This acronym stands for Consolidated Omnibus Budget Reconciliation Act of 1985, which is a very complex law that can easily be misinterpreted leading to large fines and penalties if administered incorrectly.
We strongly encourage our clients to outsource this administrative function to one of our very qualified vendor partners, which is less expensive then you might think.
SECTION 125 CAFETERIA PLAN ADMINISTRATION
Premium only plans allow employees to annually elect to pay their group health, dental, and vision premium contributions on a pre-tax basis through a payroll reduction agreement. By contributing to their premiums this way, it reduces their Federal, state and FICA income, taxes they pay.
The employer also save by offering this type plan, by saving their portion of the FICA and unemployment taxes.
Health Flexible Spending Accounts ( FSA) is another part of a cafeteria plan where employees contribute pre-tax dollars to pay for health, dental and vision care expenses not paid for by their insurance plans. There are IRS limits to the amount that can be contributed to these type plans ($2,550 for 2016, in addition to any employer contribution to the account). Additionally the employer can establish the plan to allow up to $500 to rollover to the following year for the employees use.
There are also FSA’s where the employee can contribute to the account to paying dependent care expenses of children. The amounts that can be contributed are based on single or married status and how your taxes are filed if you are married. Please check the plan document or check with your tax adviser.
This stands for Health Reimbursement Arrangement (IRS Section 105 Type Plan) that is an employer sponsored plan used to reimburse a portion of you and your families out of pocket expenses such as deductible and coinsurance. The arrangement/account is solely funded by the employer and the plan document determines how often the reimbursements are made. Please note these type accounts must be established alongside a group health plan and cannot be stand alone plans any longer. Nor can they be established alongside individual health insurance plans to reimburse expenses or premiums.
Health Savings accounts can be opened and contributed to when someone has a “qualified” individual or group health insurance plan. The IRS establishes the minimum and maximum deductible and coinsurance out of pocket limits for these type plans annually. They also establish the maximum tax deductible amount that can be contributed to these type of accounts to pay for qualified eligible expenses under IRS Sectionn 213(d).
The maximum HSA contribution for 2016 is $3,350 for single coverage and $6,750 for family, and $3,400 single, $6,750 family for calendar year 2017.
Unlike an FSA, these accounts do not have the “use it or lose it” rules and can accumulate over time to use as needed for out of pocket medical, dental, vision expenses for you or your family members even in retirement years.
Many HSA account administrators like HSA Bank have investment vehicles available for these accounts for greater growth.
Similar to FSA, contributions to an HSA can be made through a cafeteria plan if the plan design allows them. We encourage employer matching contributions up to certain limits to encourage employee participation just like a 401K plan might provide.
Our firm has developed preferred partnerships that we recommend to our clients for these type services. Due to the Affordable Care Act( ACA) payroll data has become a critical component of your compliance efforts, in developing the IRS reporting the ACA requires for Applicable Large Employers ( ALE’s) with 51 or more full time or full time equivalent employees (FTE) when part time employee hours are calculated into the FTE calculation.
SELF INSURING YOUR PLAN
For those employers (down to 20 lives or so) that are interested in the advantages of partially self insuring their health and or dental plan, ABG can deliver a number of solutions with either an insurance company or third party administrative firm (TPA) actually processing the members claims.
The goal of these type plans is to save plan costs by the employer taking on a portion of the plans claims risk versus placing all the risk on the insurance company through a fully insured plan that has taxes and insurance company profit margin built into the rates.
To protect the employer most plans have specific stop loss insurance coverage to pay for any one large claim over a certain plan deductible threshold or aggregate stop loss coverage to pay for multiple claims by members that are less then the specific stop loss amount.
ERISA PLAN DOCUMENTS AND SUMMARY PLAN DESCRIPTIONS (SPD’s)
While this is not an administrative service it is still very important to mention due to the fact that the Department of Labor is becoming more active in the auditing of health and welfare plans, even smaller plans under 50 employees.
ABG can provide your plan these required documents if we are your broker of record for all of your benefit plans ( not including any retirement plan).
This written plan document wraps around your insurance contract and employee certificates to provide the ERISA language that is (not included in the insurance contracts) to be given to each employee covered under any of your plan(s).
If the Department of Labor sends you an audit letter on your health and welfare plans, one of the first items they will request you provide will be this written plan document. The potential penalties for not having this document can very significant compared to the cost of ABG helping you obtain one.