Understanding Employee Benefits

Calendar of effective dates of Health Care Reform

2010-10-21T12:52:00.000-07:00

Calendar of effective dates of
Health Care Reform

Year of 2010

Small Employer Health Insurance Tax Credit (Initial phase)
Dependents coverage to age 26
No Lifetime caps on dollar value of Health Benefits
No Pre-existing condition exclusion for children
No rescissions unless fraud
Increase in exclusion for employer-provided adoption assistance
Reinsurance program for age 55 or older retiree Health coverage

Year of 2011

Grants available for small business wellness programs
Class programs automatic enrollment and voluntary payroll
Withholding
W-2 reporting of the value of employer sponsored Health Insurance
coverage
Restrictions on using funds in a health FSA, HRA, HSA or MSA for
over the counter Medicines
20% additional tax on HSA and MSA withdrawals not used for medical
expenses
Fee on branded prescription drug manufactures and importers
New simplified cafeteria Plan for small business

Watch for next informational report !!!

Our next bulletin will cover the years of 2012, 2013, 2014

IRS Defines "Prescription" and Announces Transition Period for OTC Purchases with Debit Cards

2010-09-29T13:23:00.001-07:00

The IRS released guidance related to the Patient Protection and Affordable Care Act (PPACA) and its corresponding definition of “prescription,” and announced a transition period until January 16th for the use of debit cards in relation to prescription purchases.
Section 213(d)(3) defines a prescribed drug as a drug or biological that requires a prescription of a physician for its use by an individual. In contrast, under §§106(f), 223(d)(2)(A) and 220(d)(2)(A), an individual may be reimbursed for over-the counter medicines or drugs, so long as the individual obtains a prescription for the medicines or drugs. For purposes of §§ 106(f), 223(d)(2)(A) and 220(d)(2)(A) only, a "prescription" means a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.
The IRS will not challenge the use of health FSA and HRA debit cards for expenses incurred through January 15, 2011 if the use of the debit cards complies with previously accepted IRS Regulations. However, on and after January 16, 2011, over-the-counter medicine or drug purchases at all providers and merchants (whether or not they have an inventory information approval system (IIAS)) must be substantiated before reimbursement may be made.
Substantiation is accomplished by submitting the prescription (or a copy of the prescription or other documentation that a prescription has been issued) for the over-the-counter medicine or drug, and other information from an independent third party that satisfies the requirements under Prop.Treas. Reg. § 1.125-6(b)(3)(i). Thus, for example, a customer receipt issued by a pharmacy which identifies the name of the purchaser (or the name of the person for whom the prescription applies), the date and amount of the purchase and an Rx number satisfies the substantiation requirements for over-the-counter medicines or drugs, as does a receipt without an Rx number accompanied by a copy of the related prescription. Debit cards may continue to be used for medical expenses other than over-the-counter medicines or drugs.
To read more from the IRS Notice, click here.
Update:
Based on the new IRS guidance, the SIGIS (Special Interest Group for IIAS Standards) Eligible OTC Products List committee completed a thorough review of the OTC List and determined that just over 15,000 items are impacted and will require a prescription to be reimbursed. Just over 27,000 OTC items remain on the list for purchase without a prescription. A detailed product list will be published on December 15, 2010.

“Simple” Cafeteria Plan – Not so simple???

2010-09-29T11:18:00.001-07:00

By now, many of you and your clients have read or heard about the “simple” cafeteria plan established under Sec. 9022 of the Pension Protection and Affordable Care Act. Many misconceptions have arisen from this section ranging from: “ I don’t need a POP plan anymore, the government says, since I have less than 100 employees, I can just pretax and be done with it” or “ We can now let our owners participate even though we are a sub-S corporation.”

The fact is: the “Affordable Care Act” only affects whether a plan must comply with discrimination testing or not. All other rules and regulation for a cafeteria plan still apply.

In years beginning after Dec. 31, 2010, certain small employers’ cafeteria plans can qualify as simple cafeteria plans and thus avoid the nondiscrimination requirements of a classic cafeteria plan under IRC Sec. 125(b).

Complicated?

Through the establishment of a simple cafeteria plan, without worrying about running afoul of the nondiscrimination requirements of a classic cafeteria plan, employers can retain potentially discriminatory benefits for highly compensated and key employees (subject to some restrictions relating to contributions, as discussed below) while allowing other employees to enjoy the benefits of a cafeteria plan.

An employer eligible to establish a simple cafeteria plan is any employer that, during either of the two preceding years, employed an average of 100 or fewer employees on business days.

If an employer has 100 or fewer employees for any year and establishes a simple cafeteria plan for that year, then it can be treated as meeting the requirement for any subsequent year even if the employer employs more than 100 employees in the subsequent year. However, this exception does not apply if the employer employs an average of 200 or more employees during the subsequent year.

This provision allows small but growing employers to continue to offer simple cafeteria plan benefits to employees without the concern of having to meet the discrimination requirements of a classic cafeteria plan. Without this exception, the establishment of simple cafeteria plans could create a disincentive to increased hiring.

Contribution Requirements

Under the contribution requirements, a simple cafeteria plan must make a contribution to provide qualified benefits on behalf of each qualified employee, in an amount equal to:
• a uniform percentage (not less than 2%) of the employee’s compensation for the year, or
• an amount not less than the lesser of:
(a) 6% of the employee’s compensation for the plan year, or
(b) twice the amount of the salary reduction contributions of each qualified employee.

If the employer bases the satisfaction of the contribution requirements on the second option, it will not be in compliance if the rate of contributions to any salary reduction contribution of a highly compensated or key employee is greater than to the rate of contribution for any other employee.

For purposes of the contribution requirements, a salary reduction contribution is any amount contributed to the plan at the election of the employee and not includable in the employee’s gross income under the Sec. 125 cafeteria plan provisions. The terms “highly compensated employee” and “key employee” retain their definitions under the classic cafeteria plan provisions. A “qualified employee” is any employee who is not a highly compensated or key employee.

Eligibility, Participation Requirements

A simple cafeteria plan also must satisfy minimum eligibility and participation requirements. The requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate, and if all employees have the same electron rights under the plan.

An employer may elect to exclude from the plan:

A) Employees who have not attained the age of 21 before the close of the plan year

B) Employees who have less than one year of service with the employer as of any day during the plan year

C) Employees who are covered under a collective bargaining agreement if there is evidence that the benefits covered under the plan were the subject of good faith bargaining between employee representatives and the employer

D) Employees who are nonresident aliens working outside the United States whose income did not come from a U.S. source

Our job is to keep Clients in Compliance

If you have any other questions please feel free to contact me by

Phone 1-800-554-0528 or 405-616-0122 E-mail robert@wbp125.net

Understanding Employee Benefits

Calendar of effective dates of Health Care Reform

IRS Defines "Prescription" and Announces Transition Period for OTC Purchases with Debit Cards

“Simple” Cafeteria Plan – Not so simple???

Our job is to keep Clients in Compliance

Robert Palmer

President