On December 13, 2013 the Tri-agencies (Internal Revenue Service (IRS), Department of Labor (DOL) and Health and Human Services (HHS) released proposed regulations that provided clarification and requested comments to ensure that certain health Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) could include specific benefits and still be considered excepted benefits. This clarification will make it easier for plan sponsors to continue to offer health FSAs and HRAs to their employees.
New Affordable Care Act (ACA) rules kicked in on January 1, 2014 that affects flexible benefits plans. We discussed these new rules in two articles - "Affordable Care Act Changes for Health Reimbursement Arrangements" and "Affordable Care Act Changes for Flexible Spending Accounts". Bottom line, health FSAs must be "excepted benefits" to be offered to employees and HRAs must be integrated, a retiree only plan or a limited-scope HRA that provides only dental and vision expense reimbursement.
After release of Notice 2013-54 questions arose from employers and third party administrators (TPAs) about the rules surrounding limited-scope vision or dental plans. These types of plans must be provided under a separate policy, not be an integral part of a group health plan, participants must have the right not to receive coverage for the benefit and if the participant elects coverage they must pay an additional premium. This is problematic since an HRA must be paid solely by the employer. The HRA could not accept employee salary reductions.
Clarification was requested by WageWorks from the Tri-agencies (view WageWorks HRA comment letters here and here) to ensure that certain health FSAs and HRAs could include limited-scope vision and dental plan benefits and still be considered excepted benefits.
Health Plan Excepted Benefits
The new proposed regulations amend the definition of limited excepted benefits to:
1) eliminate the requirement that participants in self-insured plans pay an additional contribution for limited-scope vision or dental benefits; 2) allow plan sponsors in limited circumstances to offer "wraparound" coverage to individuals who, but for the un-affordability of the premium, would receive benefits from their group health plan; and 3) define "significant benefits" for Employee Assistance Plans. Following a comment period, final regulations will be issued.
The proposed regulations outline four categories of excepted benefits:
Limited Wraparound Coverage
Some group health plan sponsors asked whether wraparound coverage could be provided for employees for whom employer group health insurance premiums are too expensive and would rather obtain coverage through an Exchange. This approach would allow employers to offer benefits to those acquiring coverage on the Exchange that is comparable to the group health plan coverage. Wraparound coverage could not replace group coverage, but would provide additional coverage to individuals and families enrolled in non-grandfathered individual health insurance coverage.
Under specific circumstances, starting in 2015, proposed regulations would allow a wraparound plan to be an excepted benefit if:
Here's a simple example of a wraparound plan: The employer provides an HRA that covers chiropractic, adult vision and dental costs or a hospital admission fee, not covered by the individual policy, and meets all of the requirements outlined above.
Employee Assistance Programs
Employee Assistance Programs (EAPs) are programs offered by employers that typically provide very limited benefits to address circumstances that might otherwise adversely affect employees' work and health. Unfortunately, some EPAs that provide a few benefits beyond the scope of very limited benefits might be enough to disqualify employees from obtaining premium assistance on Exchanges.
The DOL guidance provides welcome clarification that, starting in 2015, EAPs will be excepted benefits if the program:
WagesWorks had prior conversations with the different Departments and parties concerning these proposed rules and also submitted comments on Monday February 24, 2014 to the Tri-agencies in response to these proposed regulations.
Click here to download this compliance update.