Are there any exceptions from any health and welfare benefit being considered an ERISA benefit?

August 27, 2008

Yes. There is a safe harbor under Labor Regulations Section 2510.3-1(j) for certain voluntary employee-pay-all” benefits. To qualify for this exemption from ERISA, an employer allows an insurance company to sell voluntary policies to interested employees who pay the full cost of the coverage. The employer must then permit employees to pay their premiums through payroll deductions and permits the employer to forward the deductions to the insurer   However, the employer may not make any contribution toward coverage and the insurer may not pay the employer for being allowed into the workplace. Additionally, the employer may not “endorse” the program – this element deciding is the key element in deciding whether the program is treated as an ERISA benefit.

What makes up an endorsement?

  • Selecting insurers;
  • Negotiating terms or design;
  • Linking plan coverage to employee status;
  • Using the employer’s name;
  • Recommending the plan to employees; and
  • Doing more than the permitted payroll deduction.

What are the consequences for an employer if it does not have a plan document for its health and welfare benefits?

August 27, 2008

The consequences for not having a Plan document may include:

  • Increasing the number of Form 5500 filings;
  • Forcing a court to determine the plan terms for employees;
  • Having letters & company communications become the plan terms that would determine benefits for employees and their dependents, and
  • Making fiduciaries liable for benefit breaches
  • Is there a small employer exception for complying with ERISA?

    August 27, 2008

    No. Virtually every private-sector employer is subject to ERISA  – there is no size exemption.  This includes corporations, partnerships, and sole proprietorships.   In addition, non-profit organizations are covered as well.  However, the plans of governmental employers and of churches are exempt from the application of ERISA Title I.

    IRS NOTICES 2008-51 & 2008-52 EXPLANATION

    August 18, 2008

    The Internal Revenue Service (IRS) released IRS Notices 2008-51 and 2008-52 on June 4, 2008. These notices clarify the changes made by the Tax Relief and Health Care Act of 2006 for rolling over IRA funds to an HSA and for the new annual HSA contribution limit.   The following will first review the rules and then explain what items have been clarified… Download the whole document here

    THINGS YOUR MOTHER NEVER TOLD YOU ABOUT HSAs

    August 18, 2008

    Health Savings Accounts (HSAs) are individual-owned accounts that were created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003.  Used in conjunction with a High Deductible Health Plan (HDHP) they are designed to help individuals save and pay for qualified health expenses on a tax-free basis… Download the whole document here

    AN EMPLOYER’S GUIDE TO HEALTH SAVINGS ACCOUNTS (HSAs)

    August 18, 2008

    The following provides you, as an employer, with information about Health Savings Accounts (“HSAs”) under Internal Revenue Code (Code) Section 223.  You should read this explanation to evaluate whether HSAs may be used either as an alternative to, or in addition to, health flexible spending accounts (Health FSAs) under Code Section 125 or Health Reimbursement Arrangements (“HRAs”) under Code Section 105(h).

    To fully understand the requirements…. Download the whole document here

    HRAs or HSAs, How Does an Employer Decide?

    August 18, 2008

    As health care costs soar, employers are forced to find ways to both (1) cut costs and/or (2) shift more of the costs to participants.  They are accomplishing this by increasing deductibles, co-pays and co-insurance amounts and reducing benefits.  The theory is if participants are more responsible for paying health expenses they will be more responsible with their own dollars.

    Two vehicles that employers are considering in cutting costs and/or shifting more of the cost to employees are Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs).  Because the interplay between these two vehicles in any year is very limited, an employer must decide which one is best for its situation.  To assist an employer in deciding between HRAs and HSAs, the following discussion… Download the whole document here

    IRS Notice 2008-59

    August 17, 2008

    The Internal Revenue Service (IRS) released IRS Notice 2008-59 on June 25, 2008. The notice provide guidance on HSAs in a number of areas.  These include:

    • Who is considered an eligible individual?
    • What plans qualify as high deductible health plans?
    • What are the limits for contributions?
    • What types of expenses can be considered qualified medical expenses?
    • What is a prohibited transaction?
    • When is an HSA deemed established?
    • How are HSA administration and maintenance fees treated?

    The notice is provided in forty-two question and answer format. The following will review those aspects of HSA not covered in other guidance.

    Continued – Click Here to Download the whole PDF – hsa-notice-2008-59-explanation

    IRS Releases Proposed Regulations under Code Sections 4980B, 4980D, 4980E and 4980G

    August 17, 2008


    The Internal Revenue Service (IRS) released proposed regulations under Internal Revenue Code (“Code”) Sections 4980B, 4980D, 4980E and 4980G on July 16, 2008. The proposed regulations include:

    • The form and due dates for reporting and paying excise taxes under Code Section 4980B (failure to comply with the Consolidated Omnibus Budget Reconciliation Act (COBRA) requirements), Code Section 4980D (failure to comply with the Health Insurance Portability and Accountability Act (HIPAA) requirements), Code Section 4980E (failure to make comparable Archer Medical Savings Account (MSA) contributions) and Code Section 4980G (failure to make comparable HSA contributions).
    • Calculating comparable HSA contributions.
    • Special rules for making employer contributions to HSAs for non-highly compensated employees (NHCEs).
    • Comparability Rules and Qualified HSA Distributions.

    Rules for Reporting and Paying Excise Taxes
    Code Section 4980B – Failure to Comply With the Consolidated Omnibus Budget Reconciliation Act (COBRA) Requirements
    Excise Tax: Employers that violate COBRA may be subject to both civil sanctions and tax penalties. Under COBRA’s civil sanction procedures, either the Department of Labor or plan beneficiaries themselves can sue a plan that fails to provide…. Download the whole document here – hsa-proposed-regulations.pdf