2015 Health FSA Plan Limits |
Inflation adjustments for the 2015 tax year released by the IRS affect more than 40 tax provisions, including contribution limits to health flexible spending accounts (FSAs). The annual dollar limit on employee contributions to employer-sponsored health FSAs increases to $2,550 (up $50 from 2014). This maximum limit applies to general-purpose and limited-purpose health FSAs. To learn how this increase affects short plan years and any carryover amount from participants’ previous plan years, see our October 31, 2014 Compliance Flash. |
See Revenue Procedure 2014-61 for more on all of the 2015 inflation adjustments. |
ACA Regs Affecting Employers in 2015 |
Beginning January 1, 2015, there are several Affordable Care Act (ACA) regulations taking effect that employers and plan administrators need to address for compliance. |
Pay or Play |
Large employers with 100 or more full-time employees must comply with the employer-shared responsibility provisions known as the "employer mandate," or "pay or play." These employers must offer minimum essential health coverage to at least 70 percent of their full-time employees and eligible dependent children. This increases to 95 percent in 2016. Employers that fail to meet the mandate requirements in 2015 must make an employer responsibility payment. |
Employers with 50 to 99 full-time employees have an additional year to comply with the mandate — until 2016. However, all employers must report on their workers and coverage in 2015 (see below). For more information on the employer mandate, visit the IRS Questions and Answers webpage. |
Reporting Requirements |
Internal Revenue Code Section 6055 requires employers that sponsor self-insured plans, as well as other entities that provide minimum essential coverage, to file annual returns for each individual provided coverage. Returns are due in early 2016; however, reporting of the coverage provided is required beginning 2015. |
Coverage Statements |
Section 6056 requires large employers subject to the employer mandate (those with 50 or more full-time employees) to file annual returns on the coverage offered and furnish coverage statements to their employees. Returns and coverage statements are due in early 2016; however, reporting of the coverage offered is required beginning 2015. |
For additional details related to the requirements above, see the IRS website or speak with your organization’s legal or tax advisor. |
Guidance for Complying with Employer Mandate |
The IRS released updated guidance and draft forms instructing employers on how to comply with the employer mandate. The guidance includes employer reporting under Section 6056, which requires applicable large employers to file a transmittal with the IRS (Form 1094-C) and provide a new return to employees (Form 1095-C) in January 2016 for the 2015 calendar year. Employers are encouraged to review the guidance and draft forms in preparation for the first required filings in 2016. Finalized forms and instructions have not yet been released. |
In addition, the IRS released Notice 2014-49 which proposes an approach to use when there is a change in the applicable measurement period for determining whether an employee is full-time for purposes of the employer mandate. Under the mandate, employers may use a monthly measurement method or a look-back measurement method to determine an employee’s full-time status. While Notice 2014-49 addresses the look-back measurement method only, it includes a number of scenarios that employers and plan administrators may find helpful. Employers can rely on this Notice through 2016 or until further guidance is issued. |
Permitted Election Rules Expanded by IRS |
In September, the IRS issued guidance that expanded the permitted election rules for health insurance under a Section 125 cafeteria plan. Notice 2014-55 explains two instances when employees participating in their employer’s cafeteria plan may revoke their group health plan elections during a coverage period. |
1. |
A participant’s work hours are reduced, which results in an average of less than 30 hours per week. However, the reduction of hours does not affect the participant’s eligibility for health coverage under the employer’s group health plan. |
2. |
A participant in the group health plan who wishes to end group coverage and purchase individual coverage through the federal or state exchanges established by the Affordable Care Act (the "Marketplace"). |
This guidance became effective on September 18, 2014, and employers must amend their cafeteria plans if they would like to allow their employees these two election options. Adoption of the plan amendment must take place on or before the last day of the plan year during which elections are allowed. The effective date may be retroactive to the first date of that plan year (if the employer follows the details outlined in Notice 2014-55), and plan participants should be informed of the plan change. However, an election to revoke coverage on a retroactive basis is not permitted. Employers may download and use this sample amendment to update their cafeteria plans, if needed. |
Please note: This guidance does not apply to health flexible spending accounts (FSAs). |
For additional details, please see Notice 2014-55 on the IRS website. |
Departments Reiterate Guidance on PRAs |
The Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury released FAQs Part XXII providing three additional questions and answers on premium reimbursement arrangements (PRAs). |
Briefly stated, Part XXII reiterates previous guidance affirming health care arrangements cannot be integrated with individual market policies to maintain ACA compliance. Thus, such arrangements may be subject to penalties, including excise taxes under section 4980D of the Internal Revenue Code. For more on these FAQs and others, visit the DOL website. |
Departments Finalize Excepted Benefits for Dental and Vision |
The IRS, the Employee Benefits Security Administration, and Department of Health and Human Services issued final regulations allowing employers with self-insured dental, vision, or long-term care plans to treat those plans as excepted benefits (without regard to a separate participant contribution for the benefits). |
Effective December 1, 2014, the regulations apply to group plans and group plan insurance issuers for plan years starting in 2015. Additional guidance on limited wraparound coverage is still to come. |
Is a Health FSA an Excepted Benefit? |
Generally, excepted benefits provided under a group health plan or health insurance coverage are exempt from Health Insurance Portability and Accountability Act (HIPAA) and Affordable Care Act (ACA) market reform requirements. Typically, a health flexible spending account (FSA) is an excepted benefit if it meets certain conditions. For details on whether a health FSA plan meets the definition of an excepted benefit, see our March 2014 issue of the Comment or contact your CONEXIS representative for more information. |