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Client Alerts: FSA Increase, HSA Limits, and Two New Mid-Year Cafeteria Plan Changes

HEALTH FSA INCREASE The Internal Revenue Service (IRS) recently released the annual inflation adjustments for tax year 2015.  Among the over 40 tax provisions set forth in Revenue Procedure 2014-61 is the cost of living adjustment for health flexible spending […]


Fraser Trebilcock Employee Benefits Attorney Health Care Law HIPAAHEALTH FSA INCREASE

The Internal Revenue Service (IRS) recently released the annual inflation adjustments for tax year 2015.  Among the over 40 tax provisions set forth in Revenue Procedure 2014-61 is the cost of living adjustment for health flexible spending accounts (health FSAs).

Specifically, for 2015, the dollar limit on employee salary reduction contributions to health FSAs will increase to $2,550 (a $50 increase from the 2014 limit of $2,500).  For more information on this and other tax provision adjustments, click here.

HEALTH SAVINGS ACCOUNT ADJUSTMENTS

Additionally for 2015, in Revenue Procedure 2014-30 the IRS increased the annual deductible requirement for qualifying high deductible health plans to $1,300 self-only /$2,600 family with annual out-of-pocket maximums of $6,450/$12,900.  Moreover, the annual contribution to HSAs is increased to $3,350/$6,650. The language from the Rev. Proc. 2014-30 is restated below:

“For calendar year 2015, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,350. For calendar year 2015, the annual limitation on deductions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $6,650.

“For calendar year 2015, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,450 for self-only coverage or $12,900 for family coverage.”

For additional information, click here.

TWO NEW MID-YEAR CAFETERIA PLAN CHANGES

Pursuant to Notice 2014-55, two new mid-year election rights are allowed under cafeteria plans if the following conditions are met and if the plan document is amended to provide for such rights.  Allowing participants to change their cafeteria plan elections mid-year can result in plan disqualification unless those mid-year election changes are allowed by law and set forth in the plan document.

The two new circumstances include: (1) revoking group health plan coverage that provides minimum essential coverage (MEC) under the cafeteria plan due to a reduction in hours even if the employee remains eligible for the group health plan; and (2) revoking group health plan coverage that provides MEC under the cafeteria plan due to enrollment (or intended enrollment) in a qualified health plan through a Marketplace/Exchange during the Marketplace’s annual open enrollment or special enrollment period.  These election rights are allowed for group health plan providing MEC only, and not health FSAs.

Specifically, a cafeteria plan may allow an employee to prospectively revoke an election of coverage under a group health plan that is not a health FSA and that provides minimum essential coverage (as defined in § 5000A(f)(1)) provided the following conditions are met:

“Conditions for revocation due to reduction in hours of service

“(1) The employee has been in an employment status under which the employee was reasonably expected to average at least 30 hours of service per week and there is a change in that employee’s status so that the employee will reasonably be expected to average less than 30 hours of service per week after the change, even if that reduction does not result in the employee ceasing to be eligible under the group health plan; and

“(2) The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee, and any related individuals who cease coverage due to the revocation, in another plan that provides minimum essential coverage with the new coverage effective no later than the first day of the second month following the month that includes the date the original coverage is revoked.

“A cafeteria plan may rely on the reasonable representation of an employee who is reasonably expected to have an average of less than 30 hours of service per week for future periods that the employee and related individuals have enrolled or intend to enroll in another plan that provides minimum essential coverage for new coverage that is effective no later than the first day of the second month following the month that includes the date the original coverage is revoked.

“Conditions for revocation due to enrollment in a Qualified Health Plan

“(1) The employee is eligible for a Special Enrollment Period to enroll in a Qualified Health Plan through a Marketplace pursuant to guidance issued by the Department of Health and Human Services and any other applicable guidance, or the employee seeks to enroll in a Qualified Health Plan through a Marketplace during the Marketplace’s annual open enrollment period; and

“(2) The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee and any related individuals who cease coverage due to the revocation in a Qualified Health Plan through a Marketplace for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.

“A cafeteria plan may rely on the reasonable representation of an employee who has an enrollment opportunity for a Qualified Health Plan through a Marketplace that the employee and related individuals have enrolled or intend to enroll in a Qualified Health Plan for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.”

For additional information, click here.

If you have any questions or would like more information, please contact Elizabeth H. Latchana at 517.377.0826 or elatchana@fraserlawfirm.com. Elizabeth Latchana is an accomplished attorney, specializing in employee health and welfare benefits. Recently recognized for her outstanding legal work, she was selected by some of Michigan’s leading lawyers for inclusion in The Best Lawyers in America 2014 for Employee Benefits (ERISA) Law. Ms. Latchana has taken a prominent role in educating and advising organizations on the ever-evolving law, that may well be the largest change ever to health care in the United States, commonly known as health care reform. Her expertise also includes ERISA, COBRA, Cafeteria Plans, Wrap Plans, Health Savings Accounts (HSAs), and Health Reimbursement Arrangements (HRAs).