Benefit Resources
EMPLOYEE BENEFIT NEWSLETTER
COBRA, HRA AND CAFETERIA PLAN UPDATE
This newsletter is for informational purposes and should in no way be construed as legal advice or opinion.
4th Quarter 2008
Merry Christmas and Happy New Year!!
As another year comes to an end, we would like to take this opportunity to thank you, our loyal clients and brokers. Without you, the success that we enjoy would not be possible. All of our staff also wants to wish you and your families a Very Merry Christmas and a Happy, Healthy and Prosperous New Year!!!
Clockwise from top left: Lisa Smith, Melanie Waters, Sharon Hawkins, Glenda Hensley, Angie Hazellief, Ashley Stair, Carole Snipes, Stacey Shannon and Courtney Driggers
Inside this issue:
Best Wishes from BR!!! Cafeteria Final Regs Pdg. Michelle’s Law & COBRA New IRS Pub. 502 Debit Card Transitn. Relief About BR More Information 1 1 2 2 3 4 4
REMINDERS to Benefit Resources’ Clients— • COBRA. If you haven’t given our new COBRA Website Access a try, check it out today. Many of our clients are using it to notify us of terminations and new hires and loving it! • Cafeteria Plans. Remember HSA deductions may be pre-taxed, however, the 125 Plan Document has to be updated for this change to be allowed. • HRA’s. HRA Plans can be simple deductible plans or more elaborate with co-pays, % pay plans, etc. BR offers two levels of service, Basic and Options. For more information, please contact your agent.
2 0 0 8 - 2 0 0 9 P r i o r i t y G u i da n c e P l a n t o in clu de C afete ri a P l an s
On September 10, 2008, The IRS issued its Priority Guidance Plan for 2008 and 2009. This plan listed pending regulations and other guidance that is in the developing stages. It included the Final Comprehensive Cafeteria Plan Regulations. spending arrangements, substantiation and nondiscrimination rules. Many requirements stayed the same but there were various changes and clarifications to current rules. The requirements regarding taxation of Group Term Life Insurance Previously, the proposed Cafeteria Plan over $50,000 were effective immediately Regulations were published in August of and the previous guidance regarding 2007. It was suggested that, after a period electronic payment cards remain in force. of feedback from Employer Groups and Although the IRS was originally hopeful of Industry Specialists, these proposed regula- a January 1, 2009 implementation date, it tions would be adopted for plan years be- has not happened, but it is on the agenda ginning January 1, 2009 and after. The for 2009. As we learn more information new proposed regulations consisted of 5 about their becoming final, we’ll keep you sections: general rules, elections, flexible informed.
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NEWSLETTER
Michelle’s Law and COBRA
On October 9, 2008, President Bush signed into law, “Michelle’s Law”, Pub. L. 110-381). This short law requires group health plans to add a one-year continuation coverage provision for ill or injured college students. It leaves many questions unanswered regarding how it interacts with COBRA for students. In brief, this law will not allow an Employer to terminate coverage for a covered dependent child (one enrolled in post-secondary education immediately before a medically necessary leave of absence) before the earlier of: (1) one year after the first day of the medically necessary leave of absence; or (2) the date on which the coverage under the plan would otherwise terminate for plan termination or nonpayment of premiums. One of the unanswered questions pertains to the child’s status during this period. Does the child cease to fit the definition of a dependent child under the group health plan during this time? Another pertains to reinstatement. Would COBRA coverage be reinstated if the election window had closed as a result of the student producing a certification of serious illness from a physician. What about notification requirements? Would Michelle’s Law need to be disclosed in a COBRA Qualifying Event Letter? The law is not generally effective until 2010. Hopefully, giving governmental agencies the opportunity to address these and other questions and provide more guidance for COBRA as well as for Group Health Plans seeking to comply with this new law. As more information becomes available regarding the transition of this new law, we will provide updates.
COBRA: IMPORTANT REMINDER ABOUT Timely Notice of Termination and Election
Benefit Resources often sees situations where carriers are limiting retroactive credits for terminations and limiting the time period for retroactive additions to the health plan. We have seen 60 and 90 day limitations, especially for fully insured plans. We have had conversations regarding eligibility notification timing requirements with the South Carolina Department of Insurance and with several Department of Labor Representatives. What we learned was that there is no federal regulation that addresses this issue. This practice is governed by the Summary Plan Description of the Health Plan. To limit liability, we have some suggestions, in particular, for our COBRA clients. 1. Please make sure that eligibility notifications are to the carriers as soon as possible and notice of terminations are sent to Benefit Resources as soon as possible. 2. Employers should be careful to review their carrier billings monthly to make sure that eligibility changes, i.e. terminations, submitted by them have been processed by the carrier and reflected on the billing. 3. Our COBRA clients should be sure to review our monthly audit reports that show all notifications that we have sent to carriers to make sure that they correspond to the carrier billing. If there are any discrepancies, please notify our office as soon as possible. 4. If there are any questions regarding the timing requirements for carrier notification, please review the Summary Plan Description of the group health plan. Please feel free to contact our office for more information regarding this important issue.
IRS Releases new P u b l i c at i o n 5 0 2 for 2008
The IRS has released the 2008 Publication 502. This Publication details the eligible deductible medical expenses for individuals for 2008 federal income tax returns. This Publication is used as a guide for FSA, HRA and HSA eligible expenses. There were a couple of additions noted. 1. Transportation. For the period January 1, 2008June 30, 2008, the allowable deductible mileage rate for automobile use for medical care is 19 cents per mile. For the period, July 1, 2008-December 31, 2008, the rate is 27 cents per mile. 2. Diagnostic Medical Tests. The following medical procedures and devices have now been determined to be medical expenses: - an annual physical exam -a pregnancy test -a full-body electronic scan To see a copy of this Publication, visit http:// www.irs.gov/pub/irs-pdf/p502.pdf
E l e c t ro n i c f i l i n g f o r Form 5500 required for plan years ending 12/31/09 and after
Electronic filing for Form 5500s will be required for plan years beginning in 2009. However, the new EFAST2 system may not be in place in time for short plan year filers needing to file before December 31, 2009. As a result, the IRS has already granted an automatic extension for 2009 short-plan year filers to electronically file their 5500 returns within 90 days after the 2009 filing EFAST2 system is made available on the DOL website. An advance Form 5500 for the 2008 plan year has been released. It may be viewed at the following website: http://www.dol.gov/ebsa/5500main.html#2008. Benefit Resources provides Form 5500 preparation for Employee Welfare Benefit Plans. For more information, please contact Sharon Hawkins at sharon@benefitresources.biz or (864) 295-9225, ext. 13.
COBRA, HRA AND CAFETERIA PLAN UPDATE
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Debit Card Transition R e l i e f f o r D ru g S to r e s
The IRS had previously issued a deadline for Drug Stores and Pharmacies of 12/31/08 for Debit Card usage. This deadline pertained to the IRS requiring Drug Stores/ Pharmacies to be IIAS compliant or have 90% of the NOT—147804-08 Part III—Administrative, Procedural and Miscellaneous Section 105 – Amounts Received Under Accident and Health Plans Notice 2008-104 PURPOSE This notice provides additional transition relief with respect to the use of debit cards for medical expense reimbursements at stores with the Drug Stores and Pharmacies merchant category code. BACKGROUND Notice 2007-2, 2007-1 C.B. 254, provides that after December 31, 2008, health FSA and HRA debit cards may not be used at stores with the Drug Stores and Pharmacies merchant category code unless: (1) the store participates in the inventory information approval system as described in Notice 2006-69, 2006-2 C.B.107, or (2) on a store location by store location basis, 90 percent of the store’s gross receipts during the prior taxable year consisted of items which qualify as expenses for medical care under Section 213(d) (including nonprescription medications as described in Rev. Rul. 2003-102, 2003-2 C.B. 559) For transactions using debit cards at stores that meet the 90 percent rule described in (2) above, employers must treat all charges to the debit card as conditional (other than copayment matches, recurring expenses, and real-time substantiation as described in Rev. Rul 2003-43, 2003-1 C.B.935) pending substantiation of the charges through additional independent third-party information describing the goods or services, the date of service or sale, and the amount of the charge. TRANSITION RELIEF The deadline in Notice 2007-2 is extended by six months so that, after June 30, 2009, health FSA and HRA debit cards may not be used at stores with the Drug Stores and Pharmacies merchant category code unless the requirements of (1) or (2) above are satisfied. EFFECT ON OTHER DOCUMENTS Notice 2007-2, 2007-1 C.B. 254 is modified. DRAFTING INFORMATION The principal author of this notice is Stephanie L. Caden of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Ms. Caden at (202) 622-6080 (not a toll-free call). store’s gross receipts as those for medical expenses. Otherwise, they would not be able to accept the debit card. With Notice 2008-14 (below), this deadline has been extended by six months, to June 30, 2009.
The Answer is:
yes
ABOUT US…
Benefit Resources
ü Personalized service for your clients from our experienced staff of professionals ü Comprehensive Turn-Key approach to Cafeteria Plan & COBRA Administration ü Licensed Third Party Administrator
Benefit Resources is a Greenville, South Carolina based, licensed third party administrator that specializes in COBRA, HRA and Cafeteria Plan Administration.
God never made a promise that was too good to be true. Dwight L. Moody
Professional staff with more than 25 years in employee benefit administration is capable of decision-making and special accommodations. Benefit Resources serves numerous Employers ranging in size from fewer than 10 employees to several thousands. Our mission is to provide quality administrative services to Employers of all sizes while complementing the role of their agents and health plans. For information on Benefit Resources’ fees and more detail on services, please contact Sharon Hawkins at ext. 13 or return the mailer below.
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YES! I’d like more information
Please mail request to: PLEASE PROVIDE INFORMATION ON THE FOLLOWING ITEMS: __ COBRA ADMINISTRATION __ HRA ADMINISTRATION __ PREMIUM CONVERSION CAFETERIA PLAN __ FLEXIBLE SPENDING CAFETERIA PLAN __ FORM 5500 PREPARATION NAME/____________________________________________________________________________________________ COMPANY_________________________________________________________________________________________ ADDRESS__________________________________________________________________________________________ CITY/STATE/ZIP_____________________________________________________________________________________ TELEPHONE_________________________________________E-MAIL_________________________________________
Benefit Resources
Post Office Box 168 Greenville, South Carolina 29602