Cafeteria Plan Change in Status Rules

Transcription

1 Cafeteria Plan Change in Status Rules Benefit Advisors Network Stacy H. Barrow October 7, Marathas Barrow & Weatherhead LLP. All Rights Reserved.

2 Agenda Brief ACA Update PACE Act Allows States to Define Small Group as 50 or Fewer Employees Final Reporting Instructions Provide Relief for HRAs, COBRA Participants Section 125 Change in Status Events 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 2

3 New Developments: PACE Act Protecting Affordable Coverage for Employees Act (PACE Act) Allows states to define a small employer for group health insurance purposes as one with 50 or fewer employees in the prior year Without the PACE Act, starting in 2016 the ACA would have expanded the small group market to employers with 100 or fewer employees Most states define small group as having 50 or fewer employees Depending on the state, limit is determined based on: Average Total Number of Employees (ATNE); Full-Time Equivalents (FTEs); or Eligible Employees It is anticipated that most states will retain the 50 employee limit In 2016 Some states (CA, CO, MD, NY, VA and VT) have already changed their definition of small group to 100 or fewer employees starting in 2016 (some transition relief may be available) It is unclear whether these states will amend or repeal those laws to reflect the lower limit once again permissible under the ACA 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 3

4 New Developments: Section 6055 Reporting for HRAs Final Form 1095-B instructions for 2015 relax HRA reporting No reporting for HRA coverage is required when an employee is covered under the HRA in connection with coverage under that employer s fully insured major medical plan However, if an employer offers HRAs to employees who are enrolled in their spouse s plan, the employer must report on employees covered under their HRA 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 4

5 New Developments: Section 6056 Reporting for COBRA Final Form 1095-C instructions for 2015 relax COBRA reporting COBRA offered due to termination is reported as no offer (Code 1H) on Line 14 of Form 1095-C, regardless of whether COBRA is elected 2A is used in line 16 regardless of whether the employee elects COBRA COBRA offered due to reduction in hours is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 5

6 Cafeteria Plan Election Changes Plan sponsors are not required to adopt all the changes permitted under the regulations, so the cafeteria plan documents should be reviewed carefully to determine whether a change is permitted under the plan as well as under the law Consequently, employers who wish to provide participants in their cafeteria plans with the greatest latitude to change elections must revise their plan documents to incorporate all of the circumstances enumerated in the regulations Special rules apply to employers that offer benefits to domestic partners 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 6

7 Cafeteria Plan Election Changes New Change in Status Rules for Exchange Coverage & Changes to Part-Time Events that trigger HIPAA Special Enrollment Rights Several of the events below involve circumstances that may overlap with a participant s special enrollment rights Change in Status Events Cost or Coverage Change Judgment, Decree or Court Order Entitlement to Medicare or Medicaid COBRA Events FMLA Leave Domestic Partner Considerations 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 7

8 Revocation due to Exchange Coverage or Changes to Part-Time During a Stability Period Two new situations where a cafeteria plan may allow revocation of an election (other than a health FSA election): Enrollment in the Exchange Employee must enroll during Exchange open enrollment period or during a special enrollment period; and Employee (and related individuals) must enroll in an Exchange plan effective immediately following the revocation Reduction in hours of service Employee must change from FT (30+ hours) to PT status and be reasonably expected to remain PT; and Must enroll in another plan no later than the 1 st day of the 2 nd full month following the revocation 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 8

9 HIPAA Special Enrollment Rights HIPAA special enrollment rights permit an employee, spouse or dependent to enroll in an employer s health plan if: (i) the individual was covered under another health plan at the time coverage under the employer s health plan was previously offered to the individual; (ii) if required by the employer or insurance carrier, the employee states in writing that coverage under another plan was the reason that coverage under the employer s health plan was declined; and (iii) the employee s, spouse s, or dependent s other health coverage is exhausted (COBRA) or is terminated as a result of loss of eligibility, or employer contributions to the other coverage ceases Marathas Barrow & Weatherhead LLP. All Rights Reserved. 9

10 HIPAA Special Enrollment Rights (cont'd) Specific examples of loss of coverage may include: death divorce or legal separation employment termination dependent no longer eligible for coverage under another plan change in eligibility requirements so individual is no longer eligible under another plan change in the offered benefits under another plan with no alternative coverage relocation out of service area of another plan reaching lifetime benefit limits under another plan 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 10

11 HIPAA Special Enrollment Rights (cont'd) Special enrollment rights also apply if the employee participates under the employer s health plan (or is eligible to be enrolled) and acquires a new dependent through marriage, birth, adoption or placement for adoption. Employee must request special enrollment within 30 days of triggering event Marathas Barrow & Weatherhead LLP. All Rights Reserved. 11

12 HIPAA Special Enrollment Rights (cont'd) Special rules relating to Medicaid and CHIP permit an employee, spouse or dependent to enroll in an employer s health plan if: The employee or dependent loses eligibility under Medicaid or a state children s health insurance plan (CHIP) and requests coverage within 60 days; or The employee or dependent becomes eligible for premium assistance under Medicaid or CHIP and requests coverage under the employer s health plan within 60 days Marathas Barrow & Weatherhead LLP. All Rights Reserved. 12

13 HIPAA Special Enrollment Rights (cont'd) (i) Enroll in the cafeteria plan (e.g., no coverage to family coverage) and make initial health contribution and health FSA elections for employee, spouse, and dependents. (ii) Increase amount of health contribution and health FSA elections for employee, spouse and dependents, as applicable. (iii) Change health benefits coverage option(s) for employee, spouse and dependents, as applicable, and make new contribution elections Marathas Barrow & Weatherhead LLP. All Rights Reserved. 13

14 Change in Status Elections changes for change in status events are permitted only if the proposed change is because of and on account of such event 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 14

15 Change in Status (cont'd) Change in legal marital status Marriage (i) Enroll in cafeteria plan (e.g., no coverage to family coverage) and make initial contribution and FSA elections for employee, spouse and dependents (ii) Change coverage option(s) under health and welfare plans for employee, spouse and dependents, and make new contribution elections (iii) Increase amount of contribution and FSA elections if new spouse and new spouse s dependents join coverage (iv) Decrease amount of contribution and FSA elections for employee and/or employee s dependents, but only if employee and/or dependents are eligible for and elect coverage under spouse s applicable benefit plan(s) 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 15

16 Change in Status (cont'd) Change in legal marital status Death of spouse Divorce Legal separation Annulment (i) Enroll in cafeteria plan (e.g., no coverage to family coverage) and make initial contribution and FSA elections, if coverage is lost under spouse s benefit plan(s) for employee and dependents (ii) Increase amount of contribution and FSA elections to add dependents that lose coverage under spouse s applicable benefit plan(s) (iii) Decrease amount of contribution and FSA elections to drop coverage of spouse only 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 16

17 Change in Status (cont'd) Change in number of dependents Change as the result of birth Change as the result of adoption or placement for adoption (i) Change coverage option(s) under health and welfare plans for employee, spouse and dependents, and make new contribution elections (ii) Enroll in cafeteria plan (e.g., no coverage to family coverage) and make initial contribution and FSA elections for employee, spouse and dependents (iii) Increase amount of contribution and FSA elections to add dependents 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 17

18 Change in Status (cont'd) Change in number of dependents Change as the result of death (i) Change coverage option(s) under health and welfare plans for employee, spouse and dependents, and make new contribution elections (ii) Decrease amount of contribution and FSA elections to drop dependent 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 18

19 Change in Status (cont'd) Change in employment status affecting the employee, spouse or dependent due to: termination commencement of employment strike or lockout commencement of or return from unpaid leave of absence change in worksite individual becoming eligible or ceasing to be eligible for coverage 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 19

20 Change in Status (cont'd) Change in employment status of employee, with gain in eligibility under his or her employer s health and welfare plan(s) (i) Enroll in cafeteria plan (e.g., no coverage to single or family coverage) and make initial contribution and FSA elections for employee, spouse and dependents (ii) Increase amount of contribution elections to add newly enrolled benefits for employee, spouse and dependents 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 20

21 Change in Status (cont'd) Change in employment status of spouse or dependent, with gain in eligibility in another employer s health and welfare plan(s) (i) Decrease amount of contribution and FSA elections to drop spouse and/or dependent, but only if spouse and/or dependent elect coverage under another employer s applicable benefit plan(s) (ii) Revoke contribution and FSA elections for employee, but only if employee obtains coverage under another employer s applicable benefit plan(s) 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 21

22 Change in Status (cont'd) Change in employment status of employee, with loss in eligibility under his or her employer s health and welfare plan(s) Revoke contribution and FSA elections for employee, spouse and dependents, except for COBRA coverage (to the extent applicable) 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 22

23 Change in Status (cont'd) Change in employment status of spouse or dependent, with loss in eligibility under another employer s health and welfare plan(s) (i) Enroll in cafeteria plan (e.g., no coverage to family coverage) and make initial contribution and FSA elections for employee, spouse and/or dependents that lose coverage under another employer s applicable benefit plan(s) (ii) Increase amount of contribution and FSA elections to add spouse or dependents that lose coverage under another employer s applicable benefit plan(s) 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 23

24 Change in Status (cont'd) Dependent ceases to satisfy eligibility requirements because of attainment of age limit, student status or similar circumstance (i) Change coverage option(s) under health and welfare plans for employee, spouse and dependents, and make new contribution elections (ii) Decrease amount of contribution and FSA elections to drop dependent 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 24

25 Change in Status (cont'd) Change in residence for the employee, spouse, or dependent (i) Enroll in cafeteria plan (e.g., no coverage to family coverage) and make initial contribution elections, if relocation triggers eligibility for employer s health and welfare plans for employee, spouse and/or dependents (ii) Change contribution elections for new coverage, if relocation affects eligibility in then-current coverage option(s) for employee, spouse and dependents (iii) Revoke all contribution elections if no other coverage is available 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 25

26 Cost or Coverage Change Insignificant cost changes Plan Administrator automatically makes election changes to account for insignificant cost changes Regulations do not quantify distinction between insignificant and significant; rather it is a facts and circumstances analysis 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 26

27 Cost or Coverage Change (cont'd) Significant cost increases (i) Revoke current elections and elect new coverage under a similar plan option at similar coverage level, or if no other similar plan is available, cease participation in such plan (ii) Increase current contribution and/or FSA elections to account for increase in costs For dependent care FSAs, election changes are not permitted if the dependent care provider is related to the employee No changes are permitted under health FSAs 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 27

28 Cost or Coverage Change (cont'd) Significant cost decreases (i) Enroll in cafeteria plan (e.g., no coverage to family coverage) and make initial contribution elections for employee, spouse and dependents (ii) Revoke current elections and elect new coverage under affected plan option(s) (iii) Decrease current contribution and/or FSA elections to account for decrease in costs For dependent care FSAs, election changes are not permitted if the dependent care provider is related to the employee No changes are permitted under health FSAs 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 28

29 Cost or Coverage Change (cont'd) Significant benefit curtailment without loss of coverage Revoke current elections and elect new coverage under a similar plan or plans 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 29

30 Cost or Coverage Change (cont'd) Significant benefit curtailment with loss of coverage Revoke current elections and either (i) elect new coverage under a similar plan or plans, or (ii) drop coverage if there is no similar plan offered by employer 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 30

31 Cost or Coverage Change (cont'd) Additional or improved benefit option(s) (i) Enroll in cafeteria plan (e.g., no coverage to family coverage) and make initial contribution elections for new or improved benefit option(s) for employee, spouse and dependents (ii) Change current contribution elections to add new or improved benefit option(s) for employee, spouse and dependents No changes may be made to the health FSA elections In general, a decrease in the costs of benefit options would not be applicable here 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 31

32 Cost or Coverage Change (cont'd) Change in coverage under another employer s plan includes a spouse s, former spouse s or dependent s employer s plan, or another plan of the same employer Contribution election changes are permitted as long as change is on account of the change made under another plan, and either the election changes are permitted by the other plan, or the plan years for the two affected plans are not the same ( election lock ) 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 32

33 Cost or Coverage Change (cont'd) Loss of coverage under other group health plan sponsored by a governmental or educational institution Enroll and make initial contribution elections in, or increase elections under, the cafeteria plan for affected employee, spouse and/or dependent 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 33

34 Entitlement to Medicare or Medicaid Entitlement to Medicare or Medicaid, or loss of eligibility for Medicare or Medicaid for employee, spouse or dependent that had already been entitled to such coverage (i) Decrease contribution and health FSA elections for health coverage for employee, spouse or dependent to the extent employee, spouse or dependent becomes entitled to Medicare or Medicaid (ii) Enroll in cafeteria plan and make initial contribution and health FSA elections, or increase elections for health coverage, for employee, spouse or dependent to the extent employee, spouse or dependent loses eligibility for Medicare or Medicaid 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 34

35 Judgment, Decree or Court Order Judgment, Decree or Court Order resulting from a divorce, legal separation, annulment or change in legal custody that requires health coverage for employee s child who is a dependent, including QMCSO (i) Increase amount of contribution and FSA elections to add dependent to be covered by court order (ii) Decrease amount of contribution and FSA elections to drop dependent to be covered by another group health plan by court order 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 35

36 COBRA Event COBRA Event Increase contribution elections to pay for COBRA contributions (which typically cost the employee more money than non-cobra contributions) This election change has limited application because often employees are no longer working for the employer after a qualifying event that entitles the employee and his or her beneficiaries to elect COBRA, and consequently, the employee can no longer make elections under the employer s cafeteria plan A decrease in an employee s hours resulting in loss of group health plan coverage would be applicable here 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 36

37 FMLA Leave FMLA Leave For FMLA leave, employee may continue health coverage or revoke contribution and health FSA elections and drop group health plan coverage Upon return from FMLA, employee is entitled to re-enroll in group health plan coverage and make new contribution and health FSA elections Payment options are dictated by the plan documents This rule does not apply to non-health benefits under the cafeteria plan 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 37

38 Domestic Partner Issues Domestic partnerships are not recognized under federal law As a result, the only way for election changes to be made with respect to a domestic partner is if the domestic partner is a dependent for federal tax purposes 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 38

39 Domestic Partner Issues (cont'd) A domestic partner is a dependent if he or she meets the following requirements: (i) the individual has the same principal residence as the employee and is a member of the employee s household; (ii) the individual s gross income is less than $4,000 per year (for 2015, as adjusted from year to year);* (iii) the employee provides over 50% of the individual s support for the year; and (iv) the individual is not the dependent child of the employee or of any other person for the same year. *The income limit is disregarded when determining whether a domestic partner is a dependent for group health plan coverage purposes However, at this time, the income limit continues to apply under the regulations governing cafeteria plan election changes 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 39

40 Domestic Partner Issues (cont'd) If the domestic partner is not a dependent for federal tax purposes, then no mid-year cafeteria plan election change is permitted with respect to the domestic partner. If the domestic partner is a dependent for federal tax purposes, then mid-year cafeteria plan election changes are permitted with respect to the domestic partner just as they do for any other dependent of the employee Marathas Barrow & Weatherhead LLP. All Rights Reserved. 40

41 Domestic Partner Issues (cont'd) If a domestic partner meets the definition of dependent, except for the income limit, it is possible that a domestic partner could be added to a group health plan as a dependent, but the employee would not be able to make a mid-year election change under the cafeteria plan In that instance, covering a domestic partner under a group health plan would be a taxable benefit to the employee for the remainder of the cafeteria plan year At the end of the plan year, the employee could make new elections for the following year which would include coverage of the domestic partner on a non-taxable basis 2015 Marathas Barrow & Weatherhead LLP. All Rights Reserved. 41

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