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2014

  • Legislative & Regulatory News: ECFC ALERT: Transit Benefits Retroactivity for 2014 12/18/2014
  • Legislative Resources: ECFC 2015 Legislative & Regulatory Survey 12/11/2014
  • Legislative & Regulatory News: U.S. House vote on expired tax breaks impacts commuter benefit 12/04/2014
  • Legislative Resources: Revenue Ruling 2014-32: updates previous guidance on the use of smartcards, debit or credit cards 11/25/2014
  • Legislative & Regulatory News: Revenue Ruling 2014-32: updates previous guidance on the use of smartcards, debit or credit cards 11/25/2014
  • Legislative & Regulatory News: Additional FAQs issued on individual policies paid with pre-tax dollars 11/06/2014
  • Legislative & Regulatory News: HHS and IRS announcement regarding Employer plans and hospital coverage 11/06/2014
  • Legislative & Regulatory News: CMS announces suspension of enforcement of HIPAA HPID requirements 10/31/2014
  • Legislative & Regulatory News: IRS releases 2015 annual inflation adjustments in Revenue Procedure 2014-61 10/30/2014
  • Legislative Resources: IRS Revenue Procedure 2014-16 – Provides annual inflation adjustments for 40+ tax provisions 10/30/2014
  • Press Releases: Employer-Provided Healthcare and Open Enrollment: What Employees Need to Know 10/30/2014

    Washington, D.C. (October 30, 2014) – There’s been a lot of talk about the individual health insurance market and health insurance exchanges over the past year but, according to the most recent Census Bureau data[1], close to 85 percent of Americans get health insurance from their employers or government plans like Medicare and Medicaid. Which means it’s also open enrollment season for the more than 170 million covered by employer-sponsored plans–as well as the 48.9 million Medicare recipients who have until December 7, 2014, to make plan changes.

    “While open enrollment periods vary from employer to employer, October and November are traditionally the key months when employees have an opportunity make changes to their plans,” explains Natasha Rankin, executive director of the Employers Council on Flexible Compensation. “And many of these workers may find themselves faced with significant changes in the type and level of coverage offered by their employers this year. Most notably, an increasing move among companies towards consumer-directed benefits packages that use higher deductible health insurance plans linked to tax-advantaged health savings accounts such as health savings accounts, health reimbursement arrangements, and flexible spending arrangements.”

    A recent study from the National Business Group on Health[2], found the number of employers offering workers a consumer-directed health plan as the only health benefit option is expected to grow by nearly 50 percent next year: almost one-third (32%) plan to do this in 2015, compared with 22 percent this year. In addition, more than half (57%) of employers surveyed are implementing or expanding consumer-directed health plans.

    “There’s no denying that consumer-directed health plans are here to stay,” explains Ms. Rankin. “They make sense for employers as they try to contain costs while, at the same time, provide an affordable health insurance solution for their employees.”

    The Affordable Care Act has set minimums and maximums on deductibles and out-of-pocket expenses for qualifying high deductible health plans. In 2015, the minimum deductible is $1,300 for an individual and $2,600 for a family. Maximum out-of-pockets costs are $6,450 for a single person and $12,900 for a family.

    “The good news is employers can help their employees manage the increased out-of-pocket costs associated with these high deductible plans,” continues Ms. Rankin. “Employers can easily pair the high-deductible insurance with tax-advantaged benefits packages such as health savings accounts (HSAs), health reimbursement arrangements (HRAs), and flexible spending arrangements (FSAs).”

    Here’s how they work:

    • Health Savings Accounts (HSAs) are tax-advantaged medical savings accounts available to taxpayers who are enrolled in a qualified high deductible health plan. The funds contributed to the account are not subject to federal income tax at the time of deposit. Unused funds can be carried over to following years and added to subsequent contributions, earning tax-deferred interest. Withdrawals for qualified medical expenses are tax-free. The employer, the employee, or a combination of both can make contributions to the HSA. The best part is the HSA is owned and operated by the employee, which makes it portable. So if an employee leaves a company or the workforce, the HSA goes with the individual. For 2015, the ACA set contribution limits to HSAs at $3,350 for individual coverage and $6,650 for families. Additionally, individuals 55 and older can contribute an additional $1,000 each year to help save money for future retiree medical expenses.
    • Health Reimbursement Arrangements (HRAs) are defined contribution benefits established by the employer for the employee. The employer defines what that they will contribute to the HRA each year to help their employees cover medical expenses. The HRA plan is solely funded by the employer–but those contributions do not count as employee salary. In addition, withdrawals from the HRA for qualified medical expenses are tax-free. The HRA offers a high degree of flexibility for the employer in terms of plan design and the schedule of reimbursements. Beginning in 2014, the ACA has changed the structure and use of HRA funds. A HRA must be integrated–which means it must be paired with a qualifying high deductible health insurance plan. In addition, funds in the HRA cannot be used to cover premiums for the high deductible plan. Unlike HSAs, the HRA belongs to the employer, and it is up to the employer to determine how, or if, unused funds will be handled at year’s end.
    • Flexible Spending Arrangements (FSAs) are tax-advantaged benefit programs that allow employees to use pre-tax money for pay for eligible healthcare expenses. Based on ACA rules, an employee can elect to fund, per participant, up to $2,550 of her/his annual salary in the FSA in 2015. In addition, a new ruling issued by the IRS amends the “use or lose it” ruling. As of October 31, 2013, up to $500 in unused funds can rollover and be used in the following plan year. This rollover is restricted to plans that do not have a grace period. In addition, the ruling does not affect the $2,550 annual contribution. In terms of combining an FSA with other tax-advantaged health savings plans, FSAs can be used with HSAs in a limited capacity. Because a FSA is considered a health plan, only limited purpose FSAs‒typically covering dental and vision‒may be used with a HSA. An employee can also have both a HRA and FSA simultaneously. However, the same expense cannot be reimbursed from both accounts. The employer can set the terms of ordering rules to determine whether the HRA or FSA should be used first to cover qualifying medical expenses.

    “Educating employees about how these tax-advantaged options work should be a top priority among employers,” comments Ms. Rankin. “There are definitely aspects of each plan that can appeal to different employers and employees. For example, individuals who are 55 or older can contribute an additional $1,000 a year to their HSA to use now–or, if they enjoy good health–save for medical expenses in retirement.”

    As we move towards 2016, when the employer mandate goes into effect for companies with 50 or more employees, the Employers Council on Flexible Compensation (ECFC) anticipates even greater adoption of high deductible health insurance plans paired with defined contribution HSAs, HRAs, and FSAs.

  • Legislative Resources: Consumer-Driven Options for Open Enrollment Success 10/27/2014

    Article in SHRM bylined by Executive Director Natasha Rankin regarding a variety of strategies and incentives that promote smarter healthcare decision-making

  • Legislative & Regulatory News: Final Rule on Amendments to Excepted Benefits Released 9/30/2014
  • Legislative Resources: Pre-Publication Amendments to Excepted Benefits Final Rule 9/30/2014

    Pre-publication of the Amendments to Excepted Benefits issued by the Employee Benefits Security Administration, Health and Human Services Department, and Internal Revenue Service on September 26, 2014

  • Legislative & Regulatory News: IRS guidance on permitted election changes-health coverage under Sec. 125 Caf. Plans 9/19/2014
  • Legislative & Regulatory News: Commuter Parity Update and Fall 2014 Congressional Dashboard Description 9/10/2014

    We have additional promise and momentum to achieve parity for commuter benefits. The Joint Committee on Taxation was asked to evaluate H.R. 2288, sponsored by Rep. Blumenauer (D-Ore.) and Rep. Peter King (R-N.Y.), which establishes parity at $220, and the JCT issued a letter on September 4, that provides a scoring estimating revenue neutrality at $235. We are still looking for ways to ensure viability for this legislation, and we will share alerts with you as we have action items for you to help with.

    And, courtesy of Mehlman Castagnetti Rosen Bingel & Thomas Inc., we are including an overview of what lies ahead for Congress this fall.

    Please join us for our Legislative Update Calls on the 2nd Tuesday of each month.

  • Legislative Resources: Fall 2014 Legislative Dashboard 9/10/2014
  • Legislative Resources: Joint Committee on Taxation Letter – Commuter Parity/H.R. 2288 9/10/2014
  • Legislative Resources: Consumer-Driven’s More of a Given 9/02/2014

    ECFC Board Chair William Short quoted as part of an article about how employers are embracing consumer-driven health as they look for ways to manage costs

  • Legislative Resources: ECFC EMPLOYER ALERT: Individual Medical Policy May Result in Significant Excise Tax Liability 8/18/2014

    The Employers Council on Flexible Compensation (ECFC) is an industry association made up of leading cafeteria and related benefit plan service providers and plan sponsors. In the aftermath of agency guidance, ECFC has received numerous inquiries from employer plan sponsors and member companies as to whether employers can make available individual major medical coverage to employees on a tax-free basis as part of an employer-sponsored arrangement. This practice may have significant adverse tax consequences for employer plan sponsors. This Employer Alert Bulletin is intended to direct employers, and their counsel, to authoritative guidance on the issue. Click here for complete alert.

  • Legislative & Regulatory News: ECFC EMPLOYER ALERT: Individual Medical Policy May Result in Significant Excise Tax Liability 8/18/2014

    The Employers Council on Flexible Compensation (ECFC) is an industry association made up of leading cafeteria and related benefit plan service providers and plan sponsors. In the aftermath of agency guidance, ECFC has received numerous inquiries from employer plan sponsors and member companies as to whether employers can make available individual major medical coverage to employees on a tax-free basis as part of an employer-sponsored arrangement. This practice may have significant adverse tax consequences for employer plan sponsors. This Employer Alert Bulletin is intended to direct employers, and their counsel, to authoritative guidance on the issue. Click here for complete alert.

  • Legislative Resources: Flex-related Legislation Update as of August 11, 2014 8/12/2014

    Federal Legislation Related to Account-Based Benefit Plans

  • Press Releases: Jason Ainge, Esq., CFC, from TRI-AD Elected to ECFC Board of Directors 8/06/2014

    Jason Ainge, Esq., CFC, Director of Health & Welfare Operations and General Counsel at San Diego-based TRI-AD Elected to Board of Directors at Annual Administrators’ Symposium

    WASHINGTON, D.C. (August 6, 2014) – The Employers Council on Flexible Compensation (ECFC) announced today the appointment of Jason Ainge, Esq., CFC, director of Health & Welfare Operations and general counsel at San Diego-based TRI-AD to the association’s Board of Directors.

    Mr. Ainge, an active member in the organization currently serving as vice chair of ECFC’s Membership Committee, brings 20 years in the employee benefits industry to his new position on the board. At TRI-AD he is responsible for the overall operational delivery of its health and welfare benefits administration services, including eligibility and enrollment, premium billing, reimbursement plans, COBRA, and direct billing.  Jason is also a key contributor in the area of legal regulatory compliance, including HIPAA security and privacy, as well as supporting the company’s strategic planning, new business development and client relationship building. “I’m looking forward to bringing my unique background and experience in both the operational and legal sides of the business to work for improvements that will benefit participants, employers and administrators within the benefits industry,” explains Mr. Ainge.

    Mr. Ainge’s board appointment was announced at ECFC’s 27th Annual Administrators’ Symposium, held earlier this month in Denver, Colo., where the nation’s leading flexible compensation benefits experts convened to gain the most up-to-the-minute knowledge for the impending 2015 open enrollment season. Those “in the know” when it comes to the latest in healthcare legislation and ACA compliance and guidance shared practical advice, technical education, updates on lobbying initiatives, news on the regulatory front, and hosted deep dive sessions focusing on key issues that will impact tax-advantaged benefit plans and the industry in 2015 and beyond.

    ECFC is a nonprofit organization dedicated to the advocacy, education, advancement, and innovation of tax-advantaged benefit programs that facilitate choice for employers and their employees. “We look forward to working closely with Mr. Ainge to further our mission of empowering employees to take control of their healthcare dollars and helping employers to provide a positive benefits package and workplace environment,” says Natasha Rankin, executive director, ECFC.

    Members of ECFC include employers, third party administrators, health plan providers, payers, providers, payment networks, processors, and financial institutions. These diverse industry groups have come together under the ECFC banner to shape public policy that supports tax-advantaged benefit plans and further advances employee choice and consumerism; promote the expansion of tax-advantaged employer-provided benefits; create nationally-recognized education and certification programs to advance professionalism within the industry; and foster a community where industry thought-leaders share best practices to maximize employer and employee choice.

    Specific programs supported by ECFC include: Cafeteria plans and other flexible benefit programs under Section 125, consumer-driven healthcare arrangements including health reimbursement arrangements (HRAs), health savings accounts (HSAs), tax-advantaged transportation spending accounts (TSAs), dependent care assistance plans (DCAPs), and flexible spending arrangements (FSAs), collectively, referred to by ECFC as “flexible benefit programs.”

  • Press Releases: ECFC Symposium Helps Businesses Prepare for 2015 Open Enrollment 8/04/2014

    Nation’s Leading Flexible Compensation Benefits Experts Shared Valuable Insights, Knowledge Regarding New 2015 Compliance Issues and Guidance

    WASHINGTON, D.C. (August 4, 2014) – The nation’s leading flexible compensation benefits experts will convene in Denver, Colorado, this week to attend the Employers Council on Flexible Compensation (ECFC) 27th Annual Administrators’ Symposium. Attendees at the three day event, scheduled for August 6-8, will gain the most up-to-the-minute knowledge for the impending 2015 open enrollment season. Those “in the know” when it comes to the latest in healthcare legislation and ACA compliance and guidance will share practical advice, technical education, updates on lobbying initiatives, and news on the regulatory front, and host deep dive sessions focusing on key issues that will impact tax-advantaged benefit plans and the industry in 2015 and beyond.

    The healthcare landscape has changed dramatically over the past year, with new guidance and regulation redefining how employers–and their employees–approach healthcare benefits today and in retirement. “You can’t be a part of the health industry, flex business, or even be covered by a health insurance policy without being affected by the tidal wave of healthcare change that has been forthcoming from federal agencies and ACA implementation this past year,” explains Natasha Rankin, Executive Director, Employers Council on Flexible Compensation.

    ECFC’s annual symposium, organized specifically for third party administrators, brokers and agents, insurance carriers, plan sponsors, and employers who want answers to flexible compensation questions, also offers an opportunity for attendees to earn continuing education credits towards ECFC’s industry-standard-setting professional certification programs.

    The symposium is designed to arm ECFC members and leaders in the tax-advantaged benefits industry with valuable knowledge and skills to help them guide their clients through the complicated 2015 open enrollment process. Attendees will also come away with fresh ideas to help grow their businesses, add value, enhance client service, and tap into new advances in technology to further build consumer engagement programs.

    “The annual ECFC Administrators’ Symposium presents a unique opportunity for members and non-members alike to demonstrate their knowledge of the industry and contribute and learn from each other,” explains Ms. Rankin. “ECFC members are ahead of the curve when it comes to change because, collectively, we’ve been a recognized voice and proponent for tax-advantaged benefits programs for nearly 30 years. And, as such, we have played a critical role in helping to shape and interpret healthcare legislation.”

  • Legislative & Regulatory News: ECFC ALERT: Important Reminder Regarding July 31st PCORI Fee Deadline 7/24/2014
  • Legislative & Regulatory News: ECFC ALERT: Conflicting U.S. Court of Appeals Rulings on Premium Tax Credits to Exchange Enrollees 7/23/2014
  • Legislative Resources: Flex-related Legislation Update as of June 12, 2014 6/12/2014

    Federal Legislation Related to Account-Based Benefit Plans

  • Legislative Resources: ECFC ALERT - Take action now to support the Transit Commuter Benefit 6/03/2014

    Draft support letter and links to the Commuter Benefits Work for Us Coalition

  • Legislative & Regulatory News: IRS releases further guidance on Employer Health Care Arrangements, Notice 2013-54 5/27/2014
  • Legislative & Regulatory News: ECFC ALERT: Senate considering tax extenders that impact commuter parity and healthcare tax credit 5/15/2014
  • Press Releases: Americans Overlook, Underestimate Healthcare Costs When Saving for Retirement 5/13/2014

    WASHINGTON, D.C. (May 13, 2014)—Ten thousand. That’s how many Americans reach retirement age each day. And it’s just the tip of the iceberg. Over the next 20 years, 77 million baby boomers will join the ranks of senior citizens. But how many of these soon-to-be retirees have a plan–and savings–in place to help cover healthcare costs in retirement? Only about one-third (36 percent), reports AARP.

    According to a 2013 survey conducted by AARP, most adults in their 50s and 60s have not begun saving for healthcare costs they may incur during their retirement years. And while two-thirds have given this retiree expense some level of thought, only 52 percent are confident they can afford the costs.

    But do they truly understand the costs? Results from the Fidelity Investments Retirement Savings Assessment study suggests Americans greatly underestimate the amount of savings they need to cover health care in retirement. Among pre-retirees ages 55-64, nearly half (48 percent) believe they only need about $50,000 to pay for their individual healthcare costs in retirement. In reality, Fidelity estimates the average couple retiring today could expect to spend more than $220,000 in healthcare expenses over the course of their retirement–and that estimate does not include long-term care or dental.

    So what can people do now to prepare for those healthcare expenses in retirement? “Maximize contributions to your health savings account (HSA),” advises Natasha Rankin, Executive Director, Employers Council on Flexible Compensation. “There is no single retirement financial savings tool comparable to what an HSA can potentially offer. Paired with a required qualified high deductible health plan, HSAs are a smart healthcare financing tool that can be used to cover medical expenses now- with unused funds rolling over to help cover Medicare Part B premiums, co-pays, and deductibles on a tax-advantaged basis.”

    A health savings account is fully-owned, managed, and controlled by the individual. Annual contributions–which are pre-tax and can be made by the employee, employer, or both–are defined upfront so there are no surprises or unexpected changes in benefits. The account holder has the power to determine when, where, how, and how much will be spent on their qualified medical expenses. Once the account holder reaches 65, money saved can be withdrawn on a tax-free basis to offset eligible out-of-pocket deductible and co-pays (distributions made for any other purpose are subject to income tax). And since the HSA belongs to the account holder funds in the HSA are guaranteed for his or her use for the remainder of their life, evenif he or she leaves his or her employer.

    The added bonus of HSAs is that workers between the ages of 55 and 65 can accelerate their HSA contributions by $1,000 a year–giving them the opportunity to “catch up” on savings for retirement healthcare.

    “If a 55-year-old HSA participant banks on the probability of life–the probability that they will enjoy relatively good health for the next ten years–there is the potential to accrue a sizeable nest egg to cover future healthcare needs in retirement,” Ms. Rankin explains. “Especially if individuals employ some simple savings strategies.” Ms. Rankin recommends:
    • Make the maximum allowed contribution at the beginning of each year, as opposed to waiting until April 15, of the following year. Funding the account up front allows you to make the most of tax-free interest earned. Over decades, tens of thousands of tax-deferred interest can be accrued.
    • If your financial situation allows you to cover healthcare expenses with personal savings, then delay withdrawing funds from your HSA. The annual contributions you make, coupled with tax-free and tax-deferred growth, offers the potential to accrue a sizeable nest egg to cover future medical expenses in retirement. And, you always have the option to reimburse yourself from your HSA at any future time to cover eligible medical expenses incurred today.
    • Treat your HSA like any other investment. Seek out mutual funds and other investment options that offer potential growth. For example, a 45-year-old couple contributes $5,450 annually to their HSA for 20 years and earns a six percent return on their investment. If they withdraw $2,000 from their HSA each year to reimburse themselves for eligible medical expenses for twenty years (until age 65), they will have $134,525 in their HSA when they begin retirement. If the same couple delays withdrawing the $2,000 each year until after they retire, they will have $212,510 in their HSA at age 65.

    Let’s face it, current and future retirees shouldn’t bank on Medicare to cover all their healthcare costs in retirement. In fact, according to the Employee Benefit Research Institute, Medicare only covers about 60 percent of the cost of benefits. Not covered are Part B premiums, Part D drug coverage, and premiums for supplemental coverage. Those who can’t afford supplemental coverage will find deductibles and co-pays quickly adding up. Not to mention that Medicare doesn’t cover dental, vision, hearing, or any portion of long-term care costs.

    “American workers would be wise to prepare for retiree healthcare expenses long before they reach retirement age,” advises Ms. Rankin. “And investing in an HSA now–regardless of their age–can help them to potentially accrue a comfortable nest egg to pay for healthcare in retirement.”

  • Press Releases: New Law Signed by President Obama Eliminates Deductible Limits for Small Employer Market Health Plan 4/02/2014

    Employers Council on Flexible Compensation Heralds Repeal a Huge Victory for Consumer-Based Healthcare and Benefit Accounts

    The U.S. Congress passed legislation and the President signed into law the “Protecting Access to Medicare Act of 2014” on April 1, 2014. The bill, which prevents double digit cuts in Medicare reimbursement to doctors from taking effect this year, includes a very important change to an Affordable Care Act provision impacting account-based plans for small employers. Section 213 of the Medicare physician payment bill eliminates deductible limits imposed under the ACA for the small employer market health plans. Section 1302(c)(2) of the ACA currently limits deductible amounts offered by small employer plans to $2,000 for individuals and $4,000 for families.

    The Employers Council on Flexible Compensation (ECFC) joined forces with several other organizations in a successful advocacy effort at both the state and federal levels to get the deductible limit provision repealed. “This is a real victory for consumer-based healthcare and consumer-based benefit accounts,” explains Natasha Rankin, Executive Director, ECFC. “It allows small employers to continue to provide affordable medical insurance to their employees, including flexible compensation options such as FSAs, HRAs, and HSAs. And it allows employees to set aside tax advantaged dollars to help pay for their health care out-of-pocket and deductible expenses.”
    The new law goes into effect April 1, 2014.

  • Legislative & Regulatory News: ECFC ALERT: Small group deductible restrictions repealed and transit parity introduced 4/02/2014
  • Press Releases: The Future of Employer Sponsored Health Benefits 4/01/2014

    Tax-Advantaged Benefits Puts The Affordable In The Affordable Care Act

    WASHINGTON, D.C. (April 2014)—The Affordable Care Act (ACA) will change the way employers approach health benefits in the coming year, regardless of the recent employer mandate delay for mid-sized companies. Large employers—representing 66 percent of the workforce or 113 million American workers–will still be responsible for covering 70 percent of their full-time employees in 2015.
    Currently, 95 percent of companies with more than 100 employees offer health benefits–but how benefits are being delivered is changing. High Deductible Health Plans (HDHPs) have been an option for several years, and the experts at the Employers Council on Flexible Compensation (ECFC) predict they will continue to grow in popularity, as they have proven to be a better vehicle to control healthcare costs for employers and employees alike. “Employers are adopting HDHPs as a way to comply with ACA mandates and share the responsibility for healthcare with employees,” explains Natasha Rankin, Executive Director at the Employers Council on Flexible Compensation.

    Generally, the higher deductible plan offers immediate premium savings for both the employer and the employee. A study by Aetna released in 2013‒which looked at nearly 2.2 million Aetna members‒found that employers who switched to consumer-directed plans saved nearly $350 per employee per year. Over time, the Aetna HealthFund study calculates employer savings at $20.8 million over a six-year period for every 10,000 members. And employees benefit too. In addition to premium savings, the Aetna study found that employees spent less on most types of healthcare services, while continuing to receive the routine preventative care services they value from their primary care doctors. In fact, primary care visits and screenings for cervical, colorectal, prostate, and breast cancer outpaced those with traditional Preferred Provider Organization (PPO) plans by six-to-eleven percent.

    The savings netted by the employer and employee does shift responsibility to the employee to manage those savings against upfront costs. The Affordable Care Act has set minimums and maximums on deductibles and out-of-pocket expenses for qualifying high deductible health plans. In 2014, the minimum deductible is $1,250 for an individual and $2,500 for a family. Maximum out-of-pockets costs are $6,350 for a single person and $12,700 for a family. For 2015 and beyond, the out-of-pocket maximum will be adjusted based on increases in the average per capita premium for health insurance coverage not linked to the out-of-pocket maximum for high deductible health plans.

    “Employers can help their employees navigate these changes,” explains Ms. Rankin. “There are reliable and proven benefit instruments that employers of all sizes can easily put in place to help employees meet cost-sharing requirements–at little or no cost to their bottom line. Employers can pair the high-deductible insurance with tax-advantaged benefits packages such as health savings accounts (HSAs), health reimbursement arrangements (HRAs), and flexible spending arrangements (FSAs).” 

    Here’s how they work:

    • Health Savings Accounts (HSAs) are tax-advantaged medical savings accounts available to taxpayers who are enrolled in a qualified high deductible health plan. The funds contributed to the account are not subject to federal income tax at the time of deposit. Unused funds can be carried over to following years and added to subsequent contributions, earning tax-deferred interest. Withdrawals for qualified medical expenses are tax-free. The employer, the employee, or a combination of both can make contributions to the HSA. The best part is the HSA is owned and operated by the employee, which makes it portable. So if an employee leaves a company or the workforce, the HSA goes with the employee. The ACA established contribution limits to HSAs at $3,300 for individual coverage and $6,550 for families. Additionally, individuals 55 and older can contribute an additional $1,000 each year to help save money for future retirement medical expenses.
    • Health Reimbursement Arrangements (HRAs) are established by the employer for the employee. The employer sets the amount that will be contributed to the HRA, which is solely funded by the employer, but those contributions do not count as part of the employee’s taxable pay. In addition, withdrawals from the HRA for qualified medical expenses are tax-free. The HRA offers a high degree of flexibility for the employer in terms of plan design and the schedule of reimbursements. Beginning in 2014, the ACA has changed the structure and use of HRA funds. A HRA must be integrated–which means it must be paired with a qualifying high deductible health insurance plan. In addition, funds in the HRA cannot be used to cover premiums for the high deductible plan. Unlike HSAs, HRAs belong to the employer and it is up to the employer to determine how, or if, unused funds will be handled at year’s end.
    • Flexible Spending Arrangements (FSAs) are tax-advantaged benefit programs that allow employees to use pre-tax money to pay for eligible healthcare expenses. Based on ACA rules, an employee can elect to fund up to $2,500 (per household) of her/his annual salary in the FSA. In addition, a new ruling issued by the IRS amends the “Use-or-Lose” ruling, and now allows up to $500 in unused funds to be rolled over and used in the following plan year. This rollover is restricted to plans that do not have a grace period. In addition, the ruling does not affect the $2,500 annual contribution limit. In terms of combining a FSA with other tax-advantaged health savings plans, FSAs can be used with HSAs in a limited capacity. Because a FSA is considered a health plan, only limited use FSAs‒typically covering dental and vision‒may be used with an HSA. An employee can also have both an HRA and FSA simultaneously. However, the same expense cannot be reimbursed from both accounts. The employer can set the terms of ordering rules to determine whether the HRA or FSA should be used first to cover qualifying medical expenses.

    Educating employees about how these tax-advantaged options work should be a top priority among employers. There are definitely aspects of each plan that can appeal to different employers and employees. For example, the recent rule change to FSAs offers a risk-free option to save $500 tax-free. In addition, individuals who are 55 or older can contribute an additional $1,000 a year to a HSA to use now–or, if they enjoy good health–save for medical expenses in retirement.

    “Healthcare reform is here to stay,” explains Ms. Rankin. “As we move forward in 2014, we’ll see both private and public sector employers exploring new paradigms in health insurance plan design as they try to contain escalating costs and provide benefits to their employees. And tax-advantaged plans like HSAs, HRAs, and FSAs can help them achieve the ‘affordable’ in the Affordable Care Act.”

  • Legislative Resources: ECFC Efforts on DOI Granting Carrier Waivers on Deductible Limits/Requirements and Integrated HRAs 4/01/2014
  • Legislative & Regulatory News: ECFC ALERT: IRS issues clarifying guidance regarding FSA correction methods 4/01/2014
  • Legislative Resources: Health FSA Carryovers and Eligibility for a HSA 4/01/2014
  • Legislative Resources: Correction Procedures For Improper Health FSA Payments 3/28/2014
  • Legislative & Regulatory News: Protecting Access to Medicare Act of 2014 3/27/2014

    Good News for ECFC Members on Small Group Employer Deductible Issue