Don’t let it bite you!

On March 19, 2019March 18, 2019 By Michelle Turner, MBA, CEBSIn COBRA, HRALeave a comment

king-cobra-405623__340

If an employer is subject to COBRA (COBRA generally applies to all private-sector group health plans maintained by employers that have at least 20 employees on more than 50 percent of its typical business days in the previous calendar year) they must offer their employees (and enrolled dependents) an opportunity to elect to continue the same health coverage they had on the date of the triggering event.

A health reimbursement arrangement (HRA) by definition is a “group health plan” and if the employee’s coverage consisted of the employer’s group health plan combined with an HRA plan, then the same combination must be offered under COBRA when they experience a COBRA qualifying event (e.g. termination of employment).

How do you determine the COBRA premium?

There is little guidance on the subject, but the IRS has stated the applicable premium can be calculated either on:

the basis of past cost, or
an actuarial basis

The applicable premium under an HRA may not be based on a qualified beneficiary’s reimbursement amounts available from the HRA.

The IRS has not issued specific guidance on how to determine the applicable premium under either method. However, in my experience:

Basis of past cost: When there is history (i.e. not the first year for the HRA) the premium usually is based on past claims experience of participants and in general, it reflects the cost to the employer of administering the HRA. It’s “blended” so it’s the same for all HRA qualified beneficiaries regardless of their account balance. For example, if the annual funding is $1,200 but employees only use $600 on average, the monthly COBRA premium is $50 (600/12) + the permitted 2% administrative fee.

An actuarial basis: If it’s the first year the employer is offering the HRA, an actuarial method is used and an employer must make a reasonable determination as to what utilization is likely. What’s reasonable? That is a facts/circumstances determination, (e.g. how high is the deductible, is it a first dollar HRA) with the calculation best being left up to the experts (i.e. HRA Third Party Administrator (TPA), licensed actuary) and even then, there may be different logic on what utilization average is reasonable. However for most, their TPA may be able to provide some general utilization trends based on similar plan designs as a benchmark to help make an estimate.

Example: Post-deductible HDHP compatible HRA, similar plan designs employees who participate in the HRA spend 30% of available HRA dollars. An annual $3,000 HRA contribution is provided.

$3,000 x 30% (.3) = $900
$900 ÷12 (months) = $75
$75 x 2% (COBRA admin fees) = $76.50

Regardless of what method used, the HRA premiums must be calculated in the same fashion as the existing COBRA rules (calculated each year, prior to the 12-month determination period and different HRA COBRA premiums may not be charged to different beneficiaries.)

There are penalties for failing to offer COBRA to HRA participants….don’t let it bite you!

Mistakes happen!

On March 18, 2019March 16, 2019 By Michelle Turner, MBA, CEBSIn Cafeteria plansLeave a comment

mistake-1966448_960_720

Even HR & Benefit professionals with excellent processes in place to follow the rules for cafeteria plan administration, may stumble upon a mistake. I probably receive a question at least monthly, on some type of oversight.

For instance, most recently I received an email from an employer who discovered during a payroll audit, they failed to take the correct amount of premiums from an employee’s paycheck per the terms of the salary redirection agreement (e.g. enrollment form) signed by the employee during open enrollment. The employee was enrolled in the correct benefits with the carriers effective 1/1 but somehow the wrong employee pretax deductions occurred and too little premium withheld.

Unfortunately, there really aren’t IRS regulations or guidance addressing what to do when a mistake like this occurs (they only address a few narrow areas). However, my understanding of “cafeteria plan administrative errors” corrections is generally, an employer will want to correct the mistake so the employee and the plan are put back into the position they would have been in had the mistake never occurred.

For example, knowing there hadn’t been enough money withheld, the employer would want to let the employee know an oversight occurred and depending on the amount of the money needed to be made up, either ask for the employee to pay the entire amount or perhaps have double-premiums deducted until the shortfall is corrected.

However, whenever a mistake is discovered, and yes mistakes do happen, the best course of action is to contact an experienced benefits attorney, who can provide legal advice before implementing corrections to ensure all federal & state wage/tax laws are considered. (Let me know if you need one. I can refer you to the best!)

Common law marriage & domestic partnership….is there a difference?

On March 15, 2019June 8, 2019 By Michelle Turner, MBA, CEBSIn common law marriage, domestic partners1 Comment

grey-crowned-crane-540657_960_720

I’ve been meaning to ask if employees are able to add common law spouses or domestic partners to health insurance?

This question comes up frequently. Many believe common law marriage is the same thing as a domestic partnership, however, there are some significant differences.

If common law marriage is recognized by the state the couple has the same rights as a civil marriage for state and federal tax purposes (e.g. taxation & benefit purposes) and likewise it requires a divorce to end the common law marriage.

There is a common myth that if you live together for a certain length of time (seven years is what many people believe), you are common-law married. I am not aware of this being true anywhere in the United States.

Rather only a few states recognize common law marriages, each with their own requirements. For instance TX recognizes couples who:

Agree to be married
Live together in Texas as husband and wife, and
Tell other people that they are married.

Therefore, if the employer’s insurance plan does not specifically exclude common law spouses (e.g. dependent eligibility is defined as ‘legal spouse’) and the employee’s marriage was valid in the state in which it was entered into, the employee should be able to enroll their common law spouse.

Whereas a domestic partnership may be recognized by state law but it is not recognized under federal law. Therefore, if the plan’s eligibility includes domestic partners, the employee would be able to enroll their partner on the plan but not on a pre-tax basis, (i.e. imputed income) unless the domestic partner qualifies as a tax dependent (which isn’t common). Generally, an employer is not required to offer COBRA to a domestic partner either (i.e. no independent right to elect COBRA coverage) because COBRA is a federal regulation that doesn’t recognize a domestic partner as a qualified beneficiary. A self-insured plan an employer may design (if the stop-loss carrier agrees) to offer COBRA-like benefits to domestic partners, however, a fully-insured plan, the carrier may not be willing to amend the policy to provide COBRA-like coverage to domestic partners when under Federal Law, there is no obligation to do so.

And no, domestic partners are not equivalent to same-sex marriages….but I’ll leave that discussion for another blog post.

Are you a multistate employer?

On March 13, 2019 By Michelle Turner, MBA, CEBSIn MultistateLeave a comment

multistate

Employers with employees in multiple states must comply with all federal, state and municipal level laws in which they conduct business. The complex legal requirements, with costly penalties possible for noncompliance can present many challenges.

Conflicts in applying employment laws may exist State by State and even with Federal requirements. Employers knowing how to write their policies to be in compliance and stay in compliance can be quite a daunting task.

State and local laws cover topics including wages, benefits, background checks, medical leave, disability income, paid sick leave –the list goes on. Each of these, may need to be managed differently in different locations because they are dependent on state or local law requirements.

For example, employers with employees in these locations*:

Arizona
California
Connecticut
District of Columbia
Massachusetts
Michigan
New Jersey
Oregon
Rhode Island
Vermont
Washington

They have enacted statewide paid sick leave laws, each with its own rules for covered employers, qualifying reasons for leave and amount of paid leave. In addition, numerous cities and counties across the country have enacted local ordinances that mandate paid sick leave. Employers must generally comply with both the statewide paid sick leave law and local ordinance, and review against any Federal mandates to know which regulations are applicable.

Employers with employees in these states*:

California
Hawaii
New Jersey
New York
Puerto Rico
Rhode Island

They operate state disability insurance (SDI) programs that may be required even if the employer offers disability insurance to their employees.

Laws and regulations are created and revised all the time, making it a constant effort to keep up-to-date. Understanding and complying with the many employment laws is easier said than done. And yet, it is incredibly important to do so.

Do you need help navigating the challenges and complying with the laws?

If you feel you would benefit from a consultation with an experienced benefit consultant, who provides tools to help their clients navigate the challenges, comply with the law and keep up on the latest compliance and legal developments, let me know!

*Information is current as of 1/1/2019

Yes 65 & HSAs can go together!

On March 13, 2019April 28, 2021 By Michelle Turner, MBA, CEBSIn HSALeave a comment

Turning 65 and gaining eligibility for Medicare doesn’t disqualify an employee from continuing to receive employer contributions or making their own contributions to an HSA. Only if one voluntarily enrolls in any part of Medicare would they then be disqualified.

Likewise, enrollment in Medicare for most, is not automatic when they turn 65. Only those who have contributed 40 quarters into Medicare when they receive Social Security benefits are they automatically enrolled in Medicare Part A; or those on disability are automatically enrolled after their 25th disability payment from Social Security.

Employees wanting to work a few more years and delay retirement are able to continue to reap the triple tax advantage benefit of an HSA if they are otherwise an eligible individual.

Nature of name or SSN error	Correction to Form W-2c	Correction to Form W-3c
Employee name or SSN was incorrectly reported on original Form W-2.	Complete boxes d-i for up to the statute of limitations. Tell employee to correct the Form W-2 attached to Form 1040.	Complete boxes d-j for at least up to the statute of limitations.
Employee obtains new or reissued Social Security card (e.g., change in US resident status or name change).	Complete boxes d-i only for most current year.	Complete boxes d-j only for most current year.
Name and SSN were blank on original Form W-2.	Call the Social Security Administration (SSA) at +1 800 772 6270 for instructions.	Call SSA at +1 800 772 6270 for instructions.

The Compliance Rundown

Author: Michelle Turner, MBA, CEBS