrollment are not eligible.
Best Practices for Employers
- Educate Employees Early:
Include FSA eligibility and reimbursement rules in onboarding materials.
- Review Plan Documents:
Ensure your plan clearly outlines coverage start dates and reimbursement criteria.
- Encourage Timely Enrollment:
Prompt enrollment helps employees maximize their benefits and avoid ineligible claims.
Health FSAs and DCAPs are valuable benefits, but they come with strict IRS rules. Employers must ensure that only expenses incurred during active coverage are reimbursed. Clear communication and proper documentation can help avoid confusion and ensure compliance.
by admin | Sep 16, 2025 | Blog
When a former employee receiving COBRA coverage is called to active military duty, employers may wonder how COBRA and USERRA apply. Here’s a quick breakdown of your obligations.
What is COBRA?
COBRA (Consolidated Omnibus Budget Reconciliation Act) allows employees and their families to continue group health coverage for a limited time after job loss or other qualifying events.
What is USERRA?
USERRA (Uniformed Services Employment and Reemployment Rights Act) protects the job and benefit rights of employees who leave work for military service. It includes health coverage continuation—but only for active employees, not those already separated and on COBRA.
Does USERRA Apply in This Case?
No. If the individual is no longer employed and is receiving COBRA, USERRA does not provide additional rights.
Can COBRA Be Terminated Due to TRICARE?
This is a gray area:
- IRS rules suggest COBRA may end if the person gains other group coverage (like TRICARE).
- DOL guidance says COBRA should not be terminated just because TRICARE is in place.
What Should Employers Do?
- Don’t automatically terminate COBRA due to TRICARE.
- Check with your insurer or stop-loss carrier to avoid coverage gaps.
- Document your decisions and stay updated on federal guidance.
USERRA doesn’t apply to former employees, but COBRA coverage should generally continue—even if TRICARE is now active. When unsure, consult legal or benefits experts to stay compliant.
Source: Thomson Reuters
by admin | Jul 3, 2025 | Blog
When employees or their dependents lose group health coverage due to a qualifying event, COBRA ensures they can continue their health benefits. But what happens when a qualified beneficiary under COBRA relocates outside the service area of their HMO (Health Maintenance Organization) plan?
This scenario is more common than you might think—and it’s essential for employers and HR professionals to understand their obligations under COBRA in such cases.
COBRA Basics: Same Coverage Rule
Generally, COBRA requires employers to offer the same health coverage the qualified beneficiary had before the qualifying event. However, there’s a key exception for region-specific plans like HMOs.
The HMO Relocation Exception
If a qualified beneficiary moves out of their HMO’s service area, the employer must offer alternative coverage—but only if certain conditions are met.
✅ When Must Alternative Coverage Be Offered?
- Upon Request: The employer must offer other coverage options within a reasonable time after the qualified beneficiary requests it.
- Timing: The new coverage must begin no later than the date of relocation or the first day of the following month after the request.
✅ What Coverage Must Be Offered?
- If the employer offers other plans (e.g., PPO or indemnity plans) to similarly situated active employees that can be extended to the new location without extraordinary cost, those plans must be offered.
- If no such plan exists for similarly situated employees, the employer must offer any available plan that can be extended to the new location.
❌ What If No Coverage Is Available in the New Area?
- If no plan can be extended to the new location without extraordinary cost, the employer is not required to offer alternative coverage.
- However, if another controlled group member (e.g., a parent or subsidiary company) offers coverage in that area, it may be obligated to provide COBRA coverage.
Extraordinary Costs Are Not Required
Employers are not required to:
- Establish new provider networks.
- Create new reimbursement schedules.
- Offer preferred provider rates in areas without existing employee presence.
If a COBRA participant moves out of their HMO’s service area, you must be prepared to offer alternative coverage options—but only if they are already available to active employees and can be extended without significant cost.
Source: Thomson Reuters
