UBA Partner Firms help employers stay one step ahead by answering their employee benefits compliance questions with timely and accurate answers.
7.25.24 | FSA Annual Limits
Q. We have a group leaving a professional employer organization (PEO) effective June 30 and setting up a new flexible spending arrangement (FSA). Do the limits set by the IRS for an FSA plan reset for these members for their new July 1 - June 30 plan year? Or do members still need to account for their prior contributions in 2024 to ensure they do not have excess contributions?
A. The FSA annual limit is a plan year limit, so the contributions to the PEO’s FSA plan will not limit the employees’ ability to contribute to the maximum to their employer’s new FSA plan.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
7.18.24 | health insurance waiting period
Q. Is the following a legal waiting period? "Eligible employees may elect to begin health insurance benefits on the first day of the month after completing the ninety (90) day Orientation Period."
A. Yes, this can work. The ACA prohibits waiting periods longer than 90 days, but does permit orientation periods, as long as coverage is offered on the first day of the fourth full calendar month of employment. This means that an orientation period cannot be more than one month. This post by the Legal Information Institute includes some good examples that may be helpful.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
7.11.24 | medicare and HSA contributions
Q. An employee turns 65 in 2025 and is considering enrolling in Medicare. The employee is on an HSA-compatible plan with their 62-year-old spouse. Though the employee may be covered under Medicare next year and ineligible for a contribution in the HSA, could the spouse still make HSA contributions if they open their own account?
A. The employee's enrollment in Medicare will not impact the spouse's ability to contribute to an HSA, provided they are otherwise eligible (i.e., enrolled in an HDHP only).
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
7.4.24 | requirement to offer cobra
Q. When is an employer required to offer COBRA?
A. An employer is required to offer COBRA in a calendar year if the employer had 20 or more full-time employees (including full-time equivalent employees) for more than half of the working days in the preceding calendar year. Part-time employees count as a fraction of a full-time employee depending on how much they work compared to a full-time employee. If a full-time employee works 40 hours per week, a part-time employee working 20 hours per week would be a .5 full-time equivalent (FTE) employee and a part-time employee working 16 hours per week would be a .4 FTE.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
6.27.24 | Form 5500
Q. When does IRS Form 5500 need to be filed?
A. Form 5500 is needed when the plan has 100 or more participants at the start of the plan year. If the company utilizes a "wrap plan," which incorporates all welfare benefits (e.g., medical, dental, vision, life, AD&D), the wrap plan must file Form 5500 if any line of coverage has 100+ participants. If the company does not use a wrap plan and instead sponsors many separate ERISA plans, Form 5500 is only needed if the particular ERISA plan has 100+ participants at the start of the year.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
6.20.24 | CAFETERIA PLANS AND FINANCIAL HARDSHIP
Q. For small group clients that do not have to offer medical plans, should we discourage the use of a cafeteria plan for pre-tax premiums if they want to allow employees to drop the medical plan mid-year if they cannot afford it?
A. If you avoid using a cafeteria plan to allow employees to pay for medical premiums, the downside is that the employees must pay for the premiums on an after-tax basis. The upside is you avoid all of the Section 125 rules that generally require elections be irrevocable for the year, unless there is a qualifying life event (and insurance being too expensive is not a qualifying life event). So a good solution for employers that want to offer employees maximum flexibility is to allow them to pay premiums on an after-tax basis.
If giving employees the choice between pre-tax (through a cafeteria plan) or after-tax premiums is too confusing or administratively complex, the employer could choose NOT to offer a cafeteria plan and make all premiums be paid on an after-tax basis. Of course, if the employer does not think the financial hardship issue will occur too frequently, offering a cafeteria plan makes the most financial sense for the employees and the employer.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
6.13.24 | offering cobra to former spouse dropped from health plan
Q. An enrolled employee's divorce was finalized on 3/25/24. She dropped her spouse from coverage effective 1/1/24 and elected Employee + Children coverage only. Was the divorce a qualifying event that would allow the ex-husband to elect COBRA coverage? Was the employee allowed to drop her spouse during 1/1 open enrollment but prior to the divorce being finalized?
A. Typically, COBRA is only offered to employees and dependents on the health plan at the time of the qualifying event. Since the former spouse was not on the health plan at the time of the divorce, the normal rule is that the former spouse is not offered COBRA.
However, the IRS says that if someone is dropped from coverage in anticipation of a divorce, and then the divorce occurs, that individual must be offered COBRA from the date of divorce (not the date they were dropped from the plan). See IRS Revenue Ruling 2002-88 for the official guidance.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
6.6.24 | coverage for stepchild
Q. Can an employee add their stepchild to their insurance plan?
A. The employee can add a stepchild under the age of 26, regardless of whether the employee is the guardian. The ACA prohibits conditioning eligibility on the residence of the child, tax dependent status, or financial dependency. The only thing that matters is that the person is a child (which includes a biological child, stepchild, adopted child, and foster child) and is under age 26.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
5.30.24 | RxDC Reporting penalties
Q. We have a client that never filed their 2022 plan year D1 and P2 files (assuming the carrier filed the D2-D8). Was the $100-a-day penalty in place for this filing in 2023?
A. There was penalty relief for 2020 and 2021, but I am not aware of any penalty relief for 2022 filings. The penalty is found in Internal Revenue Code Section 4980D. The good faith relief came from the Departments of Labor, Health and Human Services and Treasury in the form of FAQ 56 issued on December 23, 2022.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
5.23.24 | W-2 Reporting
Q. A large employer client's wellness program reimburses $75 to employees who meet two minimum requirements each quarter. Should this HRA benefit be included in the employer's W-2 reporting in column DD? The employer will reimburse the last $500/$1,000 of deductible/out of pocket expenses.
A. Employers have the option to report HRA contributions in Box 12, code DD. If the employer charges a COBRA premium for people to keep their wellness benefit after a qualifying event, then they must include the wellness incentive in Box 12, code DD. It is optional if the employer does not charge a COBRA premium for the wellness benefit. The IRS provides a helpful chart. Note that the wellness incentive itself may be taxable compensation and, if so, reported on the W-2 as taxable compensation.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
5.16.24 | health coverage for newborns
Q. I have seen a reference to newborns being “automatically covered” by the mother’s health plan for 30 days after the date of birth, but I can’t find a source. The closest I can find are the HIPAA special enrollment rules allowing coverage retroactive to date of birth, but the employee has to actually enroll the child. Can you clarify the rules?
A. The “automatically enrolled” references are misleading. An employee must affirmatively elect to have a newborn covered. HIPAA gives an employee a special enrollment window in which to ask for coverage, and the law provides that if you elect coverage for the newborn within 30 days, coverage will automatically go back to the date of birth. However, the employee must affirmatively enroll the newborn. If the employee does not enroll the newborn in a timely manner, there is no coverage for the newborn at all (including the first 30 days of the newborn’s life).
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
5.9.24 | pcori fee discrepancy
Q. I understand that the PCORI fee for plans that ended in December 2023 is $3.22 (up from $3.00 in 2022). However, the current IRS Form 720 states that the fee should be $3.00 for that period. Should the client pay the $3.22 rate or the $3.00 rate listed on the IRS form?
A. It often takes the IRS many months to update the IRS Form 720s. For plan years ending between October and December 2023, the 2023 PCORI fee is $3.22 and it is due July 2024. If the client is using the current Form 720 for a plan year that ended between October and December 2023, they should use the $3.22 rate regardless of what the form says. Form 720 is a quarterly form, but the PCORI fee only needs to be filed and paid annually by July 31.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
5.2.24 | medicare, spouse exclusions
Q. Can an employer exclude Medicare eligible employees (age 65+)) or spouses form medical coverage?
A. An employer could only do this if the employer has fewer than 20 employees AND none of the excluded spouses are eligible for Medicare as a result of End Stage Renal Disease (ESRD). If any of the spouses have ESRD, or if the employer has more than 20 employees, this type of exclusion would violate the Medicare Secondary Payer Statute. The group could possibly do a spousal exclusion for ALL spouses, but could not limit it just to Medicare-eligible spouses.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
4.25.24 | dependent care fsa contributions
Q. Can an employee stop their Dependent Care FSA contributions mid-year as they realized their spouse was contributing as well and they would reach the annual maximum before the end of the year?
A. Yes, the employee can stop dependent care elections mid-year to avoid exceeding the maximum limit. The IRS suggests that the employer obtain some documentation from the employee demonstrating that the spouse also elected to contribute to their DCFSA and that the mid-year change is needed to avoid contributing more than permitted. Note that employers do not have to permit employees to change their elections, but most do.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
4.18.24 | calculating cobra hra rates
Q. What is the best way to calculate COBRA rates for an HRA?
A. The best way to determine the HRA COBRA rate is for the group to see what the HRA reimbursed on a per employee/family basis for each of the last three years. For example, if the HRA, on average, reimbursed $600 for single employees and $1,200 for families, the monthly COBRA premiums could be set at $50 for single and $100 for family (plus the 2% COBRA surcharge). If the group has access to an actuary (unlikely), they could also work with the actuary to set the COBRA rates. But assuming no free actuarial services are available, I recommend focusing on the historical cost of the HR in setting future COBRA premiums..
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
4.11.24 | qualifying event
Q. If an enrolled employee's dependent loses coverage and needs to enroll under the employee, is that an opportunity to switch medical plans and carriers, or are they restricted to their current plan?
A. The employee can enroll the dependent in any plan option offered by the employee’s employer. This is a HIPAA special enrollment right and the right extends to any benefit plan option, even if the employee was not previously on that option.
Here is an example from the HIPAA special enrollment regulations:
Facts. Individual A works for Employer X. X maintains a group health plan with two benefit packages—an HMO option and an indemnity option. Self-only and family coverage are available under both options. A enrolls for self-only coverage in the HMO option. A's spouse works for Employer Y and was enrolled for self-only coverage under Y's plan at the time coverage was offered under X's plan. Then, A's spouse loses coverage under Y's plan. A requests special enrollment for A and A's spouse under the plan's indemnity option.
Conclusion. In this example, because A's spouse satisfies the conditions for special enrollment under paragraph (a)(2)(ii) of this section, both A and A's spouse can enroll in either benefit package under X's plan. Therefore, if A requests enrollment in accordance with the requirements of this section, the plan must allow A and A's spouse to enroll in the indemnity option.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
4.4.24 | Waiting Period vs. Orientation period
Q. My under-50-employees client has an orientation period for their employees, after which they offer medical benefits. What are the key differences between an orientation period and a waiting period?
A. The ACA permits a bona fide orientation period of one month before the 90-day waiting period limitation kicks in. These rules apply to employers of any size offering a group health plan.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
3.21.24 | taxes on short-term disability benefits
Q. When an employee is on short-term disability (STD), should taxes be withheld from the STD check?
A. Short-term disability benefits are taxable if the premiums were paid by the employee with pre-tax dollars or if the employer paid the premiums and did not impute income to the employee. On the other hand, if premiums were paid by employees on an after-tax basis or if the employer included the premiums it paid in an employee's taxable wages, then the STD benefits are not taxable. Basically, either the premiums or the benefits are taxable. The tax treatment of the premiums will drive the tax treatment of the benefits.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
3.14.24 | HSA CONTRIBUTIONS AND MEDICAID
Q. If an employee carries her full family on a qualified high deductible health plan (QHDHP) but her children are mandated to also be enrolled in Medicaid, can she contribute the full family amount to her HSA?
A. If the HSA owner/employee is only eligible for the HDHP and the employee has enrolled in family coverage, the employee can contribute the full family limit to the HSA if the employee's dependents are not otherwise eligible due to Medicaid.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
3.7.24 | pcori feeS
Q. It is my understanding that groups must file Form 720 and pay the PCORI fee if they are self-funded or fully insured with an HRA. When calculating the average number of lives for an HRA, are dependents included in the average total for calculating the fee?
A. The IRS has a special rule for HRAs and allows the employer to assume one covered life for each employee with an HRA. No need to count dependents.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
2.29.24 | Paying insurance premiums from hsa
Q. Can a retiree use HSA funds to pay insurance premiums before becoming eligible for Medicare?
A. Usually, you cannot use HSA funds to pay insurance premiums, but a retired employee can use an HSA to cover COBRA premiums, Medicare premiums, or other insurance if they are receiving unemployment benefits.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
2.22.24 | QUALIFIED SMALL EMPLOYER HRAS AND COBRA
Q. A client of ours will be adding a qualified small employer HRA (QSEHRA) plan. Are these plans COBRA eligible?
A. An employer is eligible to adopt a QSEHRA only if both of the following requirements are met:
The employer must not be an applicable large employer (ALE) under Code Section 4980H; that is, the employer must employ fewer than 50 full-time equivalent employees in the prior calendar year.
The employer does not offer a "group health plan" to any of its employees.
QSEHRA plans, unlike other types of HRAs, are not considered group health plans and therefore are not subject to COBRA.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
2.15.24 | HSA Catch-up contributions for family coverage
Q. If a family has two people both over age 55, can they each make a $1,000 catch-up contribution to an HSA?
A. Each spouse can contribute the $1,000 catch-up to their own HSA. It is important that each have an HSA. If just one spouse has an HSA, that spouse will be limited to the family contribution plus one $1,000 catch-up contribution.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
2.8.24 | FSA and FSA carryover
Q. What are the time and dollar limits for a flexible spending account (FSA) and FSA carry over?
A. For 2024, the most that can be deferred to an FSA is $3,200 (a $150 increase over 2023). The amount of a 2024 FSA balance that can be carried over into 2025 is $640 (up from $610 for 2023 carryovers). A carryover is only available if the FSA does not offer a grace period. The carryover amount can be used all year.
A grace period, on the other hand, is the amount of time in a new year that an employee can incur and be reimbursed for claims from the prior year’s balance. A grace period can be as long as 2 ½ months after the close of the plan year (usually the calendar year). So if an employee has $1,000 left in their 2023 FSA, that employee could incur $1,000 of reimbursable expense prior to March 15, 2024, and spend that $1,000 if the FSA uses a grace period. An FSA cannot have both a grace period and a carryover.
And finally, most FSAs offer a run-out period. This is the time after the close of the plan year when employees can submit claims incurred in the prior year. There is no maximum amount of run-out period set by the IRS, but most employers (or FSA administrators) will set a limit of 60 to 90 days. The run-out period only allows people to submit claims incurred in the prior year, unlike the grace period which allows NEW claims incurred prior to March 15 to be reimbursed.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
2.1.24 | aca full time equivalent veteran exclusion
Q. Should veterans be excluded from the full time equivalent (FTE) count for determining if an employer is considered an applicable large employer (ALE)?
A. If the veteran employees have Tricare or receive health insurance through the Department of Veterans Affairs, they do not count for purposes of determining whether an employer is an applicable large employer.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
1.25.24 | cobra notice and election
Q. Are all employers subject to COBRA required to provide an election notice to qualified beneficiaries that experience a qualifying event?
In a hypothetical scenario, an employee is employed by a large business, Company A, is covered under their health plan, and leaves employment. Company A sends the employee a COBRA election notice.
The employee then takes a job at another large business, Company B, and is enrolled in the company’s health insurance. The employee is later terminated from Company B after a probation period for failing to satisfy the requirements of employment. Because the employee was on the health plan the day before the qualifying event that causes the loss of coverage, Company B sends a COBRA election notice.
In this situation, can the employee choose which employer's COBRA plan to elect, as he is still within the election periods for both employer plans? Is there a requirement to choose the most recent employer’s plan?
A. Yes, any employee who experiences a qualifying event with an employer subject to COBRA, must receive a COBRA election form. There is no requirement for an employee to elect coverage under the most recent employer’s plan provided the election under the former employer’s plan is still timely. COBRA coverage can terminate early if a former employee enrolls in another employer’s plan, but that doesn’t apply here because the employee did not elect COBRA when they enrolled on the latter employer’s plan. Enrollment in another plan terminates COBRA early only if enrollment occurs AFTER electing COBRA.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
1.18.24 | HSA COMBINED FAMILY CONTRIBUTIONS
Q. A group employee is asking about health savings account (HSA) contributions for herself and her husband. Her husband has an HSA plan through his employer and covers their children. If the husband contributes the family amount to his HSA account and the employee enrolls in her employer's HSA plan, can she then contribute the full individual amount? Can they have separate accounts and each max out the HSA contributions, or is there a household limit?
A. The husband can contribute up to the family HSA maximum since he is enrolled in something other than single-only coverage. The employee can contribute to her own HSA if she is on a high deductible health plan (HDHP), however the combined total contributions to both HSAs cannot exceed the family limit. The employee and her husband can divide up the contributions however they choose.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
1.11.24 | BIRTH OF A CHILD AS A QUALIFYING EVENT
Q. Upon the birth of a baby, can an employee enroll their new child, their spouse, and other dependent child in their company plan, and change the medical plan they are on?
A. It will depend on the terms of the employer’s cafeteria plan, but the law allows an employee to change the plan they are on upon the birth of a child, and can also enroll dependents, in addition to the baby, on the plan based on the birth of the baby. This is referred to as the “tag along” rule under Section 125 of the Internal Revenue Code.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
1.4.24 | COMMUTER BENEFIT
Q. If a company offers a Commuter Benefits program, can employees contribute both $315 for Transit and $315 for Parking each month for a total monthly contribution of $630?
A. Employees can contribute $315 for transit AND $315 for parking for a maximum of $630 to a commuter benefits program.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
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