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Good afternoon:
Did you enjoy your holiday
weekend? Ken and everyone at the agency hope that your holiday was pleasant and
safe.
We realize that we are in the
midst of "vacation season" and many of you may be out of the office, but we
still have important information to share with you. This month's ClientCall
will be waiting upon your return -- along with a few thousand other
emails. However, we've tweaked the newsletter's format a little, so it should
stand out from the rest : )
Ceridian is the COBRA administrator
for many of our clients; recently they published information regarding health
care reform. We are including some of the most pertinent information to your
business in this edition of ClientCall.
Wellness and health care reform:
For small employers, less than 100 employees
Under the health care reform law,
small employers will now have a financial incentive to create wellness programs.
About $200 million in grants will
be made available from 2011 to 2015 to fund comprehensive health promotion programs for employers
with 100 employees or less who work 25 or more hours a week.
The grant program is only for
companies who do not have an existing program in place.
Eligible wellness programs must
include health awareness Initiatives, efforts to engage employees, initiatives to change unhealthy behaviors and
lifestyle choices, and supportive environment efforts.
An application process or specific
rules on how employers can apply for these grants has yet to be determined. The federal government
Is expected to begin awarding grants in 2011.
The new health care reform law
results in changes to your benefit programs, which affect the services we
deliver to you in the following areas:
· Tax-Advantaged Health Care
Reimbursement Accounts
· Health & Welfare
· COBRA
We will focus on Tax-Advantaged Health Care Reimbursement Accounts in this ClientCall and follow up with Health & Welfare and COBRA in BenefitsBulletins on succeeding
Wednesdays.
There is a lot of information to process -- our goal is to make this information easier for everyone to understand and implement.
Changes to tax-advantaged health
care reimbursement accounts include the
following:
· Change to over-the-counter (OTC)
drug eligibility: HFSA, HRA, HSA
· Change to participants' pre-tax
contributions: HFSA
· Introduction of "adult
children" as eligible dependents: HFSA, HRA
· Change to the penalty for
non-qualified distributions: HSA
Change to over-the-counter (OTC) drug eligibility: HFSA, HRA,
HSA
The Change in Law:
· Over-the-counter (OTC) drug expenses incurred 1/1/2011 and
after will require supporting documentation, such as a doctor's prescription
· OTC supplies and equipment remain eligible without such
supporting documentation
· This date is effective regardless of the plan year
Actions Ceridian is Taking:
· Ceridian has published a participant FAQ for existing or
new participants
· Ceridian will update all eligible expense tables, forms,
processes and communications, for both annual enrollment and ongoing services
Impact to Participating Employees:
· Our data shows this change in OTC eligibility impacts 7% of
debit card transactions
· Inventory Information Approval System (IIAS) merchants
(typically pharmacies and grocery stores) will be updating their systems which govern debit
card approvals. Participants must
pay for OTC drugs out-of-pocket starting 1/1/2011
· Participants must submit manual claims with supporting
documentation to be reimbursed for OTC drugs incurred 1/1/2011 and after. Participants in
off-calendar plans will be impacted during the current plan year
Change to participants' pre-tax contributions: HFSA
The Change in Law:
· Effective 1/1/2013, the law limits the amount an individual
may pre-tax under HFSA to $2,500, per individual, per tax year
· Prior to health care reform, employers established the
maximum amount a participant could pre-tax under the HFSA by plan design
· The $2,500 cap does not include employer contributions
Actions Ceridian is Taking:
· Ceridian has published a participant FAQ for existing or
new participants
· Ceridian will update communications and other support
materials as needed Impact to Participating Employees:
· Our data shows the average annual election for a Health FSA
is about $1,400 with 15% of HFSA participants electing to pre-tax an amount greater than
$2,500
· Those participants who generally elect an amount greater than
$2,500 should consider increasing their election prior to the effective date of the
cap to take advantage of higher limits
currently available
· Employees will need to re-evaluate their HFSA expenses
Introduction of "adult children" as eligible
dependents: HFSA, HRA:
The Change in Law:
· Tax code was revised so that the cost of reimbursing
medical expenses of adult children under a HFSA and HRA are not taxable to the employer or
employee. NOTE: The provision mandating coverage to adult children is a separate
requirement under the law and ends when the child turns 26.
· The new category of adult child added is similar (but
distinct) to dependent: adopted or natural son, daughter, stepson, stepdaughter or foster child
of the participant until the end
of the calendar year in which the adult child turns 26.
· Current cafeteria plan rules do not permit election changes
based on an adult child meeting or ceasing to meet the eligibility rules. The IRS and
Treasury intend to modify the
rules to allow these election changes now.
· If cafeteria or HRA plan documents need to be amended (to
address definition of eligible individuals and/or to add new election change events), the
IRS and Treasury have provided
an exception to the general rule that such amendments must be
effective prospectively. So long as the employer makes such amendments by 12/31/2010,
they may be effective
retroactively to 3/30/2010.
Actions Ceridian is Taking:
· Ceridian is updating all
relevant FSA communications for participants and employees participating in a HFSA/HRA
· Ceridian's model plan document
and related materials will be updated to allow "adult children" as eligible dependents
Impact to Participating Employees:
· Effective for expenses incurred
3/30/2010 and after, participants may be reimbursed for
the eligible medical expenses of
their adult children
Change to the penalty for non-qualified distributions: HAS:
Tax-advantaged reimbursement plans
will remain an important tool to help employees reduce out-of-pocket
spending.
· OTC drug items represents the
smallest portion of HFSA/HRA expenditures
· OTC drug items can still be
reimbursed with documentation from a physician
· OTC equipment and supplies
remain eligible without additional documentation Physician statement forms are
available on Ceridian's participant website
The average annual election of
about $1,400 for Health FSAs is below the $2,500 maximum election allowed effective 2013
Tax-advantaged reimbursement plans
will remain an important tool for employers to combat the rising cost of
providing competitive health, vision and dental benefits.
· Employers will continue to save
thousands annually in FICA and FUTA taxes by offering Health FSAs, HRAs and HSAs
· HFSAs, HRAs and HSAs will be
more important than ever in driving employees to HDHPs
· Communication is key to
maintaining and increasing participation in these plans
Change to the penalty for non-qualified distributions: HSA:
The Change in Law:
· Effective 1/1/2011, the penalty for the use of funds from a
Health Savings Account for nonqualified medical expenses will increase, doubling the additional tax
on these types of
withdrawals from 10% to 20% for anyone under the age of 65
Actions Ceridian is Taking:
· Ceridian will update all relevant HSA communications for
participants and employees considering participation in an HSA plan for 1/1/2011 Impact to Participating Employees:
· Ceridian will update all relevant HSA communications for
participants and employees considering participation in an HSA plan for 1/1/2011
· HSA participants seeking disbursement of funds for
qualified health expenses will not be impacted
· Participants under age 65 who take a distribution from
their HSA for a non-qualified expense on 1/1/2011 or later must pay an excise tax of 20%
Summary:
Tax-advantaged reimbursement plans will remain an important
tool to help employees reduce out-of-pocket spending.
· OTC drug items represents the smallest portion of HFSA/HRA
expenditures
· OTC drug items can still be reimbursed with documentation
from a physician
· OTC equipment and supplies remain eligible without
additional documentation
Physician statement forms are available on Ceridian's
participant website
The average annual election of about $1,400 for Health FSAs
is below the $2,500 maximum election allowed effective 2013.
Tax-advantaged reimbursement plans will remain an important
tool for employers to combat the rising cost of providing competitive health,
vision and dental benefits.
· Employers will continue to save thousands annually in FICA
and FUTA taxes by offering Health FSAs, HRAs and HSAs
· HFSAs, HRAs and HSAs will be more important than ever in
driving employees to HDHPs
· Communication is key to maintaining and increasing
participation in these plans
In our next BenefitsBulletin, we will cover Health and
Welfare
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