This article was written by Brian Louie and Lisa Klinger, both of The Leavitt Group
Several recent legal changes will require amendments to Cafeteria Plans and reimbursement accounts in 2014. Since Cafeteria Plan administrators often charge a fee for plan amendments, we have compiled a list of changes that plan sponsors will need—or may want—to make to their plans for 2014.
Note: pre-tax dollars cannot be used to pay for a Qualified Health Plan offered through an Individual Exchange regardless of what the arrangement is called (HFSA/HRA/PRA).
Premium Only Plan (POP) – Amendments
Waiting period cannot exceed 90 days, but you probably want employees to be able to salary reduce to pay premium for underlying group health plan as of first day they are eligible, so amend POP eligibility to coincide with eligibility date for medical plan. This will be 60 days (first of the month following 30 days) for California insured plans, 90 days outside of California or for self-insured plans (first of the month following 60 days).
- Update dependent eligibility wording to include same-sex spouse.
- (Optional 2014) Change plan eligibility to include employees working 30+ hours
- (Optional, non calendar-year plans only) Change POP to allow for enrollment in or disenrollment from the employer group plan, even though the employee has not had a “qualified status change.” (This is to allow employees to enroll for Exchange coverage in 2014 and to disenroll from employer group coverage, or to allow employees who previously declined employer coverage to enroll in it as of January 1, 2014 to avoid an “individual mandate” tax penalty. The employer can limit the period during which the employee can revoke or change his or her salary reduction election to a limited period (such as the first month of 2014 only), or can allow the change anytime during the 2014 plan year.
Health FSA (HFSA) – Amendments
In order for an HFSA to meet the definition of “excepted benefits,” an employer must offer employees major medical coverage as well as HFSA coverage. “Excepted benefits” are not subject to ACA requirements such as the prohibition on annual dollar limits. Additionally, the HFSA waiting period must be equal to or greater than the medical plan waiting period.
- Change HFSA eligibility (and waiting period) to mirror eligibility under the group major medical plan.
- (Optional) If there is no current Grace Period, allow rollover of up to $500 for 2013 and future plan years.
- (Optional) If the HFSA currently provides a Grace Period and the plan sponsor would prefer to allow a rollover instead, amend the plan by the end of the 2013 plan year to eliminate the Grace Period in 2014 and to allow for up to $500 of 2014 funds to roll into 2015.
- If you have been offering HFSA coverage to part-time employees who are not eligible for your group health plan, you need to amend your HFSA to exclude part-time employees or amend your major medical plan to make part-time employees eligible. (This is so the HFSA will qualify as an “excepted benefit.”)
Grace Period: allows participants to use HFSA money from prior plan year to reimburse for qualified medical expenses INCURRED during the first 75 days of the new plan year.
Run-out Period: provides a period of up to 90 days after the end of the plan year for participants to SUBMIT qualified medical expenses incurred during the prior plan year. The run-out period does not allow participants to be reimbursed for additional claims incurred after the plan year ends.
Stand-Alone HRA – Amendments
To comply with the ACA prohibition on annual dollar maximums, HRA coverage must integrate with other GROUP health coverage that provides either Minimum Value (MV) or Minimum Essential Coverage (MEC). To satisfy this requirement, two changes must be made to standalone HRA’s:
- Change HRA eligibility to require that eligible employees must be enrolled in other group non-HRA coverage that provides MV or MEC. The other non-HRA coverage can be provided either by the employer or by another employer (such as the employee’s spouse’s employer).
- Amend HRA to allow individuals to permanently opt out of and waive future reimbursements from the HRA at least annually; and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is allowed to permanently opt out of and waive future reimbursements from the HRA.
Note: If the non-HRA coverage with which the HRA is integrated is only a MEC plan (but does not satisfy the minimum value requirement), the HRA can only reimburse for expenses that are not