Date: April 15, 2013
To: Participating Boards and Administrators
From: Howard Van Mersbergen, Vice President of Employee Benefits
New Flex Documents
Plan Document: We have enclosed the newly amended Plan Document for the Flexible Benefits Plan (Section 125 Plan). Please add this document to your Administrative Manual. If you do not have an Administrative Manual, please let us know and we can send a new one to you.
Summary Plan Description: If your school offers the Health FSA (flexible spending account) or the Dependent Care FSA, then you also have copies of the Summary Plan Description (SPD) and Notice of Privacy (Notice) document enclosed. In addition, we have e-mailed the SPD and the Notice to our flex contact at the school. Please distribute the SPD and Notice to your eligible staff in the next 30 days either via e-mail or by making copies of the enclosed. And, keep the original in your Administrative Manual to make copies for newly eligible staff.
Going forward, every employee should receive a copy of the SPD and Notice when they are first eligible for the plan; and when there are any restatements or amendments to the SPD or Notice. Eligibility reminder: any employee working 40% or more of full time is eligible to participate in the Flexible Benefits Plan.
If your school does not offer the Health FSA or the Dependent Care FSA, (i.e. for schools with the Premium-Only Plan), the SPD and Notice are not required and therefore are not included in your packet of documents.
The Plan Document and a generic SPD are available on our website: www.CSIonline.org/benefits.
Adoption Agreement: There is an Adoption Agreement enclosed that needs to be signed and the original returned to our Flexible Benefits Office. Please keep a copy for your files.
Flex Plan Updates
We have recently updated the Plan as follows:
- Health FSA election limit of $2500 per year (it used to be $3,000). The annual contribution to a Dependent Care Account is still $5,000 per calendar year.
- Prohibition on Health FSA reimbursements for OTC (over-the-counter) drugs without a prescription.
- Coverage for expenses incurred by an adult child up to age 26, through the calendar year.
- Elimination of the 2 - 1/2 month Grace Period. For more information, please see Update 64.
- New HIPAA special enrollment rights relating to Medicaid and Children's Health Insurance Program coverage and premium assistance subsidies.
- Clarification of rules regarding Dependent Care FSA qualifying expenses.
- Excepted Benefits” information. Please keep reading for more information.
Health FSAs that are offered to employees who are not eligible for medical coverage are not considered "excepted benefits" and therefore become subject to ERISA and Tax Code requirements that otherwise would not apply.
Any employee working 40% or more of full time is eligible to participate in the CSI Flexible Benefits Plan. Compare this eligibility rule with your medical plan.
Health FSAs that are not considered "excepted benefits" are subject to the following requirements:
- Must offer full COBRA rights to those particular participants (rather than the limited COBRA rights that normally apply to Health FSAs).
- Must offer an external review to individuals who appeal a denied request for benefits.
- Must issue a HIPAA Certificate of Creditable Coverage to individuals who terminate their participation.
- Must provide Coverage for expenses incurred by an adult child up to age 26.
- Are subject to the annual fees to fund comparative effectiveness research – IRS Form 720. Talk to your tax advisor / CPA.
- Must allow individuals who experience HIPAA Special Enrollment Events to add or drop coverage, consistent with the event.
- Are subject to HIPAA nondiscrimination rules (usually a factor if the employer is providing a contribution to the FSA as a wellness program incentive).
Top Six Items Employers Miss with a Section 125 Plan
For Pre-tax Deductions the School Needs a Section 125 Plan
If your school offers a medical or dental plan (or any other insurance plan) and has the employees’ premiums deducted pre-tax from the employees’ paychecks, the school must have a Section 125 in place. This is a federal regulation.
In addition, for pre-tax employee contributions to an HSA (a health savings account linked with a high -deductible medical plan), you are permitted to contribute to your HSA using one of these two methods: (1) you may contribute on a pre-tax basis through a Section 125 Plan, or (2) contribute to the HSA post-tax and claim the credit on your federal income tax return.
Utilizing the Health FSA with HSA Plans
In general, the Health FSA (flexible spending account) may be used for eligible expenses not reimbursed through another insurance plan. However, for a high-deductible health plan with an HSA component, FSA reimbursement is limited to dental and vision expenses only. In addition, you may also preserve your spouse’s HSA eligibility by only utilizing the Health FSA for yourself and dependents.
Participants Need to Re-Enroll or Waive Coverage Every Year
Every year at Open Enrollment we provide enough enrollment materials for all of your eligible staff. Everyone needs to sign the form whether they plan to participate or not.
Some Eligible Expenses May Surprise You
While the most common covered expenses include co-pays, deductibles, prescription drugs, dental and vision care, there are plenty of expenses often eligible for reimbursement that may come as a surprise. They include acupuncture treatments; doctor-ordered weight loss programs; the additional costs of gluten free food items for those with diagnosed gluten sensitivity issues; mileage to/from medical appointments; and smoking cessation programs.
COBRA for the Flexible Benefits Plan
Federal COBRA law applies to participating schools that employ at least 20 full-time equivalent employees on a typical day of the calendar year. Employers who have fewer than 20 full-time employees may, however, be subject to mini-COBRA laws that a number of states have enacted to provide similar benefits for individuals whose employer is exempt from federal COBRA requirements.
Where federal or state COBRA laws do not apply, employers will have the flexibility to make such coverage available as they see fit (as long as any insurers whose coverage is involved agree to the arrangement).
For eligible employees with a positive balance in their account this COBRA election can be done via the CSI Insurance Office. If you are interested or want more details on COBRA benefits, please contact Lois Landheer, U.S. Insurance Specialist, at 616-284-3233 or at LLandheer@csionline.org.
Schools save money on Payroll Taxes
If the school offers the Flexible Spending Account portion of a Section 125, every dollar contributed by staff to a Flexible Spending Account (either the Health FSA or the Dependent Care FSA), the school does NOT pay payroll taxes on those employee contributions. Therefore, schools can actually save money by offering a Section 125 to staff.
Contacting Us for Support
To print a flex claim form, go to www.CSIonline.org/benefits and under Flexible Benefits select Forms. To access your account information online, select Links. If you have not yet registered for an online account, contact Sharon for your school code (one-time code needed for setting up online access). As always, if you have questions about the Flexible Benefits Plan or any previous Update, please visit our website at www.CSIonline.org –or- contact Sharon by phone at 616-284-3228 or 877-274-8796 x228, or at firstname.lastname@example.org.