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Tax Tip of the Week | Health Care Plans Gain More Flexibility August 14, 2019

Posted by bradstreetblogger in : General, Healthcare, tax changes, Tax Planning Tips, Tax Tip, Taxes , add a comment

On June 13, 2019, the IRS issued final regulations regarding health reimbursement arrangements (HRAs).  These types of plans were radically changed and restricted by the Affordable Care Act. The new regulations reinstate the ability of employers to use HRAs to reimburse employees who buy their own health insurance, but the rules can be fairly complicated in certain situations. The full set of rules can be found in the federal register at https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans. In pdf form (and in typical IRS fashion), this article is 140 pages long. It appears to be a collaboration between the IRS, the Employee Benefits Security Administration, the Department of Labor, the Centers for Medicare & Medicaid Services, and the Department of Health and Human Services, and is titled “Health Reimbursement Arrangements and Other Account-Based Group Health Plans”. 

Following is a nice (and much smaller) article published on June 24, 2019, by Jessica Kuester of Taft Stettinius & Hollister, LLP, which helps explain some of the provisions of the new rules, such as who can and cannot be covered, types of HRAs, effective dates, and other features and restrictions of the new HRA regulations.

                                                   –Norman S. Hicks, CPA

Final Regulations Allow Employers to Pay For Employees’ Health Insurance Premiums

Health reimbursement arrangements (HRAs) are a very flexible type of group health plan—they allow employers to reimburse employees for certain medical expenses on a pre-tax basis. Based on the IRS’s interpretation of changes in law that were enacted by the Affordable Care Act (ACA), these arrangements lost most of the flexibility that they had been able to provide for over 50 years. Although HRAs could be integrated with major medical plans offered by employers (i.e., a so-called “integrated HRA”), they could not be offered on a stand-alone basis without the employer incurring a $36,500 per year per participant excise tax. In effect, this meant that employers could no longer reimburse employees for the cost of premiums incurred when purchasing health insurance. New regulations (issued on June 13, 2019) bring back some of the flexibility of HRAs.

What is the new type of HRA?

In a so-called “individual coverage HRA,” employers can reimburse employees for medical expenses (including premiums) that they incur on a pre-tax basis. For each month that they are covered by the individual coverage HRA, employees must be covered by individual health insurance (either offered on the ACA Exchange or not), and employers must substantiate such coverage.

Who can be covered by an individual coverage HRA?

An individual coverage HRA cannot be offered to any employee offered a traditional employer-sponsored group health plan. This means that employees cannot be given a choice between the employer’s traditional group health plan and an individual coverage HRA—employers can only offer one or the other. However, employers can decide to offer an individual coverage HRA to one or more class of employees and a traditional group health plan to the other classes. The acceptable classes are full-time employees, part-time employees, seasonal employees, employees working in the same geographic location (such as the same state or same insurance rating area), collectively bargained employees, salaried employees, hourly employees and newly-hired vs. existing employees. These are only a few examples: there are other types of classes identified in the regulations and additional classes can be formed by combining any of the acceptable classes. In addition, minimum class size rules (generally, 20 class members) apply to employers offering a traditional group health plan to some classes and an Individual Coverage HRA to other classes.

How much can employers reimburse under an individual coverage HRA?

Just like with other types of HRAs, employers can reimburse as much or as little as they want. However, the individual coverage HRA must be offered on the same terms to all employees in the class. So although the amount of reimbursement can vary between classes, they generally cannot vary among the class members (except for variations based on an employee’s age or the number of dependents).

How do employers offer an individual coverage HRA?

Employers offering an individual coverage HRA must notify eligible participants about the individual coverage HRA and its interaction with the premium tax credit that is available to certain individuals under federal tax law. Although the individual coverage HRA itself is considered an employer-sponsored group health plan, the underlying health insurance coverage purchased by the employee is not, so long as the employee’s purchase of the insurance coverage is voluntary, the employer does not select or endorse any particular insurance carrier or coverage, the employer does not receive any kickbacks for an employee’s selection of any particular individual health insurance and each employee is notified annually that the individual health insurance they select is not subject to ERISA.

What about the employer mandate?

The good news: an employer’s offer of reimbursement through an individual coverage HRA counts as an offer of coverage for purposes of the ACA’s employer mandate. The bad news: although the new regulations offer guidance on when an individual coverage HRA will be considered “affordable” for purposes of the premium tax credit, the IRS has not yet issued rules describing when the coverage will be considered “affordable” for purposes of the employer mandate. These rules are likely coming soon.

Are there any other types of new HRAs available under the new regulations?

The new regulations also create an excepted benefit HRA. The excepted benefit HRA is different than the individual coverage HRA in that it only reimburses the employee for costs incurred in connection with “excepted benefits” (such as dental and vision benefits). This new excepted benefit HRA is an HRA offered as part of an employer’s traditional group health program and can reimburse medical expenses even when the employee opts out of the group health plan itself. This is a departure from the current rules that apply to integrated HRAs, which only permit reimbursement of medical expenses when the employee actually enrolls in the group health plan.

The excepted benefit HRA:

When can employers start offering these new types of HRAs?

The new types of HRAs can be offered beginning on Jan. 1, 2020. Note that, in order to start offering coverage under the individual coverage HRA on that date, employers will need to take action before then.  Most notably, the required notice must be provided prior to Jan. 1, and employees will need to take part in the 2020 open enrollment period for individual coverage, which typically occurs in late 2019.

Jessica E. Kuester is an attorney with Taft Stettinius & Hollister, LLP and represents employers in all of their employee benefit needs. She can be reached at jkuester@taftlaw.com. Her article, as reproduced above, can be found at https://www.taftlaw.com/news-events/law-bulletins/final-regulations-allow-employers-to-pay-for-employees-health-insurance-premiums.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

This Week’s Author – Norman S Hicks, CPA

–until next week.

Tax Tip of the Week | How to Avoid being Overwhelmed in Times of Death and Illness? August 7, 2019

Posted by bradstreetblogger in : General, Healthcare, Tax Planning Tips, Tax Tip, Taxes, Uncategorized , add a comment

What do you do when one spouse refuses to be or has not been invited to be involved with finances but then an unexpected death or illness occurs?

Dealing with death and illness is a difficult time for a spouse and the family, no matter the circumstances. When the spouse is unaware of how the finances have been handled, it may lead to frozen accounts and assets. Gary Altman, an estate planning attorney in Rockville, MD., explained that it is common to find families in this situation. He recently had a client who had to ask her brother-in-law for financial assistance. Altman stated that his client did not have enough money in their joint accounts. She was unable to make ends meet because the accounts were in her husband’s name alone and the financial institutions will freeze the single-owner accounts when a person dies. 

Financial professionals and attorneys know that these times are sensitive, delicate and trying. They also have encountered many times that the surviving spouse who was hands-off has to deal with missing information and does not have complete knowledge of their net worth or where accounts are held. The surviving spouse will most likely be overwhelmed with the financial decisions while trying to cope with the day to day emotions of grief and loss. Grieving can cause a person to have high emotions, which may lead to unclear decisions. According to Susan Bradley, founder of Sudden Money Institute, grief can reduce cognitive capacity. She recommends that the surviving spouse focus on what is important or pressing during this time. For example, the survivor should pay the bills that are essential to live each day. Slowing down and realizing what is truly important throughout this time will allow prioritizing urgent matters, most importantly, dealing with emotions and getting through the day one step at a time. The surviving spouse should wait until he or she is no longer in shock to make financial decisions and understand their financial needs. 

Here are steps couples should take to prevent frozen accounts when faced with death or illness:

1.    Hire a financial planner who specializes in estate settlement and an accountant to file tax returns for state and/or federal estate tax returns. Establishing a financial advisor, that both spouses like and trust, can reduce these overwhelming decisions that one might need to make without an advisor. Each spouse should be confident and comfortable with this person.

2.    Make sure both spouses give the executor permission to manage digital assets. Enabling both spouses to have access to and control over assets will reduce potential problems in the situation of death or illness. Another way to ensure immediate access is by stating “transferable on death.” This may be done when the couple sets up the account. 

3.    Stay up to date with your online service software to track every account and asset. This will ensure secure accounts and assets. Assets that are jointly held or are held in the survivor’s name alone are protected, unless the survivor co-signed or guaranteed the debts.

Here are steps a surviving spouse should take when dealing with death or illness:

1.    Order multiple copies of the death certificate to use to reassign financial accounts and settle the estate. The death certificate will allow you to contact the spouse’s employer to ask about a 401(k), pension, stock options and life insurance, etc.  

2.    Contact the estate attorney, accountant and financial adviser. Update your will after shock has worn off. 

3.    Gather and rename household bills, bank, brokerage, insurance, and credit-card statements in your name alone. 

4.    Create a new financial plan after you have understood immediate expenses and are able to make long-term decisions. 

Credit given to:  Tergesen, A. (2019, March 29). Estate Planning for the Uninitiated. 

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

This Week’s Author – Brianna Anello

–until next week.

Tax Tip of the Week | No. 311 | IRS Sets Limits for HSA Deductions for 2016 July 15, 2015

Posted by bradstreetblogger in : General, Healthcare, tax changes, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | July 15, 2015 | No. 311 | IRS Sets Limits for HSA Deductions for 2016

The Internal Revenue Service has released the inflation-adjusted deduction limitations for annual contributions to health savings accounts in 2016.

Revenue Procedure 2015-30 provides the 2016 inflation-adjusted HSA deduction limits, which are updated annually to reflect cost-of-living adjustments.

For calendar year 2016, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,350.  For calendar year 2016, the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $6,750.

Also for 2016, a “high deductible health plan” is defined 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 (including deductibles, co-payments and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage.
You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 232 | An Update on the Affordable Care Act January 15, 2014

Posted by bradstreetblogger in : Healthcare, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes , add a comment

Tax Tip of the Week | January 15, 2014 | No. 232 | An Update on the Affordable Care Act

Health and taxes converge, equaling headaches for all

If the website headaches weren’t enough, now there appear to be problems with the health care reform tax credits.

The IRS needs to strengthen systems development controls with the new tax credits, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).

Beginning in January, eligible taxpayers who purchase health insurance through the Health Insurance Marketplace (an Exchange) may qualify for and request a refundable tax credit through the Premium Tax Credit (PTC) Project. These credits can be used to help pay health insurance premiums. The credit is claimed on the taxpayer’s Federal tax return at the end of each coverage year. Because it is a refundable credit, taxpayers who have little or no income tax liability can still benefit. The PTC can also be paid in advance to a taxpayer’s health insurance provider to help cover the cost of premiums. This credit is referred to as the Advanced Premium Tax Credit.

The IRS’s implementation plan for ACA Exchange provisions includes providing information that will support the Department of Health and Human Services and the Exchanges.

TIGTA found that improvements are needed to systems development controls for:

•    Security
•    Fraud detection and mitigation in accordance with
applicable guidance
•    Configuration and change management
•    Interagency test management process

TIGTA recommended that the IRS develop an action plan for resolving security test issues and that the Internal Revenue Manual be updated to provide specific guidance on how to identify and mitigate potential fraud risks with the design, development, and testing of the new information technology systems that must be implemented to meet ACA requirements.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Recent Changes to the Healthcare Bill | Tax Tip of the Week | No. 64 October 27, 2010

Posted by bradstreetblogger in : Healthcare, Tax Tip , add a comment

Tax Tip of the Week | October 27, 2010 | No. 64

Recent Changes to the Healthcare Bill – Already

Recently Released IRS Notices

Healthcare bill changes in 2011The IRS recently released Notice 2010-69 which says, in part:

“Provides that reporting the cost of coverage under an employer-sponsored group health plan on Form W-2, Wage and Tax Statement, pursuant to § 6051(a)(14) of the Code, will not be mandatory for Forms W-2 issued for 2011.”

What does this mean?  First some background.

Several months ago we ran a series of Tax Tips regarding the new Healthcare Bill.  One of the Tax Tips explained that starting in 2011 it would be required that employers show the cost of employer-sponsored group health costs on the employees W-2.

With this new Notice, the IRS is making it optional to report group health care costs in 2011.  The IRS is acknowledging that it may take some employers more time to get into compliance on this reporting requirement.
Is this just the first “push back” change against the Healthcare Bill?

We’ll keep you posted.

As always, give us a call if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.