The recently enacted health care reform legislation, Patient Protection and Affordable Care Act, PPACA, has specific impacts on health plan spending accounts that need to be communicated to employees. These impacts should be considered during open enrollment and throughout the balance of 2010.  The Alpha Group will work with clients to make certain employees are informed of these changes.

 

Over-the-Counter Eligibility for Reimbursement
For purchases beginning January 1, 2011, money from health plan spending accounts (HRA, HSA and FSA) will no longer be available to pay for most over-the-counter drugs and medicines without a doctor's prescription. We expect the Secretary of Health and Human Services to release details on both the type of documentation required, as well as the specific medications that will need documentation for reimbursement.

Penalty on HSA Distributions
Starting January 1, 2011, the tax penalty on HSA distributions that are not used for qualified expenses will increase from 10% to 20% of the disbursed amount.

Reimbursement for Expenses of Dependents
With the extension of dependent coverage to age 26, there are a few items to consider.  Money from HRA and FSA accounts may be used for eligible expenses incurred by all covered dependents. However, retroactive FSA reimbursement may be offered for expenses incurred by a child to age 26 - as far back as March 30, 2010. The IRS Ruling (2010-38) allows for this exception as long as the cafeteria plan documents are amended by December 31, 2010.

While the extension of dependents to age 26 impacts the underlying medical plan (HDHP), money from an HSA may only be used for eligible expenses incurred by covered dependents that meet the federal government's definition of a tax dependent.

If benefits are renewed off the calendar year (not on January 1), it's important that employees understand that the Over-the-Counter and HSA Penalty changes are effective on January 1, and are not tied to plan years or renewal dates.

Alpha is committed to keeping you informed on any new health care reform legislation, and will continue to provide updates as additional provisions and regulations are announced. Please visit Alpha's health care reform website link: www.TheAlphaGA.com  for up-to-date information.