The Medical FSA Improvement Act of 2011 - HR 1004

Note: None of this should be taken as legal or tax advice.
Reposted from ZaneBenefits, a valued partner and colleague.

In an effort to improve Flexible Spending Accounts (FSAs), Representative Charles Boustany has introduced a new bill to the U.S. House of Representatives called "The Medical FSA Improvement Act of 2011".  

If passed, the bill, effective January 1, 2013, would amend the Internal Revenue Code to allow unused amounts contributed to flexible spending arrangements to be paid back to the participants as taxable income after the close of a plan year.  Currently, such unspent amounts must be forfeited by the employee due to the "use-it-or-lose-it rule".

As we have discussed previously, effective January 1, 2013, health care reform will limit employee annual contributions to FSAs to $2,500.

Proponents argue that this change would increase FSA adoption by employers and employees.  However, it does not solve the major disadvantage associated with the "uniform coverage provision".  

What do you think?

PPACA: IRS Looks at Group Health Definitions

Source: Life and Health Insurance News

The Internal Revenue Service and its parent, the U.S. Treasury Department, are asking for comments about how they should define terms such as “employer” and “employee” when applying Affordable Care Act group health mandates.

The IRS has issued the “employer responsibility” mandate request for comments in IRS Notice 2011-36, to prepare for working with the U.S. Labor Department and the U.S. Department of Health and Human Services on implementing Section 4980H of the Internal Revenue Code (IRC).

Congress created IRC Section 4980H when it passed Section 1513 of the Patient Protection and Affordable Care Act of 2010 (PPACA) and Section 1003 of the Health Care and Education Reconciliation Act of 2010 (HCERA).

PPACA and HCERA are the two components of the Affordable Care Act package.
Republicans and others are trying to block implementation of part or all of the Affordable Care Act.

If IRC Section 4980H and related sections take effect as written and work as supporters hope, they will require an affected “large employer” to provide health coverage.

• Section 4980H(a) could require the employer to make an “assessable payment” if it fails to provide a minimum level of coverage and at least one full-time employee uses a new federal PPACA tax credit to buy individual health coverage through a state insurance exchange. Regulators will base the annual assessable payment under Section 4980H(a) all but the first 30 full-time employees.
• Section 4980H(b) could require the employer to make an assessable payment – even if the employer provides what appears to be the minimum required level of group health coverage – if officials determine that the employee could not afford the coverage, or if the plan had failed to provide a minimum level of value. Regulators will base the annual assessable payment under Section 4980H(b) on the number who qualify for health insurance tax credit subsidies.

“The definition of full-time employee is key in determining whether and, if so, to what extent, an employer may incur Section 4980H(a) liability or Section 4980H(b) liability,” officials say.

IRC Section 4980H(c)(4) defines “full-time employee” to mean an employee who is “employed on average at least 30 hours of service per week” in any month.

Section 4980H(c)(2) defines an “applicable large employer” to be an employer that “employed an average of at least 50 full-time employees on business days during the preceding calendar year.”

“For purposes of determining whether an employer is an applicable large employer, full-time equivalent
 employees (FTEs), which are determined based on the hours of service of employees who are not full-time, are taken into account,” officials say.

In a section on the definition of “employee,” officials say, “‘Employee’ would mean a worker who is an employee under the common-law test." A special rule would apply to “seasonal employees.”

If employer’s workforce exceeded 50 full-time employees for 120 or fewer days during a calendar year, and the extra employees employed during those 120 days were seasonal employees, the employer would not be an applicable large employer, officials say.

In a section on “hours of service,” officials say they are thinking about treating an employee who works for 130 hours in a calendar month as the equivalent of an employee who works 30 hours per week.

The hours of service could include up to 160 hours for which an employee was paid, or entitled to be paid, for time off work as a result of vacations, holidays, illness, disability, layoffs, jury duty, military duty or leaves of absence, officials say.

Defined Contribution Health Plans in North Carolina

Due to the annual cost increases associated with traditional employee health benefits, a new form of health benefits, called a defined contribution health plan, is quickly gaining popularity in North Carolina. Defined contribution health plans allow North Carolina employers to offer health benefits to employees without offering a traditional group health insurance plan. 

Rather than paying the costs to provide a specific group health plan (a "defined benefit"), North Carolina employers instead fix their costs by establishing a monthly dollar amount (a “defined contribution”) that employees choose how to spend. Employees participating in a defined contribution health plan in North Carolina can request tax free reimbursement for their out-of-pocket medical costs and personal health insurance expenses.

Recruiting and retaining key employees is important to every company and a company's health benefit program is a critical part of the compensation it offers to its employees. 

The general concept of a defined contribution health plan in North Carolina is that a company gives each employee a fixed dollar amount that the employees choose how to spend. Typically, employees are allowed to use their defined contribution to reimburse themselves for individual health insurance costs or other medical expenses such as doctor visits and prescription drugs. 

Defined contribution health plans in North Carolina are programs that allow employees to be more involved in their health care choices.

Are you the employer of 20 to 75 people? Contact Health Benefits US today to learn how you can save thousands of dollars without negatively affecting your employee's health situations.

Businesses turn to 'private exchange' health insurance

Fed up with the unpredictable cost of health insurance for his small business, Mike Sarafolean last year made a dramatic change: Instead of picking a plan to offer workers, he now sends them to a "private exchange" or marketplace where they compare and choose their own insurance. And the amount his company pays toward coverage is capped.

The move puts his St. Paul-based company on the leading edge of a nascent trend that could shape how more employers offer and pay for health benefits in the coming years.

It's part of an ongoing evolution in job-based health benefits that's gradually shifting cost and responsibility to workers.

The private exchanges, mainly run by former insurance executives and employee-benefit consulting firms, operate in more than 20 states.

While representing a tiny fraction of workplaces, the movement may be about to grow. One of the nation's largest employer benefits consulting firms, Aon Hewitt, said Wednesday it will launch an exchange aimed at large employers. It hopes to have at least 100,000 workers enrolled by early next year.

Proponents say the effort shields employers from unpredictable premium increases because they'll choose how much to increase their contribution each year, and that may be less than premiums actually increase. If so, workers would make up the difference.

Contact HBUS Inc for information on how you can participate in such a program.

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