The New FSA $500 Carryover
Presented by:
Mark Schmersahl
Vice President
BeneFLEX HR Resources, Inc.
Save the Date
November 20, 2014
20th Anniversary Open House
Agenda
• Impact of Healthcare Reform on pre-tax benefits
• The New FSA
–
–
–
–
–
Summary of modifications to the “Use it or Lose it” rule
Options and implications for employers
Educational opportunities for your employees
Enrollment support
Administrative considerations
• Parking and Transportation COLAs
• HSA COLAs
• Questions
Notice 2013-54
• Provides clarification on the provisions of the
Affordable Care Act (ACA) to eliminate an
employer’s ability to use funds to pay premiums for
individual health insurance policies through a Health
Reimbursement Arrangement (HRA), a Health
Flexible Spending Arrangement (FSA), or a Premium
Only Plan (POP).
• HRAs and Health FSAs must be integrated with an
employer’s group health plan to be considered an
excepted benefit.
Health Reimbursement Arrangements
• Stand-alone HRAs for any Section 213 expenses
are no longer permitted.
– HRAs must be integrated with an employer’s group
health plan
– Spend down permitted for existing stand-alone
HRAs for amounts unused after 2013
• HRAs are no longer allowed to reimburse
premiums for individual insurance policies.
Keeping Health FSAs as Excepted Benefits
FSAs must meet 2 conditions:
1. Only individuals eligible for employer-provided
medical coverage can be offered the Health FSA.
2. The Health FSA can include employer
contributions. Those contributions are capped
at $500 or up to a dollar for dollar match of each
participant’s election.
90 Day Waiting Period
• Begins January 1, 2015
• Cannot exceed 90 day waiting period
• May include an additional 30 day orientation
period
• Health FSAs and POPs should mirror waiting
period for underlying health insurance plan
• DCAP may be longer
Amendment Action Steps
Health FSA and POP
•
•
May need to amend your plan to adjust the waiting
period not to exceed 90 days.
60 Days in California!
A Long Journey
• A true industry effort
• Legislative and
regulatory initiatives
• Groundwork laid;
circumstances matter
• Thanks to all who
played a part!!
Amendment Timing
• Must be announced before the end of the year
• Must amend plan before the end of the plan
year, which begins in 2014
• If grace period, must amend the plan before the
year-end to eliminate the grace period
— Address any non-code legal constraints
Grace Period — Notice 2005-42
Allows a Grace Period immediately following the end of the
plan year in which unused benefits or contributions remaining
at the end of the plan year may be paid or reimbursed to
participants for qualified expenses incurred during the grace
period.
• Up to 75 days or 2½ months
• No limit of funds
• Does not reduce $2,500 salary reduction amount
• Must be uniformly available
• BeneFLEX does not recommend for DCAP
$500 Carryover — Notice 2013-71
Allows optional adoption of $500 (or less) Carryover for
Health FSA (not DCAP)
• Does not reduce $2,500 salary reduction amount
—Must be uniformly available
• In lieu of Grace Period
A Huge Opportunity!
For
Consumers
For
Employers
No more fear of use/lose
Everyone should participate!
Even “invincibles” have some out-of-pocket
No rushed spending at the end of the plan year
or Grace Period
• More likely to participate at a higher rate
•
•
•
•
• Exciting – and simple – benefit enhancement
• Increases plan flexibility with choice of $500 Carryover
or Grace Period
• Low/no cost due to FICA savings
• Widespread participation = Increased satisfaction
Important Note
• On average most companies have 15 to 20%
of employees with a $500 + balance in their
accounts.
• We suggest starting the $500 Carryover in 2014,
but spread the word now, so employees can
maximize their election for 2015!
FSA Communication Tools
Revised FSA Enrollment Kit for employers and
employees
Plan Amendment and SMM to Include Carryover
ETC ETC ETC!!!
Options & Implications for Employers
•
•
Only one of the options
can be applied to a
given year.
A switch to or addition
of the $500 Carryover
option requires a plan
amendment.
2. Decide on a timeframe for
change to $500 Carryover
The $500 Carryover
option can be
implemented now for
the 2014 plan year.
1. Decide on Grace
Period vs. $500 Carryover
• The $500 Carryover will
lead to fewer forfeitures
and high re-enrollment for
the next year.
• The Carryover in 2014
may increase participation
and may impact election
amounts.
3. Educate employees on
the chosen plan design
Note: 2014 employees may have
made their elections based on the
grace period, if applicable.
Administrative Considerations
Weighing Grace Period vs $500 Carryover
Advantage to $500 Carryover 2014
• Carryover duration not limited
• Larger election with the $500 Carryover option
Example:
$1,000 medical expenses + $500 Carryover
+ Higher election amount
+ Extra $500 for unexpected medical expenses
= Greater tax savings
Administrative Considerations
About the carryover amount
•
Coordination with run-out period
— Carryover determined on first day of the new plan year
•
Carryover is indefinite
— Unless terminate employment
•
Could be capped at less than $500
— But must be uniformly applied
Carryover is available to participants in the plan on the last day
of the year even if not electing an FSA for the next year
•
Administrative Considerations — HSAs
Potential impact on HSA eligibility
Under IRC 223, individuals with non-excepted health coverage are
not HSA eligible
• Carryover would generally preclude HSA eligibility
• Existing IRC 223 guidance would allow eligibility for those
with zero balance on the last day of the plan year
New Guidance Issued
• An individual covered under a Health FSA as the result of
a carryover is not allowed to contribute to an HSA for the
entire plan year
• An individual who participates in a Health FSA may elect
to have any unused funds carried over to a Limited FSA
Administrative Considerations — HSAs
A Cafeteria Plan that offers both a Health FSA and a Limited
FSA may automatically treat an individual who elects
coverage in a qualified health plan for the following year as
enrolled in an HSA and carryover any unused amounts into
the Limited FSA.
An individual may elect prior to the beginning of the year to
waive the carryover for the following year.
• During the run out period, the unused Health FSA amounts
may be used to reimburse any allowed Section 213
expenses incurred prior to the end of the plan year.
Administrative Considerations — COBRA
Any unused amounts in an employee’s Health FSA at
termination of employment is forfeited unless the
participant has underspent their account and elects
to continue under COBRA.
•
If a carryover is offered and the qualified beneficiary elected
to participate in the Health FSA under COBRA, they are
eligible to carryover the remaining funds in the new plan year.
— The carryover is ignored when calculating COBRA
premiums for the new plan year.
— FSA Reenrollment rights do not need to be offered during
open enrollment for the new plan year.
Our Mobile App
Allows your employees to:
• Check available balances
• View account activity
• Review claim transactions
and contributions
• Access convenient
customer service
contact info
• Submit claims
• Upload receipts using
phone’s camera
There's an App for that!
Now you can use your iPhone, iPod Touch, iPad, or Android-powered device to easily check
your available balance(s), submit medical FSA claims, upload pictures of receipts, and receive
text alerts using BeneFlexHR Mobile.
BeneFLEX HR Resources, Inc. makes it easy for you to install the app.
1. You must set up your account online at www.beneflexhr.com.
2. From your iPhone, iPad, or Android device, go to iTunes or Google Play and download
the BeneFlexHR Mobile App.
3. You will use the same username and password you use to access your account.
For an online "how to" demo, go to YouTube and search for BeneFlexHR, or visit our
website at www.beneflexhr.com/beneflexhr-mobile-application.
Get connected with the BeneFlexHR Mobile App!
BeneFlexHR Mobile Login Trends
Login and see why thousands of other participants are
using BeneFlexHR Mobile to check account balances,
submit claims/receipts, and track medical expenses.
Powering a Complete Solution
Flexible Spending
Account
Consumer Portal
Health
Reimbursement
Arrangement
Mobile
Health
Savings Account
Card
Transportation
Management
Account
Communications
25
2014 Parking & Transit
• The monthly limit on the amount that may be excluded
from an employee‘s income for qualified parking benefits
is $250 (a $5 increase from the 2013 limit of $245).
• The combined monthly limit for transit passes and
vanpooling expenses for 2014 is $130 (a $115 decrease
from the 2013 limit).
Note: The substantial decrease in the combined monthly limit for transit passes and
vanpooling expenses is due to the expiration of the “rule of parity.” The temporary
“rule of parity” made the combined limit for transit passes and vanpooling expenses
the same as the parking limit for 2012 and 2013. At this time, it is uncertain if
Congress will extend this rule.
Transportation
Management
Account
2015 HSA Limits
HSA Contribution Limits
• Single Coverage $3,350 (up from $3,300 in 2014)
• Family Coverage $6,650 (up from $6,550 in 2014)
HDHP Minimum Deductible
• Single Coverage $1,300 (up from $1,250 in 2014)
• Family Coverage $2,600 (up from $2,500 in 2014)
HDHP Out-of-Pocket Maximum
• Single Coverage $6,450 (up from $6,350 in 2014)
• Family Coverage $12,900 (up from $12,700 in 2014)
The New FSA Changes Everything
80% of employees
declined the FSA due to
the “Use-or-Lose” rule
How BeneFLEX Supports You
• Comprehensive and clear compliance updates
• Helpful resource center at
www.beneflexhr.com/services/fsa-500-carryover
• No charge plan amendment
• Sample employee communications
• Consultations with our Sales & Customer Service
Teams
• Process and technology available now to execute
any plan changes
To Implement the $500 Carryover
Send your request to:
[email protected]
You will be sent:
1. Amendment Checklist
2. SMM
3. Marketing materials to promote the
$500 Carryover for 2015 elections.
Questions — Thank You
Questions about The New FSA 500 Carryover?
Contact your Account Manager today!
Phone: (314) 909-6979
Toll Free: (800) 631-FLEX