News

"Mandatory changes: HIPAA special enrollment events  ... What about dental and vision? ... Are tag along changes [for dependents] allowed? ... (Optional) permitted changes: Section 125 cafeteria plan permitted changes  ... Examples."

"Yes, if the change in the spouse's place of residence is deemed to be an IRS qualifying life event ... [However,] the written plan document may not adopt the full range of IRS qualifying life events related to enrollment eligibility, or the document may specifically exclude 'change in residence' from its enumerated qualifying life events; thus, curtailing the plan's observance of certain IRS identified QLEs."

35 pages; May 2, 2024. "What's New ... [1] The business mileage rate for 2024 is 67 cents per mile.... [2] For 2024, the monthly exclusion for qualified parking is $315 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $315.... [3] For plan years beginning in 2024, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $3,200."

"FMLA rules addressing the health FSA permit employees to [1] continue coverage through pre-pay, pay-as-you-go, or catch-up contributions, or [2] revoke coverage for the period of leave and return at a full or reduced election to address the missed contributions during leave."

"The average FSA contribution in 2022 was $1,291. The vast majority -- 85 percent -- of accountholders took a distribution in 2022. Among those who did, the average distribution was $1,323.... Roughly half of FSA accountholders forfeited funds to their employer in 2022. The average forfeiture was $441."

"Yes, provided that your plan document has been drafted as expansively as IRS rules allow regarding midyear election changes due to changes in cost or coverage. The rules apply broadly to dependent care assistance programs (DCAPs), permitting midyear election changes in a variety of circumstances involving changes in care providers or in the cost of care."

"A mid-year election change will typically be effective as of the first of the month following the election change request to avoid the Section 125 cafeteria plan issues associated with paying for retroactive coverage. The primary exceptions are for new hires (elections may be retroactive to the date of hire) and newly born/adopted children (medical coverage must be retroactive to the date of the birth/adoption)."

"ERISA (and IRC section 125) requires an official written plan document for each health and welfare benefit plan as well as a summary of that plan document, called a summary plan description (SPD).... Some employers rely on insurance carrier documents (e.g., policies, certificates of coverage) as their ERISA plan documents. Typically, these do not meet ERISA's plan document requirements."

"Depending on how the underlying program is structured, some services might be reimbursable if presented as a requirement implicating the plan's cost sharing features, such as member copays. In such instances, part or all of the fee might actually satisfy IRC Section 213(d), thereby qualifying for reimbursement on the basis of a qualifying and eligible individual healthcare related expense."

"Some companies are mistakenly claiming that doctors' notes based on self-reported health information 'can convert non-medical food, wellness and exercise expenses into medical expenses.' It is not so. The mere presence of a doctor's note does not magically turn otherwise general health expenses into proper medical expenses."

"Most employee benefit plans that provide tax-advantaged benefits include nondiscrimination rules to discourage employers from providing more generous benefits to highly compensated and/or key employees.... [This article] lays out the various nondiscrimination requires that may apply to a cafeteria plan and its component plans."

"This [IRS] news release may be helpful to those on the 'front lines' of plan administration, who are sometimes asked to explain the reasons for operating rules or decisions. Like last year's IRS guidance on substantiation shortcuts, it also serves as a reminder of the importance of obtaining adequate and appropriate substantiation before reimbursing claims, and highlights the challenges involved with certain expenses."

"A DCAP cannot reimburse payments to an employee's child who is under age 19 at the end of the year or to someone whom the employee (or the employee's spouse) could claim as a dependent.... [The authors] recommend that you include information in your DCAP summary or open enrollment materials about the providers whose care can and cannot be reimbursed under a DCAP."

"If your organization offers an FSA grace period, take time to help employees protect their health and avoid becoming one of the nearly 40% of FSA users who forfeit funds each year....There are thousands of products that are FSA eligible ... An FSA can help employees prepare their skin for spring ... [] Menstrual care products are FSA eligible ... Over-the-counter medications are covered."

"Some companies mistakenly claim that notes from doctors based merely on self-reported health information can convert non-medical food, wellness and exercise expenses into medical expenses ... Such a note would not establish that an otherwise personal expense satisfies the requirement that it be related to a targeted diagnosis-specific activity or treatment[.]"

"For erroneous elections, the IRS only allows an employer and employee to correct a mistaken election if there is 'clear and convincing evidence' that a mistake has occurred.... Examples may be wrong salary reductions, benefit elections entered into the HRIS/payroll system, or a delay in changing a salary reduction when a change in status occurs."

"[As] a precondition of payment or reimbursement of expenses for qualified benefits, the health FSA must require substantiation by an independent third-party. The independent third-party substantiation must include ... [1] Information describing the service or product; [2] The date of the service or sale; and [3] The amount of the expense."

23 pages; Rev. Jan. 5, 2024. "For use in preparing 2023 returns.... What's New: ... Notice 2023-37 addresses the announced end of the COVID-19 public health emergency and the National Emergency Concerning the Novel Coronavirus Disease 2019 Pandemic ... Notice 2023-37 also clarifies whether certain items and services are treated as preventive care under section 223(c)(2)(C)."

24 pages; Feb. 6, 2024. "For use in preparing 2023 returns.... What's New: ... Notice 2023-37 addresses the announced end of the COVID-19 public health emergency and the National Emergency Concerning the Novel Coronavirus Disease 2019 Pandemic ... Notice 2023-37 also clarifies whether certain items and services are treated as preventive care under section 223(c)(2)(C)."

"[If] an employee accidentally checked the wrong box on the form ... or there was a computer error, you might decide to put them in the position they thought they had elected. But if it looks like the employee simply regrets their choice and wishes they had done something different, be very careful in allowing changes! You'll be violating the Section 125 rules, possibly committing a fiduciary breach under the medical plan, and might be getting in hot water with your stop-loss carrier."

"Section 125 establishes the rules for cafeteria plans, which limits participation in those plans to 'employees,' a term that excludes individuals deemed 'self-employed' under the Code, including sole proprietors, partners in partnerships and LLPs, members of LLCs, and more-than-2% owners of S corporations. Being employed by the business (for example, as its CEO) does not change this determination because, from a tax perspective, at least, a person who works for a business they own is essentially working for themselves (i.e., they are self-employed)."

"FSAs can encourage employees to plan and budget for annual medical expenses. Those expenses don't include the vitamins, healthy food, or gym memberships that we choose to purchase. Should they? Should tax policy encourage and reward ... healthier choices by expanding the use of FSAs? Some companies -- intermediaries between consumers, FSA providers, and health and wellness industries -- think the answer is yes."

35 pages; Dec. 14, 2023. "What's New ... [1] The business mileage rate for 2024 is 67 cents per mile.... [2] For 2024, the monthly exclusion for qualified parking is $315 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $315.... [3] For plan years beginning in 2024, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $3,200."

"To ensure that employees derive more value from their health benefits and their FSA or HSA, organizations need to educate their teams about account eligibility and how to use funds to supplement, or fill in the gaps, in health plan coverage.... [1] Doctor visits ... [2] Over-the-counter (OTC) medications ... [3] Everyday wellness products ... [4] Chronic condition management ... [5] Lifestyle management."

"For use in preparing 2023 returns.... What's New: ... Notice 2023-37 addresses the announced end of the COVID-19 public health emergency and the National Emergency Concerning the Novel Coronavirus Disease 2019 Pandemic ... Notice 2023-37 also clarifies whether certain items and services are treated as preventive care under section 223(c)(2)(C). S"