Key Actions for Plan Sponsors When Ineligible Employees Are Enrolled in a Health Plan

Key Actions for Plan Sponsors When Ineligible Employees Are Enrolled in a Health Plan

As a plan sponsor of a self-insured health plan, it’s crucial to maintain accurate records and ensure that all enrolled employees meet the eligibility criteria. However, situations can arise where outdated information leads to ineligible employees being enrolled in the health plan. If you’ve discovered that employees working 25 hours per week have been enrolled based on old handbook information, while your plan documents and Summary Plan Description (SPD) correctly state a 30-hour threshold, swift and strategic action is required.

Immediate Steps for Plan Sponsors

Upon discovering such errors, you must act promptly to minimize complications and potential liabilities. Here are two primary options to consider:

Allow Ineligible Employees to Remain Enrolled:
  • Fairness Consideration: Allowing employees to remain in the plan for the rest of the plan year can be seen as fair, especially if they relied on the outdated handbook information. This approach reduces the risk of employees seeking equitable relief due to miscommunication.
  • Stop-Loss Insurance Risk: Check with your stop-loss insurer before proceeding. Stop-loss coverage typically adheres to the terms in the plan document, not ancillary documents like handbooks. Without insurer approval, claims from these employees might not be covered under your stop-loss policy.
Remove Ineligible Employees from the Plan:
  • Consistency with Plan Terms: Removing these employees aligns with the plan document and SPD, mitigating the risk of significant uncovered claims under your stop-loss policy.
  • Prospective Removal: Ensure the removal is prospective, not retroactive, to avoid the impermissible “rescission” of coverage. Retroactive removal could lead to significant legal and ethical issues.
  • Equitable Relief Risk: Be aware of the potential for employees to claim equitable relief for lost benefits due to reliance on the outdated handbook.
Ensuring Compliance and Fair Treatment

Consistency is key in handling such situations. Treat all similarly situated employees alike to avoid claims of discrimination under various laws. Disparate treatment can lead to claims of discrimination based on sex, race, age, or health status. Additionally, adhere to the nondiscrimination rules under Code § 105(h) for self-insured health plans.

Discovering ineligible employees enrolled in your health plan requires careful consideration and prompt action. Whether you decide to keep the employees enrolled for the remainder of the plan year or remove them, ensure that your actions are consistent with plan terms and fair to all employees. By addressing the issue swiftly and consulting with your stop-loss insurer, you can mitigate potential risks and maintain the integrity of your health plan.

Source: Thomson Reuters

Key Actions for Plan Sponsors When Ineligible Employees Are Enrolled in a Health Plan

Understanding HRA Benefits After an Employee’s Death: Navigating Legal and Tax Implications

When an employee passes away, employers often face challenging questions regarding benefits and compensation. A common question that arises is whether an employer can pay a deceased employee’s unused Health Reimbursement Arrangement (HRA) balance to the surviving spouse. This article delves into the regulations and best practices surrounding HRAs in such scenarios, ensuring compliance and clarity.

HRAs and Their Restrictions

Health Reimbursement Arrangements (HRAs) are designed to reimburse employees for qualifying medical expenses, as outlined in Code § 213(d). Importantly, HRAs are not allowed to disburse cash payments to employees or their beneficiaries at any time, including after the employee’s death. Any attempt to convert HRA balances into cash would disqualify the HRA for all participants, rendering all reimbursed amounts taxable—even those for legitimate medical expenses.

The Concept of Post-Death Spend-Downs

While direct cash payments are prohibited, HRAs can include a provision known as a post-death “spend-down.” This feature allows the remaining HRA balance to be used to cover qualifying medical expenses for the deceased employee’s surviving spouse, tax dependents, and qualifying children. Employers should check their HRA plan documents to see if this feature is included and, if not, consider amending the plan to incorporate it.

Compliance and Nondiscrimination Rules

Amending an HRA plan to include a post-death spend-down feature must comply with several nondiscrimination rules. These rules ensure that benefits are not skewed in favor of highly compensated individuals. Specifically, all benefits provided to highly compensated participants must also be made available to all other participants.

Additionally, IRS Notice 2015-87 casts some uncertainty on whether family members without major medical coverage can utilize a post-death spend-down feature. Until further clarification from the IRS, a cautious approach would be to limit these reimbursements to family members who also have major medical coverage.

Administering Post-Death Spend-Downs

Proper administration of the post-death spend-down feature is crucial. Only qualifying medical expenses for eligible individuals should be reimbursed. Failure to adhere to this can result in all HRA reimbursements becoming taxable, not just those for ineligible expenses. Employers must also remember their obligations under COBRA. If a deceased employee’s death triggers a COBRA qualifying event, then qualified beneficiaries must be given the opportunity to continue their HRA coverage for the duration prescribed by COBRA, regardless of the presence of a post-death spend-down feature.

Conclusion

While it may seem compassionate to pay out a deceased employee’s unused HRA balance to their surviving spouse, doing so would jeopardize the tax-advantaged status of the HRA for all participants. Instead, employers should explore the option of a post-death spend-down feature, ensuring they comply with all relevant nondiscrimination rules and administrative guidelines. By carefully navigating these regulations, employers can support their employees’ families while maintaining the integrity of their HRA plans.

Source: Thomson Reuters

Key Actions for Plan Sponsors When Ineligible Employees Are Enrolled in a Health Plan

IRS Reminder: Not All Health Expenses Qualify for Deductions

In a recent news release, the Internal Revenue Service (IRS) has reiterated important guidelines regarding the eligibility of health and wellness expenses for deductions and reimbursements under health Flexible Spending Arrangements (FSAs), Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs), and Medical Savings Accounts (MSAs).

What Qualifies as a Medical Expense? According to the IRS, for an expense to be considered a medical expense under Code § 213, it must be directly related to the diagnosis, cure, mitigation, treatment, or prevention of disease, or must affect the structure or function of the body. This definition excludes expenses that are solely for general health benefits.

The Risk of Nonmedical Reimbursements: The IRS warns that if health FSAs or other account-based health plans reimburse nonmedical expenses, it could result in all plan payments, including those for legitimate medical expenses, being included in participants’ taxable income.

Misleading Claims and the Importance of Diagnosis-Specific Documentation: The IRS has expressed concerns about companies misleading individuals by suggesting that a doctor’s note can transform general food and wellness expenses into medical expenses. However, without a clear connection to a diagnosis-specific treatment or activity, these expenses do not qualify as medical expenses.

Case in Point: The Denied Claim Highlighting the issue, the IRS shared an instance where an individual with diabetes was denied reimbursement for healthy food expenses through his health FSA. Despite obtaining a doctor’s note from a company that advertised such services, the claim was rejected because the food did not meet the criteria for a medical expense.

Guidance for Taxpayers: For those seeking clarity on what constitutes a reimbursable medical expense, the IRS points to its FAQs on nutrition, wellness, and general health expenses. These resources clarify that food or beverages purchased for health reasons, such as weight loss, can only be reimbursed if they do not fulfill normal nutritional needs, are used to alleviate or treat an illness, and are substantiated by a physician’s prescription.

Understanding the fine line between general wellness and medical care is crucial for taxpayers and plan administrators. As the IRS emphasizes, only expenses that meet the stringent criteria set forth in the Code will be considered for deductions and reimbursements, ensuring the integrity of health-related financial plans.

Source: Thomson Reuters

Key Actions for Plan Sponsors When Ineligible Employees Are Enrolled in a Health Plan

Broker Builder Solutions Names NueSynergy a Preferred PartnerBroker

LEAWOOD, Kansas – NueSynergy, Inc., one of the nation’s fastest growing employee benefits and billing administrators in the country, is pleased to announce its preferred partnership with Broker Builder Solutions (BBS), a national leader in support services for the benefits and technology industry.

“NueSynergy is an industry partner that reflects our shared commitment to solution-oriented strategies for benefits brokers and Human Resource professionals within the employee benefits sector,” said Tonya Taylor, Marketing Leader and Client Relationship Liaison at BBS. This alliance leverages both teams’ expertise to educate clients and effectively provide solutions to their benefits administration and technology challenges. Our shared foundation of outgoing and professional staff is crucial in delivering excellence to the industry and the companies we serve. Through this collaboration, BBS looks forward to expanding our network of trusted benefits professionals.”

NueSynergy continues to achieve exceptional business results with innovative products like its SpouseSaver Incentive Account and COBRAcare+ administration. NueSynergy will work with BBS to offer agents and agencies a wide variety of administrative services for their new and existing employer clients.

“After investing heavily in technology and expansion of our overall infrastructure, NueSynergy has concentrated on partnering with well-known benefits leaders as we continue to expand our nationwide presence,” said Josh Collins, President of NueSynergy. “As we continue to focus on industry-leading service and expanding administration solutions for employers, we have found Broker Builder Solutions to be a natural fit in helping us build new broker and client relationships.”

About NueSynergy
NueSynergy is known for industry-leading service, innovative technology, and excellence in providing full-service administration of consumer-driven and traditional account-based plans to employers of all sizes and sectors. Headquartered in Leawood, Kansas, NueSynergy also has locations in Arizona, Florida, Idaho, North Carolina, Pennsylvania, Virginia, Washington, and Rzeszów, Poland.

NueSynergy offers a fully integrated suite of administration services, which include Health Savings Account (HSA), Health Reimbursement Arrangement (HRA), Flexible Spending Account (FSA), Lifestyle Savings Account (LSA), and COBRAcare+ administration as well as SpouseSaver Incentive Account, Combined Billing, Direct Billing, and Specialty Solutions. For more information, visit www.NueSynergy.com.

About Broker Builder Solutions
Broker Builder Solutions is dedicated to assisting organizations with their benefits administration needs. Whether setting up a new benefits administration platform or maintaining/leveraging an existing platform, BBS can help. With over 15 years of benefit administration experience, the BBS team are experts in leveraging Ben Admin platforms to provide seamless implementations and carrier file transmissions. But their most important win is fostering positive and long-lasting relationships with all organizations across the benefits industry ecosystem.

BBS has expertise in Client Implementation, 834 EDI File Implementation, Carrier and Payroll Integrations,
Eligibility Maintenance Support, ACA Reporting, and Data Migration support for cross platform transitions.
For more information, visit www.brokerbuildersolutions.com.

Key Actions for Plan Sponsors When Ineligible Employees Are Enrolled in a Health Plan

Agency RFI Focuses on No-Cost Coverage of OTC Preventive Products Without a Prescription

A DOL, HHS, and IRS request for information (RFI) is seeking input about how the preventive health services mandate applies to over-the-counter (OTC) preventive items and services, including the potential benefits and costs of requiring plans and insurers to cover these items at no cost without a provider’s prescription. Agency guidance has previously advised that OTC items and services generally must be covered without cost-sharing only when prescribed by a provider.

The RFI seeks information on current access to and utilization of OTC preventive products, as well as operational challenges for plans, insurers, third-party administrators, and pharmacy benefit managers. For instance, the request asks about operational challenges that may be associated with using telepharmacies and mail orders within and across states or localities. The agencies are also interested in “lessons learned” from providing coverage for OTC COVID-19 diagnostic tests during the COVID-19 public health emergency. The RFI explains that the agencies are particularly focused on OTC preventive care items that can be purchased without a prescription now or in the future, such as contraceptives, tobacco-cessation products, folic acid during pregnancy, and breastfeeding supplies.

Click here for the full request.

Source: Thomson Reuters

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