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At TASC, we closely monitor the moves taking place in Healthcare Reform. Especially important to us is any language being put forth in the bill(s) that would affect tax-advantaged employer sponsored health benefits, such as Flexible Spending Accounts (FSA), Health Reimbursement Arrangements (HRA), and Health Savings Accounts (HSA).

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LATEST NEWS!   (7/16/10)

 

The White House has launched their new website which will make it easier for citizens to find health care coverage and find out how the new rules from the Affordable Care Act may affect them, their family or business.  The website is HealthCare.gov , and it's jammed packed with lots of good information!  

 

Click on 'Find Insurance Options' and take a brief survey to find the most appropriate healthcare coverage for you available in your state.  Read the most recent 'In Focus' topic to learn about the new Preventive Care legislation and what you can expect to see change in your insurance plan.  Stay in tune with the healthcare reform debate by reading the ongoing 'Healthcare Notes' blog or viewing videos on different topics in the 'Videos & Chats' section.  You can even sign-up to receive e-mail updates. 

 

 

POSTED 7/2/2010

VIEW THE LATEST TASC HEALTHCARE REFORM CHART FOR A SNAPSHOT OF THE CHANGES

 

W-2 Reporting of Health Benefits (FSAs and HSAs)

Section 9002 of H.R. 3590 requires employers to calculate and report the aggregate cost of applicable employer-sponsored health benefit coverage on employee IRS Form W-2s. The legislation is effective for tax years beginning after December 31, 2010. All employers who offer employer-sponsored health insurance coverage must comply with this new legislation and should be prepared to provide updated W-2’s no later than February 1, 2011 (for employees who are terminated within the 2011 tax year and request to receive their W-2's prior to January 2012).

Under the new requirement, costs must be reported for the following plans and services:

• Medical plans;
• Prescription drug plans;
• Executive physicals;
• On-site clinics which provide more than a minimum of care;
• Medicare supplemental policies;
• Employee assistance programs;
• Dental and vision plans, unless they are "stand-alone" plans.

The cost of coverage - even if employer sponsored - under health Flexible Spending Accounts (FSAs) is excluded from the reporting requirement.

Employer contributions to a Health Savings Account (HSA) are excluded from being reported as part of the aggregated health coverage amount, but should continue to be reported in Box 12 of the W-2 as usual under existing law.

The aggregate cost of health coverage (including both employee and employer portions of cost) is determined under rules similar to COBRA. Under the new reporting requirement, employers must establish value for coverage provided by plans and programs not previously valued for COBRA purposes. (Government regulations regarding how to value plans for COBRA purposes are expected shortly. Any regulations issued will apply both to COBRA and to the new IRS Form W-2 reporting requirements.)

In addition to reporting health benefit costs, the new reporting requirement appears to require the following:

• A monthly calculation of coverage value. (Future regulations may clarify how to report coverage of less than a full month.)
• W-2 reporting of former employees who are still provided with health coverage (including early retirees, retirees, terminated employees on COBRA, and surviving spouses).

For additional clarification on these points you may wish to consult with your payroll professional or health insurance provider.  (See below for information re: W-2 and HRA)

POSTED 6/24/2010

How do the new Healthcare Reform changes affect Health Reimbursement Arrangements (HRA)?  

1. Health Care Benefits for Children Under Age 27 (HRA)

As a result of recent IRS Notice 2010-38, health insurance coverage has been extended for employees’ children under age 27, and is generally provided for such children on a tax-free basis to the employee. This change went into effect on March 30, 2010.

The Notice provides for employer-sponsored insurance premium costs (of the extended coverage) as well as for medical expenses incurred under a HRA Plan (if applicable under your Plan design). Under the notice, the definition of a child includes a son, daughter, stepchild, adopted child or eligible foster child (including a child of the employee who is not the employee’s dependent). These new age and dependent status changes replace earlier lower age limits and establish that a covered child need not qualify as a dependent for tax purposes.

The exclusion from gross income for premium and medical HRA expenses applies only to an employee’s child who has not attained age 27 at the end of the taxable year. In sum, employees with children who remain under age 27 at Plan Year end are eligible for the new tax benefit beginning March 30, 2010, if the children are already covered under or added to the employer’s plan.

For purposes of this Notice, the taxable year is the employee’s taxable year; employers may assume that an employee’s taxable year is the calendar year and may rely on the employee’s representation as to the child’s date of birth.

While this change affects most employee benefit plans, including HRAs, government estimates suggest only 3 percent of employees with family coverage will add a child. The timing of the change will be determined by you the employer, who will need to make insurance and payroll election changes as well as adding newly eligible dependents to your DirectPay Plan. To add a dependent to your Plan simply download the DirectPay Change Form, complete it, and return it to DirectPay.  
(See below for information about Age 27 and FSAs)


2. W-2 Reporting of Health Benefits for HRAs

Section 9002 of H.R. 3590 requires employers to calculate and report the aggregate cost of applicable employer-sponsored health benefit coverage on employee IRS Form W-2s. The legislation is effective for tax years beginning after December 31, 2010. All employers who offer employer-sponsored health insurance coverage must comply with this new legislation.

Under the new requirement, costs must be reported for the following plans and services:

• Medical plans;
• Prescription drug plans;
• Executive physicals;
• On-site clinics which provide more than a minimum of care;
• Medicare supplemental policies;
• Employee assistance programs;
• Dental and vision plans, unless they are "stand-alone" plans;
• And, the cost of coverage under a Health Reimbursement Arrangement (HRA) Plan.

The aggregate cost of coverage under the plans (including the employee and employer portions of cost) is determined under rules similar to COBRA. Under the new reporting requirement, employers must establish value for coverage provided by plans and programs not previously valued for COBRA purposes. (Government regulations regarding how to value plans for COBRA purposes are expected shortly. Any regulations issued will apply both to COBRA and to the new IRS Form W-2 reporting requirements.)

In addition to reporting health benefit costs, the new reporting requirement appears to require the following:

• A monthly calculation of coverage value. (Future regulations may clarify how to report coverage of less than a full month.)
• W-2 reporting of former employees who are still provided with health coverage (including early retirees, retirees, terminated employees on COBRA, and surviving spouses).

For additional clarification on these points you may wish to consult with your payroll professional or health insurance provider.

3. Over-the-Counter (OTC) Eligible Expenses and DirectPay Uninsured Medical HRAs

Language in H.R. 3590 makes the current definition very clear: “…reimbursement for expenses incurred for a medicine or drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.” Interpreted literally and for the purposes of HRA Plans this is then defined as:

• While all medically necessary medicines continue to be HRA eligible, some items may require additional substantiation.
• OTC medicines/drugs are HRA ineligible as of January 1, 2011, unless you retain a prescription (or Letter of Medical Necessity) from your physician, or if it’s insulin.
• OTC health-related supplies continue to be HRA eligible after December 31, 2010.

Individuals who require a medicine or drug for a medical condition should obtain a prescription (or Letter of Medical Necessity) for such from their health provider. TASC foresees that this process will be straightforward, and that said authorization will render the expense eligible under the DirectPay Uninsured Medical HRA Plan.

According to a study conducted by a large health debit card provider, losing the tax-deductible status for OTC medicines will affect only a small percentage of employee medical HRA reimbursements. As the employer sponsor, it is at your discretion whether you wish to encourage your employees to make additional OTC purchases before December 31, 2010, when the new eligibility rules go into affect.

To assist you and your Participants, we have created a helpful document that explains the new OTC changes and provides examples of HRA expenses that may be affected by this change. Please download this document and share it with your employees.   (See below for information about OTC Expenses and FSAs)

POSTED 6/22/2010

 

The following content relates to the FSA OTC expense eligiblity change as well as the change to healthcare benefits for children up to age 26.  You will also notice two documents published that you can provide to your participating employees (document FX-4311 contains information about the FlexSystem Debit Card/TASC Card, document FX-4311a is the same document with references to the Card removed.)  

 

Over-the-Counter (OTC) FSA Eligible Expenses Change

Language in HR 3590 makes the current definition very clear: “…reimbursement for expenses incurred for a medicine or drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.” Interpreted literally and for the purposes of FSA elections this is then defined as:

• While all medically necessary medicines continue to be FSA eligible, some items may require additional substantiation.
• OTC medicines/drugs are FSA ineligible as of January 1, 2011, unless you retain a prescription (or Letter of Medical Necessity) from your physician, or if it’s insulin.
• OTC health-related supplies continue to be FSA eligible after December 31, 2010.

Individuals who require a medicine or drug for a medical condition should obtain a prescription (or Letter of Medical Necessity) for such from their health provider. TASC foresees that this process will be straightforward, and that said authorization will render the expense eligible under the FlexSystem medical FSA Plan.

According to a study conducted by a large health debit card provider, losing the tax-deductible status for OTC medicines will affect only a small percentage of employee medical FSA reimbursements. Therefore, groups currently undergoing FSA enrollment should advise their employees to continue to make their FSA elections as usual, because elections for a medical FSA are typically conservative (meaning Participants’ medical expenses usually exceed the funds they elect with their medical FSA). In sum, it is highly likely that other expenses will be used for reimbursement in lieu of those now deemed ineligible by this change.

If additional legislative clarification subsequently affects previous medical FSA election decisions, TASC will allow Participants to alter previously elected amounts. This flexibility reflects our pro-Participant corporate philosophy, and helps ensure that Participants are not adversely affected by the use-it-or-lose-it rule. Further, we will back this policy with our exclusive Audit Guarantee.

TASC will comply with the list of eligible expenses (as published and maintained by SIGIS ) in accordance with IIAS rules used for auto-substantiation of debit card purchases. Updates will be made to the IIAS system at the merchant level for debit card processing.

Purchases made with the TASC Card are automatically differentiated and substantiated as eligible or ineligible expenses during the point-of-purchase. At that time, if the eligibility of an expense is called into question (because a required prescription or other physician authorization is absent), other available Request for Reimbursement methods may be required in place of or in conjunction with the TASC Card.

To assist you and your Participants with enrollment, we have created some helpful documents that explains the new OTC changes and provides examples of medical FSA expenses that may be affected by this change. Please download the appropriate document(s) and share them with your employees.