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How would you like the chance to ask a key governmental official a benefit-related question? The American Bar Association’s Joint Committee on Employee Benefits does this annually with four agencies: IRS, DOL, the Centers for Medicare and Medicaid Services (CMS), and the Equal Employment Opportunity Commission (EEOC).
The following summarizes the agencies’ unofficial, non-binding responses:
IRS
Mid-Year Election Changes . The general rule is that an election cannot be changed during the middle of a plan year. However, the Cafeteria Plan regulations contain numerous exceptions to the rule. One scenario does not qualify as a legitimate exception. An employer has a group health plan and a Health Flexible Spending Arrangement (FSA), both with calendar year plan years. Mid-year, the employer increases the plan’s deductible and tries to implement a second FSA so that participants can increase their FSA deductions. IRS confirmed that this would be impermissible because it would be an end-run around the mid-year election change rules.
The outcome was different with another scenario. A dependent has a reduction in benefits because she can no longer receive a type of treatment that was previously offered (perhaps, due to satisfying the maximum). This would constitute a Loss of Coverage for which the employee could change their election, dropping the dependent from coverage. One could see this happening with dependent children and Orthodontia benefits when both parents have access to health plan coverage.
Health Savings Accounts (HSAs) . Assume a High-Deductible Health Plan (HDHP) with two deductibles: one for prescription drugs, one for medical expenses. Expenses that satisfy the drug deductible also apply to the medical deductible, but not the other way around. What is the maximum HSA contribution available? Assuming both deductibles were less than the statutory maximum contribution limit, the maximum HSA contribution would be the lesser of the two deductibles.
Highly Compensated Employees (HCEs) . For nondiscrimination testing and other purposes, IRS increased the compensation threshold for HCEs to $100,000 as of January 1, 2006. IRS clarified that, for 2006 plan years, the HCE definition is based on 2005 compensation, for which the threshold is $95,000, not $100,000.
DOL
Disability Extensions under COBRA . DOL stated that it would be unreasonable for an employer to deny a Disability extension to a Qualified Beneficiary who could not produce a copy of the Disability Award but could produce other evidence from the Social Security Administration. DOL tempered its response by saying that this might be a question better decided under the jurisdiction of the Department of Treasury.
Other Group Coverage as a COBRA Terminating Event . If a Qualified Beneficiary obtains other group health plan coverage, the former employer, of course, has the right to terminate COBRA coverage. The former employer may not do so until and unless the new group coverage is elected. Any efforts by the former employer to terminate coverage before then or to persuade the Qualified Beneficiary to elect new coverage could constitute an ERISA violation.
Notice Obligations for COBRA Secondary Events . DOL clarified that Secondary Events do not require an additional notice of the Qualified Beneficiary’s rights as long as a proper election notice was previously sent.
USERRA Reemployment Rights . An employee, returning from USERRA leave, goes to work for a different employer but one in the same multiemployer health plan. The employee is not entitled to immediate reinstatement in the health plan (as he would be if rehired by the prior employer), with a limited exception for certain plans with hour banks.
CMS
HIPAA Security Audits . CMS confirmed that its investigations currently are complaint-driven only. It has not developed an audit program, although it may in the future. Given a fact scenario of a large plan that ignored the Security Rule, CMS said that its likely course of action would be to investigate and then discuss corrective action. Significantly, CMS did not broach the subject of available penalties.
Medicare Part D Notices . CMS clarified that employers are not required (but are encouraged) to provide the new personalized Notice of Creditable Coverage discussed in its recent guidance. Use of the Model Notices is also optional.
EEOC
Wellness Programs . EEOC clarified that programs that qualify as bona fide wellness programs under HIPAA may still run afoul of the Americans with Disabilities Act. For example, if the program requires answers to disability-related inquiries or medical examinations, participation must be voluntary. Otherwise, it is discriminatory.
Infinisource expends considerable time and effort to stay abreast of the latest legislative, regulatory, and judicial changes. Infinisource clients can contact our Customer Response, Sales Support, or Fringe Benefits Administration teams with questions that arise. Our Compliance Department and other subject matter experts called Senior Sales Consultants also provide additional support.
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