Archives on August, 2015

Section 125: Who CANNOT Participate in a Cafeteria Plan, FSA, or HRA

Posted by mnjinsurance on August 27, 2015

We often receive the question of “Who can and cannot participate in a Section 125 Cafeteria Plan, Flexible Spending Account (FSA), or HRA?”  From time to time, we find clients who are participating in tax-favored benefits who should not, as they are not eligible, or they do not have a plan document in place.  Of course, these items can be an issue!

 

First, it is important to note, an employer’s eligibility rules may not discriminate in favor of highly compensated individuals. Pursuant to Code section 125(g)(3), a plan does not discriminate in favor of highly compensated individuals if it meets all of the following:

  • The plan benefits a classification of employees that does not discriminate in favor of highly compensated individuals;
  • The same employment requirement applies to all employees and the plan does not require more than three years of employment to participate; and
  • Entry into the plan is not delayed.

 

While there are some exceptions, generally an employer can define which classes of employees and former employees are eligible to participate in a Section 125 plan. However, the following individuals are NOT eligible to participate in Section 125 Cafeteria Plan, Flexible Spending Account (FSA), or Premium Only Plan (POP), or any of its qualified benefits:

 

  • More than 2% shareholder of an S-corporation, or any of its family members,
  • Sole proprietor,
  • Partner in a partnership, or
  • Non-employee director, solely serving on a corporation’s board of directors, and not otherwise providing services to the corporation as an employee. (26 CFR Section 1.125-1(g)(2)(i).

 

There are a few exceptions to the above-mentioned rule:

 

  • Dual-status individuals are eligible IF they are both an employee and provide services to the employer as a director or independent contractor.  This rule is not available for partners or more than 2% S-corporation shareholders. (26 CFR Section1.125-1(g)(2)(iii).
  • Employee spouse of self-employed individuals are eligible if they are bona fide employees and are not themselves self-employed.  State laws relating to ownership (especially in community property states) may also affect their status.

 

NOTE:  Sole proprietors, partnerships, and S-corporations may still sponsor Section 125 Cafeteria Plans and FSAs to their employees, and there are benefits to both the employer and employee for doing so.  In addition, the more than 2% shareholders in a S-corporation can still deduct health insurance premiums paid or reimbursed by the S-corporation, but must report these payments as income.  (Notice 2008-1).

 

Health Reimbursement Arrangements (HRA)

 

Self-employed individuals cannot participate in HRAs.  The same rules described above for Cafeteria Plans and their qualified benefits also apply to HRAs.  Informal guidance by the IRS suggests that the self-employed individuals cannot participate in a HRA even if they are taxed on the value of the benefits they receive.

 

Other Things to Take into Consideration:

 

Non-discrimination Testing:  Since self-employed individuals are not eligible to participate in Cafeteria Plans, qualified benefits and HRAs, they should not be included in the non-discrimination testing for such plans.  However, for Section 125 testing, understand that employee-spouses will almost always qualify as Key Employees under the ownership attribution rules, and may make a plan susceptible to failing the Key Employee Concentration Test.

 

Consequences of Non-compliance:  The Section 125 Cafeteria Plan Regulations provide a non-exhaustive list of 11 operational failures that will disqualify the tax-favored status of a Cafeteria Plan and all of its qualified benefits, including a FSA, forcing all such benefits for participants to be reclassified as taxable income.  Similarly, an HRA with ineligible participants would lose its tax-favored status for all participants.

 

If you have any questions or would like to further discuss how a Section 125 can benefit your company and its employees, reduce benefit costs, and improve employee engagement, please contact MNJ Insurance Solutions at (714) 716-4303.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

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Section 125: Benefits for the Employer AND Employee

Posted by mnjinsurance on August 27, 2015

Section 125 cafeteria plan

A Section 125 cafeteria plan is an employee benefits program designed to take advantage of the pre-taxed savings through the Section 125 of the Internal Revenue Code. The cafeteria plan allows employees to pay certain qualified expenses, such as health insurance premiums, on a pretax basis, and therefore reducing their taxable income and increasing their spendable/take-home income. Funds set aside in a flexible spending accounts (FSA) are not subject to federal, state, or Social Security taxes. On average, employee save from $0.25 to $0.49 for every dollar they contribute to the FSA.

 

Premium Only Plan (POP)

Employers may deduct the employees portion of the company sponsored insurance premium directly from eligible employees paycheck before taxes are deducted.

 

Flexible spending account (FSA)

In a FSA, employees may set aside on a pre-taxed basis of pre-established amount of money per plan year. The employee can use the funds in the FSA to pay for eligible medical, dependent care, or transportation expenses, depending on the plans the employer offers.

 

Benefits to the Employer

Employers may add a FSA plan as a key element in their overall benefit package. Because an FSA plan offers a tax advantage, employers experience tax savings from reduced FICA, FUTA, SUTA, and Worker’s Compensation taxes on participating employees. These tax savings reduce or eliminate the various costs associated with offering the plan. Meanwhile, employee satisfaction is heightened because participating employees experience a “raise” at no additional cost to the employer.  Increase participation equals greater tax savings to the employer.

 

Benefits to the Employee

An employee who participates in the FSA must place a certain dollar amount into the FSA each year they wish to participate. This election amount is deducted from the employee’s paycheck (for that amount divided by the number of payroll periods). For example, an employee is paid 24 times a year, and elects $1200 to contribute towards his/her medical FSA. The $50 is deducted pre-tax from each paycheck and it’s held in an account by the plan administrator to be reimbursed upon qualifying claims submissions.

 

The Use-It-Or-Lose-It Rule and Carryover

This rule states that any funds remaining in the participating employee’s FSA account at the end of the plan year will be forfeited to the employer.

 

In addition, there is a new carryover provision that was implemented on October 31, 2013, where employees carryover up to $500 of unused medical FSA funds from one plan year to the next with no fees or penalties. Carryover ensures the participating employee a safety net when determining how much money to set aside in a medical FSA each year. Employees can contribute funds with more confidence, knowing they will not lose funds (maximum carryover is $500) at the end of the plan year. NOTE: This must be included in the Section 125 the plan document to allow such carryover.

 

Cafeteria plans are qualified, non-discriminatory benefit plans, meaning a discrimination test must be met based on the elections of participants.

 

Nondiscrimination testing

Section 125 of the Internal Revenue Code requires that cafeteria plan to be offered on a non-discriminatory basis. To ensure compliance, the Internal Revenue Code sets forth testing requirements that must be satisfied on an annual basis. These testing requirements are in place to make certain that cafeteria plan benefits are available to all eligible employees under the same terms, and that the plan does not favor highly-compensated employees, officers, and owners.

 

Qualifying Events that will Allow a Participant to Adjust or Revoke a Plan Election

  • A marriage or divorce
  • Death of spouse or dependent
  • Birth or adoption of a child
  • Termination or commencement of a spouse’s employment
  • Change in employment status from full-time to part-time, or part-time to full-time for you or your spouse

 

Please refer to your summary plan description “SPD” for more information about changing your elections. Changes must be made within 30 days of the qualifying event.

 

Exceptions in Participation in the Section 125 Cafeteria Plan

 

The following individuals are not eligible to participate in a section 125 cafeteria plan, including a premium only plan “POP.”

 

More than 2% shareholder of an S-Corporation, nor any family members, Sole Proprietor, Partner in a partnership, or Nonemployee director, so we serving on the corporation’s board of directors (and not otherwise providing services to the corporation as an employee).

 

Special rules apply to more than 2% shareholder of the organization. These individuals may not participate in the plan, nor made their employee spouse, children, parents, and grandparents. In determining the status of an individual that becomes or ceases to be more than a 2% shareholder during the course of the S-corporation’s taxable year, the individual is treated as a more than 2% shareholder for the entire year.

 

For more details, please refer to:

http://www.irs.gov/pub/irs-drop/n-05-42.pdf

FAQs about Affordable Care Act Implementation (Part XXII)

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

HSA, HRA, or FSA…What is the Difference?

Posted by mnjinsurance on August 24, 2015

high-interest-savings-account

Health care accounts are not all created equal. That’s why you need an experienced, trusted adviser to help you understand health care accounts. MNJ Insurance Solutions is here to help you understand the complex, and sometimes confusing, health care accounts and their acronyms, like HSAs, HRAs, and FSAs, so you can make an informed decision about the type of health plan and corresponding health account that is right for you.

 

Below is a chart to help compare Health Savings Accounts (HSA), Health Reimbursement Arrangements (HRA), and Flexible Spending Accounts (FSA) and highlight their differences in benefits.

 

  Health Savings Account (HSA) Health Reimbursement Arrangement (HRA) Flexible Spending Account (FSA)
Account definitions A tax-advantaged account used to pay for qualified medical expenses of the account holder, spouse, and/or dependents. An employer-funded arrangement used to reimburse employees for out-of-pocket qualified medical expenses. An employer-established and optional tax-advantaged account funded by the employee to pay for qualified medical expenses with pre-taxed dollars.
Who can open the account? The employee or employer as long as the employee is enrolled in an HSA-compatible health plan. The employer. The employer.
Who can contribute? Employers, employee/account holder, or any third party, IF the employee has a HSA-compatible health plan. The employer. The employee.
Who owns the account? The employee/account holder. The employer. The employee, but unused account balances revert back to the employer at the end of the plan year.
Is there an annual contribution limit? In 2013, limits are $3,250 and $6,450, respectively. See HSA limits per applicable year. Yes, as determined by the employer’s plan design. Yes, as determined by the employer’s plan design, and subject to maximums redefined by ACA.
Do unused funds carry over to the next year? Yes. Possibly, as determined by employer’s plan design. Possibly, if the plan document includes the rollover provision.   See your Section 125 FSA Summary Plan Description for more details.
Can you take the account funds with you if you change jobs, change health plans, or retire? Yes. No. Section 125 FSA plans are a COBRA eligible benefit.   Therefore, an employee may opt to take COBRA for the unused benefits for the duration allowed.
Can you use the account for retirement income? Yes, after age 65, you can withdraw funds for any reason with no penalty. Although, if not used for qualified medical expenses, withdrawals will be taxed as income and an excise tax will be applied. No. No.
Is the account tax advantaged? Yes, account holders contribute tax-free, any interest or investment gains are tax-free, and when used for qualified expense, you withdrawals are tax-free. No. Yes, employees’ contributions are made through pre-taxed payroll deductions.
Can the account earn interest? Yes, and after the account balance reaches a minimum balance requirement (typically $2,000), you can invest in funds available with your HSA third-party administrator and any gains are also tax-free. No. No.
Can the account reduce the out-of-pocket health care expenses of the account holder? Yes. Yes. Yes.

 

Additional Information Resource:

ACA impact on health reimbursement arrangements (HRAs)

 

If you have any questions or would like to further explore HSA, HRA, and/or FSA options for your company, please contact MNJ Insurance Solutions at (714) 716-4303.

 

This content is provided for informational purposes only.  It is not intended as and does not constitute as legal or tax advice.  The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting or tax professionals.

New Rules and Penalties for Employer Premium Reimbursement

Posted by mnjinsurance on August 10, 2015

IRS Notice 2015-17: New Guidance for Employer Premium Reimbursement

In the past, many employers have helped employees pay for individual health insurance policies (i.e. through “Employer Payment Plans”) in the offering an employer-sponsored plan. In recent months, the Department of Labor (DOL), Health and Human Services (HHS), and Treasury Departments have released several pieces of guidance addressing these arrangements. According to this guidance, employer payment plans do not comply with several ACA provisions that took effect beginning in 2014. In May 2014 release from the IRS, violations of these rules can result in excess lines of $100 per day, per employee or $36,500 annually under section 4980D of the Internal Revenue Code.

 

Later, on February 18, 2015, the Internal Revenue Service issued Notice 2015–17. This Notice clarifies that increase in employee compensation does NOT constitute an employer payment plan, as long as the increases are not conditioned on the purchase of individual coverage; provides transitional relief from the excise tax for small employers through June 30, 2015 and to S-corporation healthcare arrangements for 2% shareholder employees; and addresses whether employers may reimburse employees for Medicare or TRICARE premiums for active employees under ACA. The DOL and HHS have reviewed the Notice and agree with the guidance provided.

 

What is an Employer Payment Plan?

 

An Employer Payment Plan is an arrangement through which an employer pays, directly or indirectly (i.e. including direct or indirect payments with after-tax dollars), and employee’s premiums for major medical coverage purchased and in the individual market (inside or outside the exchange), and/or Medicare Part B or D premiums. Employer Payment Plans violate one or more of the health insurance reform through the ACA (including the prohibition on annual dollar limits on essential health benefits and the requirement to provide preventive care without cost-sharing) and as such, excise taxes of up to $100 per day per employee would apply under Code Section 4980D. See IRS notice 2013–54 and Agency ACA FAQs XXII. The Notice also describes and clarifies the types of permissible arrangements that can be used for employers to reimburse Medicare Part B or D premiums or TRICARE expenses without running afoul of the health insurance reforms.

 

Temporary Transition Relief for Small Employers until June 30, 2015

 

The new Notice acknowledges this rule may be a challenge for smaller employers with 50 or fewer full-time equivalent employees for 2014 to comply with, and therefore, small employers will not be penalized for noncompliant premium payment plans that were in effect during 2014. According to Notice 2015–17, there is a delay in the excise tax penalty for employer some are not considered to be an applicable large employer. Small employers may require more time to implement alternative health coverage. This transition relief is temporary and small employers may be subject to the excise tax after June 30, 2015. In addition to waiving the penalty, the smaller employers will not be required to file the Form 8928 on which non-compliance is expected to be self-reported.

 

It is important to note, there is no relief for employers with 50 or more full-time equivalent employees, and they were required to begin compiling as of January 1, 2014.

 

S-Corporation healthcare arrangements for 2% shareholder employees

 

Under IRS Notice 2008-1, if a S-corporation pays for, or reimburses premiums for individual health insurance coverage during a 2% shareholder, the payment for reimbursement is included in income, and the 2% shareholder may deduct the amount of premiums, provided that all other eligibility criteria for deductibility are satisfied. Notice 2015–17 refers to this as “2% shareholder-employee healthcare arrangement.”

 

The Notice indicates that the agencies expect to issue additional guidance in the future regarding the application at the health insurance reforms to more than 2% shareholder arrangements. Although not addressed in the Notice, it would seem that similar relief maybe necessary for other self-employed individuals who are allowed to take a section 162(I) deduction for individual market health insurance, such as partners in a partnership. The Notice also indicates that the IRS and Treasury are considering whether additional guidance is needed regarding the federal tax treatment of health coverage provided to more than 2% shareholder employees. Until then, S-corporations and more than 2% shareholders may continue to rely on Notice 2008-1 with regard to tax treatment of these arrangements for all federal income and employment tax purposes.

 

Reimbursement of Medicare premiums

 

Notice 2015-17 indicates that certain employer payment plans that reimburse Medicare Part B and/or D premiums will be considered integrated with a group health plan for the purposes of the health insurance reforms, if the following conditions are satisfied:

 

  • The employer offers a group health plan, other than the employer payment plan, that provides minimum value coverage;
  •  The employee participating in the employer payment plan is actually enrolled in Medicare;
  •  The employer payment plan is available only to those who are enrolled in Medicare; and
  •  The employer payment plan limits reimbursement to Medicare Part B or part D premiums and excepted benefits, including Medigap premiums.

 

Employer should proceed with caution regarding this portion of the notice. While this arrangement may not be in conflict of healthcare reform is, it will violate Medicare Secondary Payer (MSP) rules, unless a small employer (under 20 employees) MSP exception applies.

 

TRICARE Arrangements

 

TRICARE is not considered an employer group health plan. As a result, such coverage cannot be integrated with an employer payment plan (such as plan reimbursing individual medical premiums). Notice 2015–17 provides a similar relief for HRA’s that reimbursed expenses incurred by employees covered by TRICARE.

 

TRICARE arrangements will be considered integrated with a group health plan for the purposes of healthcare reform, providing the following conditions are met:

 

  • The employer offers a group health plan, other than reimbursement arrangement, that provides minimum value;
  •  The employee participating in the reimbursement arrangement is actually enrolled in TRICARE;
  •  The reimbursement arrangement is available only to those who are enrolled in TRICARE; and
  •  The reimbursement arrangement limits reimbursement to cost share under TRICARE and excepted benefits, including TRICARE supplemental arrangement.

 

Similar to Medicare, TRICARE has strict coordination rules that make this type of arrangement illegal for employers subject to TRICARE coordination.

 

Call to Action for Employers:

 

Health Care Reform has made many changes to the insurance industry, and we are here to assist you with ensuring your groups compliance and Employee Benefit needs. With the new, additional guidance from the IRS, we recommend employers to do the following:

 

  • Evaluate your current policy and procedure regarding benefits;
  • Small employers that reimburse employees to pay directly for all or part of employee’s premiums for individual health coverage must change this practice and seek other options for group health insurance to avoid costly penalties for non-compliance.

 

If you have any questions or would like further clarification, MNJ insurance Solutions is here to assist you with your group health insurance needs and compliance.

 

More Information:

http://www.irs.gov/Affordable-Care-Act/Employer-Health-Care-Arrangements

IRS Notice 2013-54

IRS Notice 2015-17: Guidance on the Application of Code § 4980D to Certain Types of Health Coverage Reimbursement Arrangements

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

California: New Legislation Amends the Paid Sick Leave as of July 13, 2015

Posted by mnjinsurance on August 5, 2015

California’s new paid sick leave law, the “Healthy Workplaces, Healthy Families Act of 2014” (paid sick leave law) recently went into effect on July 1, 2015. Less than two weeks later, the law has already been amended. On July 13, 2015, the California legislature passed AB 304 amending the Paid Sick Leave Law. Governor Jerry Brown signed the bill into law the same day, as the law contains an urgency clause and the changes become effective immediately. Below is a brief description of the most important changes.

 

Who are covered workers?

The amendments clarify that the law applies to an employee who works in California for the same employer for 30 or more days within a year.

 

How does the employer calculate the sick leave accrual?

 

The original law provided only one method of calculating the sickleave a grill. Now, with the amendment, the employer can calculate sick leave pay for nonexempt employees by one of the following:

  •  Using the same calculation used to determine the employees regular hourly rate for overtime purposes, or
  • Dividing the employees total wages (excluding overtime) by the employee’s total hours worked in the full pay cycle of the prior 90 days of employment.

 

Under the amendment, the employer can calculate sick leave pay for exempt employees by the following:

  •  The same method of calculating wages as it uses for other forms of paid leave, such as vacation.

 

Alternative accrual method:

  • The paid sick leave amendment clarifies that employers may use methods of occurring sick leave other than the “one hour of sick leave for every 30 hours worked method” (1-in-30 method) used in the original language of the law.
  • Alternative accrual method, such as accrual by pay period or by months of employment are also valid, provided that the employees receive at least 24 hours (3 days) of sick leave by the 120th calendar day of employment or the employer’s sick leave year (calendar year or otherwise).

 

Employers existing paid time off (PTO) or sick leave policies:

Under the amendment of the Paid Sick Leave law, sick leave policies that existed before January 1, 2015 and that use an accrual method that differed from the “1-in-30 method,” have been grandfathered IF they meet the following three conditions:

 

  1. Accrual occurs on a regular basis;
  2. Employees receive not less than eight hours (one day) of sick leave within the first three months of employment or sick leave year; and
  3. Employees receive at least 24 hours of sick leave within the first nine months.

 

Listed below are some additional minor changes and clarifications to the paid sick leave law:

 

  • Employers with unlimited sick leave policies can state “unlimited” on employees paycheck stubs, rather than having to list a specific number of days or hours.
  • Employers do not have an obligation to reinstate an employee sick leave upon rehire within one year, if the employer paid the employee for the accrued sick leave upon termination.
  • Employers do not have an obligation to ask employees about the reason for taking the leave.
  • The language in the law of “a year” means a year of employment, a calendar year, or another employer designated 12 month period.
  • The amendment clarifies that employees have to work for 30 days for the same employer before becoming eligible for paid sick leave.

 

Action items for Employers to comply with Healthy Workplace Healthy Family Act of 2014 (AB 1522):

 

If an employer implemented a new sick leave policy, or revise their previous sick leave or paid time off policy within the last six months, to comply with the requirements of the paid sick leave law, most likely, no immediate action is required. However, if an employer failed to revise its existing policy prior to July 1, 2015, the employer should immediately review the newly amended law to ensure their sick leave policy complies with the amended Paid Sick Leave law. Regardless of whether the employer’s policy is grandfathered or not, the newly amended law allows the employer to have an option of an accrual method that may better meet its business needs. We recommend that you have your policy reviewed by your legal counsel/Business attorney to ensure compliance and the appropriate language in your policies.

 

In addition, the employer must do the following to comply:

 

  • Display poster on paid sick leave (Spanish) (Vietnamese) where employees can read it easily.Provide written notice to employees with sick leave rights (Spanish) (Vietnamese) at the time of hire.
  • Provide for accrual of one hour for every 30 hours worked and allow use of at least 24 hours or 3 days or provide at least 24 hours or 3 days at the beginning of a 12 month period of paid sick leave for each eligible employee to use per year.
  • Allow eligible employees to use accrued paid sick leave upon reasonable request.
  • Show how many days of sick leave an employee has available. This must be on a pay stub or a document issued the same day as a paycheck.
  • Keep records showing how many hours have been earned and used for three years. Affected employers may review the AB-1522 Employment: paid sick days Affected Employers may review the text of the amendments for the additional changes

 

 

For more information:  Healthy Workplace Healthy Family Act of 2014 (AB 1522)

 

  • Retaliation or discrimination against an employee who requests or uses paid sick days is prohibited. An employee may file a complaint with the Labor Commissioner against an employer who retaliates or discriminates against the employee for exercising these rights or other rights protected under the Labor Code.
  • Local offices are listed on our website at http://www.dir.ca.gov/dlse/DistrictOffices.htm.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

Help…I Lost my Job…Should I Take COBRA or an Individual Policy?

Posted by mnjinsurance on August 5, 2015

COBRA is a federal law that requires employers of 20 or more employees with group health plans to offer employees, their spouse and dependents a temporary period of continued health care coverage if they lose coverage through the employer’s group health plan.  Employers who have not continuously had 20 employees are covered if they had at least 20 employees on more than 50% of  the typical business day in the previous calendar year.  Both full-time and part-time employees are counted to determine whether the plan is subject to COBRA.

 

Individuals are not obligated to participate in COBRA after leaving an employer or having a reduction in hours.  However, if an individual declines the initial offer of COBRA, he/she may qualify for “special enrollment” in Covered California health insurance or an “off-exchange plan” outside of the annual Open Enrollment period for Individual/Family coverage.  An “off-exchange plan” are plans that are offered by the carrier direct, rather than through Covered California.  In order t take advantage of the special enrollment in Covered California or “off-exchange plan,” the individual/family losing group coverage must apply for coverage no later than 60 days after their employer-sponsored plan ends.  It is also important to note that if an individual were to terminate their COBRA coverage during Open Enrollment of Covered California or elect an off-exchange plan, he/she cannot change their mind to go back to COBRA.

 

If an individual were to elect COBRA and loses his/her coverage (i.e. due to non-payment), he/she will NOT be eligible for special enrollment through Covered California, nor opt to an off-exchange individual plan at that time.  Outside of Open Enrollment, individuals qualify for special enrollment with Covered California or off-exchange individual plans if one of the following apply:

 

  • If former employer was responsible for remitting payments for the COBRA premium and fails to do so in a timely manner, therefore participant is cancelled due to group non-payment;
  • The COBRA participant moves out of the plan coverage area and there is not another option available (i.e. former employer offers HMO only plan and COBRA participant moves out of state and the HMO would no longer be a good option);
  • If the former employer cancels the group plan, therefore, COBRA is no longer available; or
  • The beneficiary has maximized their COBRA duration available under the plan.

 

Listed below are pros and cons of Electing COBRA vs. Enrolling in Covered California after an individual and qualified beneficiaries have had a qualifying event.

 

PROS CONS
ELECTING COBRA  ·         The network of doctors and hospitals available in each plan and individual can continue the current benefits.

·         Covers more Rx than individual plans.·         Transition and electing COBRA is typically an easier process than enrolling in Covered California.

·         If you are currently seeking treatment or under the care of a physician, it is easier to continue care under COBRA.

 ·         The total monthly premiums for the individual and qualified beneficiaries (family members previously enrolled on the plans) are paid by individual.

·         If the individual and qualified beneficiaries enrolled in COBRA, they cannot drop their COBRA plan and enroll in Covered California plan unless it is Open Enrollment for Covered California.

·         Depending on the level of benefits previously provided by the employer, the COBRA monthly premiums may be more expensive than desired coverage through Covered California (i.e. if employee or dependents may not need the rich covered previously offered by the employer).

 

ENROLLING IN COVERED CALIFORNIA ·         Depending on income, the individual and qualified beneficiaries may qualify for tax credit and/or subsidy (depends on household income – chart for 2015) with Covered California.

·         Copays and deductibles may vary with options for Covered California or “off-exchange plans.”

·         Individual has options to move to another carrier (plans for 2015) than what may be provided through their former employer.

 

 ·         Doctors and hospitals may not be in the network for the Covered California or “off-exchange” plan option.

·         Prescription plans offered through Covered California individual plans or “off-exchange” plans often cover a smaller list of formulary drugs.

 

Note: If you have a qualifying event, your spouse has other group coverage offered through his/her employer, you may also want to explore adding onto their group plan as an additional alternative.  If this is an option through his/her employer, it must be done within 30 days of the loss of coverage.

 

If you have questions regarding your personal situation, MNJ Insurance Solutions are able to assist and can be reached at (714) 716-4303.

 

More Resources:

COBRA vs. Exchange Coverage – Covered CA

 

Disclaimer:  The views and opinions expressed are those of the author and do not necessarily reflect the official policy or position of Covered California.  Any content provided by our bloggers or author is of their opinion and are not intended to malign any organization, company, government entity, anyone or anything.

This document is for general information only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy or completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice from their own attorneys and tax advisors with respect to their individual circumstances.

What is the Difference between Federal COBRA and Cal-COBRA?

Posted by mnjinsurance on August 5, 2015

When an employer offers a group health insurance plan, such as medical, dental, or vision insurance, the employee and covered dependents (“Qualified Beneficiaries”) are provided an opportunity to continue their current plan at the individual/family’s expense when they have a qualifying event. Qualified events may include termination or reduction of hours of the covered employee’s employment for other than gross misconduct; divorce or legal separation from a covered employee; the loss of dependent status by overage dependent; the covered employee becomes eligible for Medicare; or the death of the covered employee. The continuation of group coverage option is known as either “Federal COBRA” or “Cal-COBRA.”

 

Listed below are some highlights of Federal COBRA vs. Cal-COBRA:

 

  Federal COBRA Cal-COBRA
Employer size 20 or more employees more than 50% of the previous calendar year 2-19 employees
Who is eligible? Covered Individual and covered spouse/dependents at the time of the qualifying event Covered Individual and covered spouse/dependents at the time of the qualifying event
Who sends the COBRA Notice to the individual and qualified beneficiaries? Either the employer or a third-party administrator sends the COBRA notice within 30 days of the qualifying event. Employer must notify the insurance carrier and the carrier is responsible for sending out the Cal-COBRA notifications to the individual and qualified beneficiaries.
How long do they have to elect the COBRA/Cal-COBRA coverage? Employee and/or qualified beneficiary must elect coverage within 60 days of the qualifying event. Employee and/or qualified beneficiary must elect coverage within 60 days of the qualifying event.
How much does it cost to continue coverage? Cost is 102% of the regular premium for 18 months.NOTE: premium may change within that period, depending on plan year and renewal rates with insurance carriers. Cost is 110% of the regular premium for 18 months.NOTE: premium may change within that period, depending on plan year and renewal rates with insurance carriers.
Duration of Coverage Continuation Generally extends health coverage for 18 months. Individuals with certain qualifying events may be eligible for a longer extension (i.e. 29 or 36 months). Cal-COBRA allows individuals to continue their group coverage for up to 36 months. For individuals covered under Federal COBRA, Cal-COBRA may also be used to extend health coverage for a combined period of up to 36 months.

 

 

We typically recommend that employers with 20 or more employees outsource the COBRA administration to one of our preferred third-party administrators (TPA), as COBRA requires a number of plan notifications to take place at different stages in the COBRA process. Some of the notifications include:

 

 

The other option for Insurance coverage for individuals and qualified beneficiaries may be to elect Individual coverage, either “on” or “off-Exchange” plans, providing it is within their “Special Enrollment” period. If it is not “open enrollment” for individual coverage for on or off-Exchange plan and they had a qualifying event (as seen above), then they have up to 60 days to enroll under the special enrollment period. See blog post:   Help…I lost my job…Should I take COBRA or Covered California (Exchange)?

 

For more information, please do not hesitate to contact MNJ Insurance Solutions at (714) 716-4303.

 

Additional COBRA Information:

 

This material is for informational purposes only and not for the purpose of providing legal advise.  You should always contact your attorney to determine if this interpretation is appropriate for your particular situation.

U.S. Supreme Court Ruling: Subsidies Will Continue for Federal Marketplace Coverage

Posted by mnjinsurance on August 3, 2015

us supreme court

On June 25, 2015, the U.S. Supreme Court released their decision in the King v. Burwell case concerning the provision in the Patient Protection and Affordable Care Act (PPACA), and ruled that subsidies will continue to be available in all states and not just those with state-based exchanges.  Subsidies with federally-facilitated exchanges will continue, as the Obama administration intended.  The ruling affirmed the earlier decision by the Fourth Circuit Court of Appeals.

 

California has a state-based exchange, known as “Covered California,” and this decision does not affect things in California, but the clarification is important and applicable to the residents in the 34 states that utilize the Federal Marketplace.  Since nothing has changed as a result of this decision and NO ACTION is required by individuals who are currently receiving health insurance subsidies in California at this time.

 

The Court considered two possible scenarios in its decision:

  1. Adhere to the strict reading of the law that subsidies may only be available with state exchanges, OR
  2. rule in favor of the intent of the law for universal availability of subsidies in all states and all exchanged.

 

Following this ruling in favor of allowing premium subsidies to be distributed through both federal and state exchanges, the implementation of PPACA will continue and its insurance reform provision will remain in effect.

 

Since the continuity of subsidies, in both state and federal exchanges are no longer in question, it is our hope that legislation will make Health Care Reform more workable for both individual and business consumers.  In addition, it is our hope that sate and federal policymakers will not focus their attention on efforts to reduce the cost of providing health care, as PPACA has still not fully addressed the issue.  Lawmakers and regulators need to look at the portions of our health care system that are working well and keep a variety of health insurance products and options available to all consumers, and improve the areas that need adjustments.  We believe the employer-based system has been reliable and effectively delivered health coverage to generations of Americans, and as a nation, we need to preserve it!

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

IRS Announces HSA Contribution Limits for 2016

Posted by mnjinsurance on August 3, 2015

On May 4, 2015, the Internal Revenue Service (IRS) released Revenue Procedure 2015-30 to announce the adjusted inflation limits for Health Savings Accounts (HSA) for the 2016 calendar year.  These limits vary based on whether an individual has self-only or family coverage under their HSA-qualified health plan.

 

The IRS announced the following limits for 2016:

 

  Type of limit 2015 2016 Change
HSA Contribution Limit Self – only $3,350 $3,350 No change
HSA Contribution Limit Family $6,650 $6,750 Increase limit by $100
HSA Catch-up contributions (not subject to adjustment for inflation) $1,000 $1,000 No change
HDHP Minimum Deductible Self – only $1,300 $1,300 No change
HDHP Minimum Deductible Family $2,600 $2,600 No change
HDHP Maximum out-of-pocket Maximum expense limit (deductibles, copayments, and other amounts other than premium) Self – only $6,450 $6,550 Increase limit by $100
HDHP Maximum out-of-pocket Maximum expense limit (deductibles, copayments, and other amounts other than premium) Family $12,900 $13,100 Increase limit by $200

 

If you should have any questions regarding HSA-qualified plans or would like us to evaluate your current plan options, please contact MNJ Insurance Solutions at (714) 716-4303.

 

For the IRS full version of this release, Click Here

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

Healthy Workplace Healthy Family Act of 2014 (AB 1522) – Paid Sick Leave in CA

Posted by mnjinsurance on August 3, 2015

The new law, Healthy Workplace Healthy Family Act of 2014 (AB 1522), is effective as of January 1, 2015; however, the right to accrue sick leave becomes effective on July 1, 2015.  Affected employers should be mindful that a new law requires most businesses to provide up to 24 hours (or 3 days) per year of paid sick leave to employees who work in California for 30 or more days within a year from the commencement of employment.  Employees, including part-time and temporary employees, will earn at least one hour of paid leave for every 30 hours worked. Accrual begins on the first day of employment or July 1, 2015, whichever is later.  An employer may limit the amount of paid sick leave an employee can use in one year to 24 hours or three days. Accrued paid sick leave may be carried over to the next year, but it may be capped at 48 hours or six days.

 

Exceptions:

 

Employees covered by qualifying collective bargaining agreements, In-Home Supportive Services providers, and certain employees of air carriers are not covered by this law.

 

Background

  • Employees will accrue paid sick days at the rate of 1 hour per every 30 hours worked, beginning at the commencement of employment or July 1, 2015 (whichever is later).
  • Upon the oral or written request of an employee, an employer must provide paid sick days for certain purposes, including (among other things) diagnosis, care, or treatment of an existing health condition of—or preventive care for—an employee or an employee’s family member.
  • An employee is entitled to use accrued paid sick days beginning on the 90th day of employment, after which day he or she may use paid sick days as they are accrued.

 

Usage


  • An employee may use accrued paid sick days beginning on the 90th day of employment.
  • An employee may request paid sick days in writing or verbally. An employee cannot be required to find a replacement as a condition for using paid sick days.
  • An employee can take paid leave for employee’s own or a family member for the diagnosis, care or treatment of an existing health condition or preventive care or for specified purposes for an employee who is a victim of domestic violence, sexual assault or stalking.

Action Items for Employers to comply with the Healthy Workplace Healthy Family Act of 2014 (AB 1522):


Important:  Retaliation or discrimination against an employee who requests or uses paid sick days is prohibited. An employee may file a complaint with the Labor Commissioner against an employer who retaliates or discriminates against the employee for exercising these rights or other rights protected under the Labor Code.”

 

As seen on:  State of California Department of Industrial Relations as of August 2, 1015.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.