Flexible Benefit Plans

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Best Practices in Communicating Health Care Payment Card Programs.
Pourfallah, Stacy; Benefits & Compensation Digest; v47 no8 pp 24-27 Aug 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Health care payment cards simplify using flexible spending accounts, health savings accounts and health reimbursement arrangements. Similar to debit cards, they draw on funds in the personal health accounts, using pretax dollars to pay for qualified services and products. Substantiation is automatic, avoiding the need to submit paperwork and get reimbursement. For employers, the cards lower the administrative burden and provide valuable benefit utilization information. Communication to employees about the payment card program is key before, during and after enrollment. Special attention should be paid to points often misunderstood, such as covered expenses and use-it-or-lose-it provisions.
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Now It's Employers' Turn.
Kushner, Gary B.; HR Magazine; v55 no6 pp 35-39 Jun 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Employers need to understand the Patient Protection and Affordable Care Act and take action on certain provisions. Plans existing March 23, 2010 are grandfathered in, though it is unclear whether they can make changes. Employers must determine how health benefits fit into their total compensation strategy and make the critical decision to continue or discontinue benefits, which, for firms over 50 employees, would mean annual penalties and the end of tax advantages. Tax incentives and the ability to offer simple cafeteria plans will help small employers. Firms offering health insurance must cover dependent children up to age 26, remove lifetime and annual caps on benefits, cover preexisting conditions and, for firms with 200 or more employees, automatically enroll new employees starting in 2014. Employers must also consider action on reinsurance for early retirees' claims, free coverage for preventive services, ineligible nonprescription drug costs and taxes on high cost health plans.
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Ten Ways to Cut Costs, Improve Health and Welfare Benefits.
Clark, Mary H.; Benefits & Compensation Digest; v47 no6 pp 30, 34-35 Jun 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Immediate cost cutting in health and welfare plans is difficult to achieve, but two starting points are to provide coverage for the right people and to pay only the right claims. The details of vendor contracts must be scrupulously correct. Employers should take advantage of all free or low cost vendor resources and services available. Any variations in plans should be continuously reviewed and justified. Plan sponsors should know the cost drivers and be ready to respond as drivers change. Also helpful are increasing participation in flexible spending account plans, addressing pharmacy costs from multiple angles, reviewing provider networks often and considering different approaches to plan financing.
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Flexible Benefits: Flexible Spending Reimbursement Rules Will Take Effect Jan. 1, 2011, for All Plans.
Olsen, Florence; BNA's Pension & Benefits Reporter; v37 p 1146 May 18, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Administrators of fiscal year health and welfare plans should consider adopting early rules on reimbursement for over-the-counter medications. The rules, enacted in early 2010 and effective January 2011 for all plans, prohibit reimbursement for over-the-counter medicines and drugs unless the medications are prescribed. Fiscal year plan administrators must decide before the next fiscal year whether to comply early in order to prepare members for the change. The meanings of the terms prescribed and medicines and drugs under the rules is unclear, and, depending on how the terms are interpreted, administrators may face additional difficulties.
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Notice 2010-38: Tax Treatment of Health Care Benefits Provided With Respect to Children Under Age 27.
Internal Revenue Bulletin; no2010-20 pp 682-684 May 17, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The IRS has provided guidance on the extension of the general exclusion from gross income for health care costs for dependent children up to age 27 under the Patient Protection and Affordable Care Act. Notice 2010-38 explains the exclusion of employer provided medical care reimbursements and employer provided accident or health coverage. It details the treatment of cafeteria plans, flexible spending arrangements, health reimbursement arrangements and voluntary employees beneficiary associations. The IRS and Treasury Department intend to amend a number of regulations to include dependent children under age 27.
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Health Care Reform: The Good, the Bad and the Ugly.
LeTourneau, Janet; Broker World; v30 no5 pp 52, 54, 70 May 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Patient Protection and Affordable Care Act (PPACA) involves both welcome and unwelcome changes to flexible savings accounts (FSAs). It expands the definition of an eligible dependent child to those not yet 27 years of age by the plan year's end and allows establishment of simple cafeteria plans for employee groups of 100 or fewer members. However, starting in 2011 the law requires 20 percent taxation on unqualified distributions for nondisabled persons under age 57 1/2 years. Further, over-the-counter (OTC) medications will need a doctor's prescription to be reimbursed from an FSA, health savings account or health reimbursement arrangement with few items exempt. Health care debit cards will not be usable at pharmacies for OTC drugs. Starting in 2013, FSA contributions will be capped at $2,500 annually, indexed for inflation.
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Vive la Difference.
Cote, Richard; Benefits Canada; v34 no5 pp 15, 17, 19 May 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A Hewitt Associates survey revealed differences between Quebec and the rest of Canada in flexible benefits and retiree health care benefits. Quebec employers are about as likely to offer full flexible benefit plans as employers nationwide. Of the other 27 percent with traditional plans, 83 percent are moving toward implementing flex plans, leaning more strongly toward a modular flex plan than employers in other provinces. Quebec employers cite cost as more important than meeting diverse employee needs and rank concerns over communication higher than administration. While 61 percent of Canadian employers offer postretirement medical and dental coverage, 79 percent of Quebec employers offer only medical benefits. Fewer expect to reduce benefits for future retirees.
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Provisions of Interest to Employers in the Patient Protection and Affordable Care Act.
Lawson, Kurt L.P.; Daily Labor Report; no68 p I1 Apr 12, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Parts of the Patient Protection and Affordable Care Act (PPACA) affect group health plans as soon as September 23, 2010. These include a prohibition against annual and lifetime benefit limits, limits on coverage cancellation and a mandate to provide certain recommended preventive health care at no charge. Plans must extend dependent coverage for members' children up to age 26 if they are ineligible under their own employer's plan. Tax credits for small businesses will help provide coverage and comply with the individual mandate to maintain coverage. In 2013, employers will have to provide automatic enrollment and notices about alternatives. By 2014 states must establish exchanges for individuals and employers to purchase health care coverage, and large employers must report on coverage to each full-time employee and the Department of Treasury. The PPACA also includes provisions related to prescription drug plans, the Medicare Part D subsidy, cafeteria plans and extra taxes on highly compensated employees.
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TRICARE; Relationship Between the TRICARE Program and Employer-Sponsored Group Health Coverage: Final Rule.
Federal Register; v75 no68 pp 18051-18055 Apr 9, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Office of the Secretary of the Department of Defense issued a final rule prohibiting employers from discouraging employees from participating in a group health insurance plan when they are eligible for TRICARE. Such action by an employer transfers health care costs to the Department of Defense. For employees and beneficiaries in an employer-sponsored health plan, TRICARE is the secondary payer, functioning similarly to Medicare. Section 125 plans do not contradict the rule if the cafeteria plan is not a TRICARE exclusive benefit, though TRICARE supplemental plans endorsed by the employer would violate the rule. The final rule varies little from the proposed version.
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Flexible Spending Accounts Complete Benefits Package.
LeTourneau, Janet; Broker World; v30 no4 pp 62, 65 Apr 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Flexible spending accounts (FSAs) or cafeteria plans provide the advantage of choice to most benefit plans. A limited FSA can extend the tax advantages of high deductible health plans (HDHPs) with health savings accounts (HSAs), covering health care beyond basic coverage as well as day care and adoption costs, voluntary benefits and insurance premiums. FSAs also provide tax protection on health expenses beyond the established limit of a health reimbursement arrangement (HRA). FSAs serve those who typically draw fully on their medical coverage, provide a backup for those with fewer health bills and serve as an investment vehicle for others.
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National Health Care Reform Becomes Law.
Segal Company: Bulletin; 4 pp Apr 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Many changes under the Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act take effect in 2014 but some start much sooner. Grandfathered group health plans are exempt from many of the reforms. However, for plan years starting October 2010, they must end lifetime and annual benefit limits, offer coverage for dependent children up to age 26, cover preexisting conditions, end coverage rescission except for fraud and expand disclosures regarding benefit changes. Other changes pertain to flexible spending account coverage of over-the-counter drugs, Medicare drug subsidy taxation and a public long-term care program. Provisions for coverage waiting periods, automatic enrollment, wellness programs apply to existing plans starting after 2011. Starting in 2010 tax credits for small businesses and a national high risk pool become available.
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Federal Health Care Reform and Employer-Sponsored Group Health Plans: A Preliminary Assessment.
Bianchi, Alden J.; BNA's Pension & Benefits Reporter; v37 p 721 Mar 30, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : On March 21, 2010 Congress passed major federal health care reforms, subject in some cases to alteration by the Senate. Large employers will be required to make coverage available to full time employees or pay a penalty. Medical flexible spending account contributions are capped at $2,500, and over-the-counter drug coverage for many consumer driven health plan options is denied. The favorable tax treatment of Medicare retiree drug subsidies is eliminated, but small employers are offered tax credits for purchasing employee health insurance. The reforms also include mandates for insurers and individuals, requirements for states to create health insurance exchanges and tax credits for low income individuals.
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Health Care Overhauled.
Geisel, Jerry; Business Insurance; v44 no13 pp 1, 18 Mar 29, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Nearly all employers will need to redesign their health plans in response to the health care reform legislation passed in March of 2010. Most significantly, Medicaid has been greatly expanded and new federal health insurance premium subsidies extend coverage to 30 million uninsured U.S. residents. Employers with calendar year plans will have until January 1, 2011 to extend coverage to employees' adult children up to age 26, eliminate lifetime dollar limits and remove preexisting condition exclusions for children up to age 19. Elimination of a tax break for prescription drug coverage will require immediate action, as the change needs to be reported immediately under accounting rules.
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Family and Medical Leave Act and Cafeteria Plans.
LeTourneau, Janet; Broker World; v8 no2 pp 62-63 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : One of the few opportunities to change elections to a cafeteria plan comes is available to an employee taking leave through the Family and Medical Leave Act (FMLA). An employee taking an FMLA leave must have options to pay for continued health coverage. Alternatively, a member may lose coverage for nonpayment or actively revoke coverage before starting FMLA leave. In either case, the FMLA requires the plan to allow the employee to be reinstated when he or she returns from leave. The employee can be reinstated at the same level of coverage as before taking leave and pay the missed contributions, or resume at a lower coverage level, paying a proportionate share.
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Election Changes for FSA Plans.
LeTourneau, Janet; Broker World; v30 no1 pp 70-71, 73 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Changes may be made to existing flexible spending account (FSA) elections when a change in status, cost or coverage occurs and the election change satisfies the consistency rule. The consistency rule, applying to each participant separately, essentially states that the change in election must correspond with a change in status that affects that plan year's eligibility under the employer's plan. There is an exception in cases where the participant becomes eligible for COBRA under the employer's group health insurance plan.
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Health Savings Accounts: Back to the Future.
Klug, Kathy; Chianese, Lois; Benefits Quarterly; v26 no1 pp 12-23 1st Qtr 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : December 8, 2009 was the sixth anniversary of the health savings account (HSA). In the six years since their creation, adoption of HSAs has been surprisingly robust, beating out medical savings accounts and 401(k) plans. HSAs offer the ability to make pretax contributions, grow assets tax free and receive tax free distributions for qualified medical expenses. Unlike other individual account plans, HSAs are true accounts owned by participants, and unlike a 401(k) account an HSA allows for tax-advantaged withdrawals. While six years is not sufficient time to declare the HSA a success, the performance of HSAs indicates they still have the potential to increase health care cost savings.
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Retirement Planning Portal Gives 401(k) Participants a Crystal Ball.
Koster, Kathleen; Employee Benefit News; v24 no1 p 42 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A financial planning portal provides various views of the future for EMC employees. The portal, developed with Fidelity Investments Consulting Services, simulates the financial effects of changing deferral choices, saving more or longer and altering flexible spending accounts (FSAs), health savings accounts (HSAs) and employee stock purchases. For the 2,100 EMC employees who used the modeling tool for a year, FSA, HSA and employee stock purchase plan participation rose substantially or maintained, while participation for nonusers was flat or dropped. The tool shows how well users are on track in retirement planning and provides customized supplementary educational materials geared to specific life events with financial consequences.
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Employee Benefits Answer Book.
DeScherer, Dorinda D.; Myers, Terence M.; 1215 pp 2010 10th ed.; book

Availability : International Foundation of Employee Benefit Plans
Abstract : Comprehensive guidance for employers and professionals involved in the design and administration of employee benefit plans, in a question-and-answer format. Covers regulatory compliance and other benefit issues across a broad range of plan types. Case law summaries, practice pointers and examples are provided.
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Health Insurance Answer Book.
Garner, John C.; 915 pp 2010 9th ed.; book

Availability : International Foundation of Employee Benefit Plans
Abstract : Covers a broad range of health insurance topics, including lan design, funding, federal and state regulation, cost management, quality assurance and communication. Also addressed are related topics such as dental insurance, vision coverage, mental health treatment, Medicare, employee assistance programs and wellness. Case law citations and examples are provided in straightforward language. Includes several model COBRA notices and a sample QMCSO procedure. New in this edition: information on vendor selection; updated guidance on health savings accounts; results from the 2008 United Benefit Advisors survey of plan design and plan costs, that includes responses from small and midsized employers which sponsor most of the health plans in the United States.
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National Survey of Employer-Sponsored Health Plans.
52, 48 pp 2010; book

Availability :
Abstract : The average per-employee cost for health care benefits rose 5.5 percent in 2009, following increases of 6.1 percent in 2005 through 2007 and 6.3 percent in 2008. The average benefit cost per employee was $8,945. Due to job losses, fewer people were covered by employer-sponsored health plans than in 2008. Small employers held down costs by moving employees into consumer-directed health plans and increasing PPO deductibles. Larger employers added wellness programs and policies to manage health care costs. The average cost for prescription drug benefits was up 7.6 percent.
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U.S. Master Employee Benefits Guide.
Kennedy-Luczak, Kathleen; King, Melanie; Panszczyk, Linda; Turan, Tulay; 840 pp 2010 2010 ed.; book

Availability : International Foundation of Employee Benefit Plans
Abstract : Discusses pertinent federal tax and employment laws and offers insight into daily issues that confront human resources and benefits personnel. Covers communicating benefits information to employees. Updates to this edition include: Michelle's Law on health care coverage for dependent students; final regulations on PHI breach notification; HIPAA changes under HITECH; COBRA premium subsidy under the American Recovery and Reinvestment Act; final GINA regulations; Children's Health Insurance Program Reauthorization Act.
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USERRA and the HEART Act.
Hoseman, Linda Lemel; Employee Benefit Plan Review; v64 no6 pp 24-25 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The provisions of the Uniformed Services Employment and Reemployment Rights Act (USERRA) and the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008 affect employers with employees serving in the military. The USERRA requires that time in active military service count toward vesting for defined benefit pensions and other benefits. Those in defined contribution pension plans must be allowed to make up missed contributions, and the employer must provide employer contributions as usual. The HEART Act requires retirement plans to extend survivor benefits and permits benefit accrual up to the day before death or disability. Employers must count any wage differential as compensation for federal taxes. Section 125 plans may recognize a change in status event, and they may permit distribution of unused funds in the participant's account. Plans must be amended to reflect these changes, and benefit calculation methods may need to be updated.
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Massachusetts Health Reform: Employer Coverage From Employees' Perspective.
Long, Sharon K.; Stockley, Karen; Health Affairs; v28 no6 pp W1079-W1087 suppl. Nov-Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Since Massachusetts enacted its health insurance initiative in 2006, most employers maintained their health plans and the number ending or reducing benefits is insignificant. A survey of employees found that by 2008, access to health benefits holds at about 90 percent, with the percentage of workers at small organizations holding steady. Most workers perceive their employer's plan, provider choice and overall quality to be very good or excellent, higher than before the reform. Out-of-pocket spending rose, especially for employees at smaller firms, but the wider availability of flexible spending account funds helped access to care remain stable.
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The Evolution of Employee Benefits at the Economical Insurance Group.
Hubbard, Jennifer; Singh, Parbudyal; Compensation and Benefits Review; v41 no6 pp 27-35 Nov-Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Prior to 2002, The Economical Insurance Group (TEIG) offered a fixed benefit plan that gave the same coverage to all employees combined with a defined benefit pension plan. By 2002 TEIG was expanding rapidly and seeking to increase employee involvement in their own benefits. The company began expanding its benefit offerings with a flexible benefit plan. In 2003, TEIG introduced a defined compensation pension plan, to which most employees chose to transfer. TEIG began offering purchaseable vacation days in 2007, and in 2008 they introduced wellness programs. As of 2009, the company is investigating flexible work arrangements for various employee roles.
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Review Your Benefits Menu: Cafeteria Plans Need Attention.
Culbreth, James H., Jr.; Britton, Eric D.; McClay, Susan D.; Employee Benefit Plan Review; v64 no4 pp 8-9 Oct 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : IRS proposed regulations, issued in 2007, became effective January 1, 2009. The proposed regulations affirm the need for formal documents detailing the plan terms in order for employees to realize tax benefits from cafeteria plans. They also clarify the definition of dependent, allow cafeteria plans to pay adoption assistance and COBRA premium benefits, and limit changes in elections to specific change-in-status circumstances. Additionally, the proposed regulations set limits on changing the plan year and clarify the nondiscrimination rules that apply to cafeteria plans.
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