account based plans - wageworks · 2017. 9. 18. · organization saves money through reduced fica...

4260-WW-ABP-Client-Admin-Guide © 2017 WageWorks, Inc. All Rights Reserved. 1

Account Based Plans

Client Administration Guide


TABLE OF CONTENTS

Section 1 – Summary of All Plans and Services ................................................................... 3

Account-based Plans ..........................................................................................................................................3

Exchange Services .............................................................................................................................................3

Federal Mandates and Other Services ...............................................................................................................4

Optional Services Associated with Account-based Plans ..................................................................................4

Section 2 – Support Services ................................................................................................. 5

Overview .............................................................................................................................................................5

Technology Platform ...........................................................................................................................................5

Relationship Management Team ........................................................................................................................6

Participant Notices ..............................................................................................................................................7

Finance ...............................................................................................................................................................7

Unclaimed Check Procedures ............................................................................................................................8

Communications and Updates ............................................................................................................................9

Section 3 – The Website ........................................................................................................ 10

Participant Website .......................................................................................................................................... 10

Participant Mobile Services ............................................................................................................................. 10

Client Website .................................................................................................................................................. 11

Section 4 – Plan Administration ........................................................................................... 13

Payroll Adjustments for Account-based Plans ................................................................................................. 13

Contribution Notifications for Account-based Plans ........................................................................................ 13

Renewal Process ............................................................................................................................................. 14

Plan Year Close ............................................................................................................................................... 14

Section 5 – Account-based Plans ........................................................................................ 16

Flexible Spending Accounts ............................................................................................................................ 16

Health Reimbursement Arrangement .............................................................................................................. 26

Section 6 – Elections, Leaves of Absence, and Terminations ............................................... 32

Elections and Mid-year Election Changes ....................................................................................................... 32

Leaves of Absence (LOA) ................................................................................................................................ 45

Terminations .................................................................................................................................................... 48

Section 7 – Optional Services .............................................................................................. 56

Optional Services ............................................................................................................................................. 56


SECTION 1 – SUMMARY OF ALL PLANS AND SERVICES

We offer a comprehensive suite of benefit plans, programs, and administrative services. In addition to account-based plans, we offer a variety of administrative services that you can purchase separately or bundle together to create custom solutions. Our account-based plans allow you to offer your employees many of the most popular tax-free programs, which can help attract and retain talented employees.

Account-based Plans

We offer various account-based plans, with several programs that can be stacked together for a robust benefits package.

Flexible Spending Accounts

Flexible spending accounts (FSAs) are a great way to offer your employees more benefits without the high costs normally associated with employee benefits. In fact, you may be able to add an FSA plan at little or no cost to your organization. We offer the following types of FSAs:

Healthcare FSA

Limited-purpose FSA

Dependent Care FSA also referred to as Dependent Care Assistance Program (DCAP)

Health Savings Accounts

With health savings accounts (HSAs), you can help ease employees through the transition from traditional health insurance coverage to a qualifying high deductible health plan (HDHP), while dramatically reducing premium costs. As the employer, you can contribute tax-deductible HSA funds, and employees can also contribute on a pre-tax basis. Since pre-tax funds are used to pay for eligible healthcare expenses, each employee lowers their gross income – which reduces your payroll taxes.

Health Reimbursement Arrangements

Our Health Reimbursement Arrangement (HRA) is a great way to combat the rising cost of healthcare. Offering an HRA allows you to provide a valuable benefit to your employees, giving them access to funds to pay for eligible medical expenses, while your organization reaps significant savings. We offer a wide variety of HRA plan types and can set up and administer an HRA that’s specific to your organization’s needs.

Commuter Benefits

A commuter benefits plan lets your employees save money by using pre-tax dollars to pay for eligible work-related transit and parking expenses. Because these funds are deducted on a pre-tax basis, your organization saves money through reduced FICA contributions.

Exchange Services

The Exchange Services program combines the WageWorks retiree HRA plan with the proven group-to-individual conversion services of HealthCompare. Together, these services form a powerful program that allows employers to keep their coverage promise to their retirees while significantly reducing their retiree-related insurance costs. Exchange Services offers employers the following:

Group-to-individual Conversion Services for Retirees

Coverage Options for Other Workforce Populations

HRA Administration


Federal Mandates and Other Services

We handle many of the most difficult and time-consuming federal mandates, making the process easy while saving you both time and money.

COBRA

Complete COBRA administrative services to protect your organization from costly fines, penalties, and lawsuits that result from mistakes or improper processes. Our services include the Simply Covered program, which provides COBRA qualified beneficiaries with in-depth information about COBRA and other coverage alternatives as well as access to licensed benefits advisors who can help individuals find and enroll in coverage at the right price.

HIPAA and Other Federal Notices

Distribution services for all HIPAA notices for group health plan continuation coverage, including HIPAA privacy notices, HIPAA initial rights notices, and notices related to the Women’s Health & Cancer Rights Act.

Direct Bill Services

Billing services for non-COBRA populations including retirees, surviving spouses, leave of absence (LOA), and Family and Medical Leave Act (FMLA).

Optional Services Associated with Account-based Plans

We offer a variety of optional services to help employers make the most of their account-based plans.

The CONEXIS Visa® Benefit Card

Nondiscrimination testing

Healthcare FSA Carryover

FSA two-month and 15-day grace period

Participant welcome kits

Open Enrollment support For details about how these services can help employers and their participants, see the Optional Services section. The CONEXIS Elite Visa

®Benefit Card is issued by UMB Bank, n.a. pursuant to a license from Visa U.S.A. Inc.

Please note: This information is provided with the understanding that WageWorks is not engaged in rendering legal or tax advice. If necessary, you should seek counsel from your tax or legal advisor.


SECTION 2 – SUPPORT SERVICES

Overview

We are here to help educate, assist, and support you in the successful installation and administration of your account-based plan(s). We provide various ways to manage account information for both you and your employees, including our website, toll-free customer service, and interactive voice response (IVR).

Technology Platform

Our proprietary, integrated system is flexible and designed to provide reliable and scalable administration for our account-based plans as well as COBRA and HIPAA. We own the software code to our single technology platform, which is entirely supported by our information technology staff and is constantly upgraded without cost or interruption of services to our clients. Our system features real-time access to benefits data including account information, imaged notices, reporting, ad hoc queries, and case management services. Our system automatically identifies all plans, eligibility rules, unique combinations of benefits, plans, and options; manages enrollee demographic combinations; and accommodates unique benefit and cost calculations. Functionality includes:

Event tracking – Every event is tracked and available online, including file transfers, web transactions, accounting entries, case management activities, and relationship management actions.

Audit controls – The automated system design allows for perpetual audit activity with oversight by senior management. Rules programmed into the system generate exceptions that result in immediate email notifications. Exceptions are monitored, documented, tracked, reported, and resolved immediately.

Flexible business rules engine – To accommodate flexible reimbursement account administration, the system is designed around unique, logic-driven claim product tables that automate claims payment or rejection within our system. These claims tables allow full automation of claims processing based upon plan-specific rules. The tables allow customization of expense type, eligibility, and pay order.

Customizable options – The system offers hundreds of client options that allow employers to customize services to meet their specific needs. Client options are reviewed with the client and determined during implementation.

Integrated card solution – Our real-time benefit card platform supports plan stacking for FSAs and HRAs, all of which can be accessed with one benefit card. See the Optional Services section for additional card details.

Case management – Within our platform, our automated case management system is used for compliance, service support, and quality assurance purposes. Every call and document received is recorded in the participant record within our system. Our participant advocates have access to a robust history of events and viewable documents – all in chronological order. Speed and efficiency of issue resolution are monitored by the system at the participant and plan-sponsor levels, and all cases can be viewed online. You also have the ability to open cases, submit inquiries, and track resolution.

Records maintenance – We support daily, weekly, bi-weekly, or monthly EDI services. All records are imaged electronically and stored indefinitely.


Relationship Management Team

Our client experience team integrates sales, implementation, and relationship management to ensure a consistent, positive client experience. Our sales and implementation teams work hand-in-hand with the employer to collect employer demographics, business rules, and plan information during the sale and setup process.

Implementation

Our implementation team sets up each client account. The tools we use during the implementation process and ongoing relationship management support include (but are not limited to) process flows, project plans, checklists, audits, action items, and decision logs. Below are the 10 phases for client implementation:

Discovery

Account setup and testing

Plan setup

Client business rules setup

Benefit card/commuter/plan setup

Electronic data integration, if applicable

Enrollments

Client readiness

Final audit

Transition to relationship management

Relationship Management

Once implementation is complete, your relationship management team is available to provide support and answer any questions you may have. Relationship management team members have extensive experience in benefits and are trained to assist clients with the day-to-day process of administration and the client’s specific needs. The relationship manager is your personal liaison between our various support units. This individual is responsible for all daily account management activities and is familiar with your organization and particular business rules, allowing for a quick and thorough response to specific client needs.

Participant Services

We know that we can only be successful if we provide outstanding service to your employees and retirees. That’s why we offer various features and programs that foster a positive participant experience.

Customer Service

Our customer service representatives have specialized training and expertise in the product line they support. Each representative is committed to providing the highest level of customer service while empowering and educating your participants. A real-time case management system is used to log, track, and monitor all customer service activities. Employers can easily view these activities online at any time.


Available Assistance

Participants have access to various support services, including:

Toll-free telephone support – Customer service representatives provide fast and accurate answers to questions concerning regulations or account status. Our highly trained representatives are available Monday through Friday (excluding holidays and scheduled company closures) from 7 a.m. to 7 p.m. CT.

Interactive voice response (IVR) system – We also provide real-time access to account information via a toll-free IVR system 24 hours a day.

Online account management – The participant website offers a self-service center with real-time status of their plan information. Depending on program participation, participants can view plan details, account balances, and card transactions; make online payments; view FSA and HRA claims; read various notices statements, sign up for Real-time Alerts; and access forms, review frequently asked questions, and request support through the Message Center.

Our case management system is used to log, track, and monitor all customer service activities, notices, and system-generated emails.

Participant Notices

Most participant notices are handled electronically. Participants receive an email whenever the system generates any type of notice or correspondence regarding their benefit plan. The email notifies the participant to log in to their account and review the plan information. A participant has to be registered and must log in to their account for access. Notices are posted on our website, and certain notices are mailed if not read within a specific time frame. To take advantage of these automated features, we must have your participants’ email addresses in our system. We are committed to privacy and do not share email addresses with other individuals or organizations. Please note: If participants are enrolled in direct deposit, they receive electronic claims payment Explanation of Benefits (EOBs). If we don’t have a valid email address on file, participants must access their claims payment information in their online accounts. We encourage you to remind participants to provide us with a valid email address so they can receive timely claims payment and account information.

Finance

We feature funding options depending on the type of account-based plan you offer.

Standard Bank Funding Arrangement Using ACH Transfer (FSA and HRA)

Our best-practice funding recommendation for employers utilizes a method that will allow us to fund the reimbursement of your participants’ claims by withdrawing only the necessary funds from a bank account of your choosing. This method of withdrawal is known as an Automated Clearing House (ACH) transfer. We will provide detailed reporting to you one business day prior to the transfer so the account can be properly funded. Upon verification of a successful transfer, we release checks and direct deposit reimbursements to participants.


If you do not have sufficient funds available in your bank account, we will hold reimbursements until sufficient funds are available. If sufficient funds have not been made available, we reserve the right to switch from ACH reimbursement to standard checks and/or hold checks until appropriate funding is received. On the selected day of your check run, you will receive separate ACH and check registers via email. Our standard minimum check amount is $10. Check and ACH register copies are also available on our client website. Simply log in to your client online account to access them.

Visa Benefit Card Funding

Benefit card transactions are funded similarly to the ACH process described above; however, in most cases our banking partner, UMB Bank, initiates the ACH transfers on a daily basis. A separate ACH transaction will occur for manual claims on your scheduled check run days. You will receive reports prior to each transfer to ensure that the account is properly funded. Failure to fund benefit card transactions may result in the suspension or termination of all associated benefit cards. For additional details on our benefit card, go to the Optional Services section.

Statement of Monthly Activity

No later than the 15th business day of the month, we will send you an email that includes a statement of monthly activity report of all claims payment and funding activity (including benefit card claims) for the prior month.

Administrative Fees

Each month, you will receive a mailed invoice for your monthly reimbursement account administrative fees. In addition to your invoice, we provide a supplemental fee invoice that’s posted in your online account. The supplemental fee invoice provides you with details and a list of participant charges based on participant count.

You may submit your payment to us by:

Wire transfer

ACH

Check Feel free to contact your relationship manager if you have questions about where to send your payment. Please note: Payments sent via wire transfer or ACH that do not match the invoice amount may delay the application of the payment. If you happen to send a payment that is different than the invoice amount, please notify your relationship manager in writing to explain the difference.

Unclaimed Check Procedures

Part of our administration services includes performing an audit to determine if any participants failed to cash their reimbursement checks or otherwise present them for payment.


We believe that avoidance is the key to appropriate escheat/unclaimed property law administration. To avoid state law violations, the employer must ensure that all rights to payment are forfeited prior to the expiration of the shortest time period under all state laws. The argument is that loss of right eliminates any abandonment issues. All states have Unclaimed Property Laws, but dormancy periods can differ by state and property type. Most state laws have at least a three-year abandonment rule. We state in our sample Summary Plan Description that any check that’s unclaimed or not cashed by the end of the plan year following the year in which the check was issued is considered forfeited. That will be no longer than one year, 11 months and roughly 30 days (assuming a check is issued on January 1). This time frame is less than the applicable time period for the typical unclaimed property law (i.e., three years). Thus, the state unclaimed property laws would arguably not apply. Once the funds are credited back to you as the plan sponsor, it is your responsibility to comply with any applicable state laws that might require a transfer of payment to the state since participants are your employees. We recommend that you discuss this issue with legal counsel.

Communications and Updates

We’re committed to keeping you informed. Our public website provides valuable information about all our products and services, including benefit guidelines, expense guides, FAQs, and much more. Extensive Library of Participant Communications Employee awareness and education are the key contributors to both plan participation and overall satisfaction. We provide a variety of no cost or low-cost communication tools to assist you in educating your employees and promoting participation, including printed, email, and web-based communications. Contact your relationship management team for additional details.


SECTION 3 – THE WEBSITE

Our website is designed to help both you and your participants get the most out of your account-based plans. The public website at www.wageworks.com/conexis provides valuable information about all our products and services, including benefit guidelines, eligible expenses, FAQs, and much more. For participants considering enrollment, our online savings calculators can help determine the tax advantages of participating in an FSA benefits program. In addition to the public website, we provide 24/7 online access to secure online accounts through the participant or client website.

Participant Website

The participant website allows individuals to manage their account-based plans. Available anytime day or night, participants can log in to their online accounts at mybenefits.wageworks.com. Once logged in, participants may view account details such as claims activity, contributions, and reimbursements. They can also view various electronic notices and submit support requests through the Message Center. In their online accounts, participants may simply use the online claims submission feature, or if preferred, download the electronic Request for Reimbursement Forms. Participants with the CONEXIS Visa Benefit Card who have unresolved transactions requiring action may use our online repayment feature if they are unable to substantiate or offset unresolved expenses. This site also includes helpful tools and resources that maximize the benefits of an account-based plan, such as Real-time Alerts (for benefit cardholders), direct deposit registration, the Message Center, detailed FAQs that help participants find quick answers to the most commonly asked questions, as well as extensive information regarding eligible and ineligible expenses.

Participant Mobile Services

We offer a mobile website located at m.wageworks.com for easy account management from any mobile device. We make it simple for participants to keep up with their accounts while on the go. FSA and HRA participants with certain mobile devices will benefit from the MyCONEXIS mobile app. Our app allows individuals to use the camera on their mobile device to take pictures of itemized receipts and other documentation and then submit the expense for reimbursement or verify a card transaction requiring action. This eliminates the need to fax or mail a claim. The app for iOS devices (iPhone®, iPad®, or iPod touch®) is available in the App Store. Our app for AndroidTM devices can be downloaded from Google Play. The CONEXIS Benefit Card is issued by UMB Bank, n.a. pursuant to a license from Visa U.S.A. Inc. Apple, the Apple logo, iPhone, iPad, and iPod touch are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android and Google Play are trademarks of Google, Inc.

http://www.wageworks.com/conexis

https://mybenefits.conexis.com/


Client Website

The client website helps you manage your participant population. Our website allows you to view and update participant records, as well as view notices, payments, history, and if applicable, benefit card details. The website also has comprehensive participant information, including claim status, and year-to-date (YTD) deductions and account balances. It also allows real-time data entry for key administrative functions.

Accessing Your Online Account

Visit our public website at www.wageworks.com/conexis to log in to your account; simply click the blue button at the top of each webpage.

Once logged in, you can manage your participant population. Key functions available to you include the following:

Participant searches

Enrollments

Life status changes

Contributions

Terminations

Reporting

Please note: The following sections show some of the most common day-to-day tasks used to administer your account-based plan(s); however, our website includes additional functionality that you may find helpful. For further details, please see the Client Website Navigation Guide located in the Resources section.

Participant Searches

From the Participants link, you can search for records, view listings, update information (including process a qualifying event), and even add participants. You can search for a participant’s record by Social Security number, name, account number, and more. For more information about participant searches, see the Client Website Navigation Guide available in the Resources section.

Enrollments

From the Account-based plans link, select the Enrollments tab to enroll employees in a plan. Once you’ve located a particular employee’s record, you can view, update, or enroll the employee. For more information about enrolling participants on the client website, see the Client Website Navigation Guide in the Resources section.

Life Status Changes

From the Account-based plans link, select the Status Change tab to notify us of a status change for an existing participant. Once you’ve located a particular employee’s record (by performing a search by Social Security number), you can view, update, or process a status change. For more information about entering life status changes on the client website, see the Client Website Navigation Guide in the Resources section.


Contributions

From the Account-based plans link, select the Contributions tab to enter employee or employer contributions. Simply select the appropriate contribution type and you will see instructions to guide you through the process. For more information about adding contributions on the client website, see the Client Website Navigation Guide in the Resources section.

Terminations

From the Account-based Plans webpage, select the Terminations tab to process a plan change when this type of qualifying event occurs. Simply search for the employee using their Social Security number, and you are given the option to view, update, or process a qualifying event (QE). For more information about entering terminations on the client website, see the Client Website Navigation Guide in the Resources section.

Reporting

From the Account-based plans link, select the Reports tab to see a list of all your reporting options. Below is a list of the types of reports available:

General Reports

Flexible Spending (FSA) Reports

Benefit Card Reports

Health Reimbursement Arrangement (HRA) Report

The list of reports available depends on the type of plan(s) you have. For more information about reporting, see the Client Website Navigation Guide in the Resources section.


SECTION 4 – PLAN ADMINISTRATION

This section describes how to prepare your payroll department, accounting department, or payroll service to accommodate account-based plans. We also provide information about renewing your account-based plan(s) each year and the plan year close process.

Payroll Adjustments for Account-based Plans

Generally, the only payroll adjustment required when implementing a cafeteria plan is to deduct the premiums for qualified insurance coverage or plan contributions for FSAs, parking and transit accounts before calculating and withholding payroll-related taxes. Applicable taxes are calculated based on the reduced gross income. FSA plan deductions are exempt from federal tax withholding, FICA, FUTA, and most state income taxes.1 Review the statutes in your state or consult an accountant or payroll provider for specific information regarding state unemployment and workers compensation taxes. Please check with your specific state and local taxing authority to determine how FSA plan deductions are treated.

Contribution Notifications for Account-based Plans

We must receive payroll data on each of your plan participants. Notification of payroll deductions can be received in three different ways:

Assumed deduction Electronic file (EDI) Our website

Assumed Deduction

You will provide the enrollment amount for each plan participant. Based on the number of pay periods, our system will automatically post the employee’s per pay period contribution to their account. After each pay date, we send a report of the assumed deduction amounts posted. Any required changes to a participant’s contribution amount for that pay period may be made via our website.

Electronic File

Our EDI department handles all files submitted by clients or third party administrators. We provide advanced file transfer specifications, designed for employers who want to send an electronic file. This process will require the commitment of your HR and IT departments to implement and maintain the file(s). We will make every effort to process files within two business days from receipt of the file. Processing reports are generated when the file is processed and sent to you for review. If there are any rejected records on the processing report, you can resubmit the corrected records on the next file or manually via our website.

1 Contributions are deducted before federal and most state taxes. Check with your tax advisor for details regarding your state

taxes.


Our Website

If you utilize our website for captured deductions, you must go online and post payroll contributions on the pay date. When posting deductions, you can post pay schedules, multiple participants or just one participant. You can also log in to the website and manually post contributions at any time. If you have questions on how to post payroll contributions, please see the Client Website Navigation Guide available in the Resources section, or contact your relationship manager.

Renewal Process

To ensure service continuity, your dedicated relationship management team handles ongoing administration including the annual renewal. The timeline for the renewal process is as follows:

You will receive the renewal paperwork via email approximately 90 days prior to the renewal date of the plan. The renewal packet includes:

- Client paperwork (including profile, general questions and due dates) - Enrollment information – time frame for submissions of enrollments

Renewal paperwork must be returned to us no later than the specified date on the client profile. Upon receipt, the relationship management team will review the renewal paperwork and may contact you with any questions or concerns.

Please note: It’s important for you to meet all plan renewal deadlines, especially if you offer the benefit card. If we do not obtain participant enrollments and elections on time during open enrollment, new plan participants may not receive their benefit cards before the first day of the plan year. Even worse, new and re-enrolled participants may not have access to their account funds when the plan year begins. Additionally, in order to auto-substantiate card transactions properly, we must receive your co-pay and plan information by the due dates noted in the renewal paperwork.

Plan Year Close

Plan Year Close without Benefit Card

Once we complete processing all claims received during the run-out period, the plan year close process begins – typically about 30 days after the run-out period ends. During this process, we perform reallocation on grace period transactions if the plan design includes the grace period feature. This allows participants to receive the maximum benefit from the plans. If your Healthcare FSA plan includes a carryover feature, participants’ carryover funds are available shortly after the run-out period ends. This gives participants time to submit reimbursement requests for eligible expenses they incurred during the plan year. It also reduces the risk of forfeiting money if participants have more than the allowed carryover amount in their Healthcare FSAs when the plan year ends.

Plan Year Close with Benefit Card

For plans that include the benefit card, additional actions are required as part of the plan year close process. Several attempts are made though the card communication process to obtain substantiation from the participant or receive repayment from the participant for the overpayment. If the participant does not provide the appropriate substantiation or repayment, we notify you that additional action is necessary to recoup the funds.


Once the run-out period has expired, we will send your final unresolved card claims report or notification to pull the report from the client website. These open transactions are treated as overpayments unless the participant provides appropriate documentation or repayment. It is ultimately your responsibility as plan sponsor to recoup these overpayments from each participant. Please note: All benefit cards that are in a suspended status as of the last day of your plan year will remain suspended during the run-out period, or until the transaction is substantiated. Within 10 business days of the date we send you the final unresolved card claims report, we update each transaction in our system from open to closed status and suspended cards will be reactivated. Supporting documentation from a participant that is received after a transaction is closed will not be returned to the participant unless requested. As such, you should proceed with one of the options provided above in order to recoup the funds. Once we complete processing all claims received during the run-out period, the plan year close process begins – typically about 30 days after the run-out period ends. During this process, we perform reallocation on grace period transactions if the plan design includes the grace period feature. This allows participants to receive the maximum benefit from the plans. If your Healthcare FSA plan includes a carryover feature, participants’ carryover funds should be available 30 days after the run-out period ends. This gives participants time to submit reimbursement requests for eligible expenses they incurred during the plan year. It also reduces the risk of forfeiting money if participants have more than the allowed carryover amount in their Healthcare FSAs when the plan year ends.


SECTION 5 – ACCOUNT-BASED PLANS

Flexible Spending Accounts

Our FSA administration program makes it easy for employers to offer this money-saving benefit. FSA participants are able to increase their take-home pay by setting aside money on a pre-tax basis to pay for eligible healthcare and dependent care expenses. An FSA plan allows the employer to enhance their employee benefits program, and with enough participation, the savings will meet ‒ and many times exceed ‒ the cost of the program.

FSA Plan Types

We offer several plan options to meet your needs:

Healthcare FSA – This account can be used to pay for eligible FSA expenses like co-pays and deductibles, prescription drugs, dental and vision care expenses, and hundreds of other items.

Limited-purpose Healthcare FSA – This is the perfect plan for your employees who also participate in a health savings account (HSA). The account can be used to pay for eligible dental and vision expenses without jeopardizing their eligibility for an HSA.

Dependent Care FSA – This account can be used to pay for eligible child care expenses, as well as care for a family member who is incapable of self-care and lives with the employee more than half the year.

Your employees may enroll in an FSA during initial or annual enrollment. They can make annual elections by estimating qualified out-of-pocket expenses they anticipate for the plan year. However, their annual election may not fall below the minimum amount or exceed the maximum amount specified in the plan document. There’s no requirement for the minimum amount, but employers cannot exceed the IRS statutory amount. Tip: Employees can calculate their potential FSA savings by using the FSA savings calculator on our public website.

Healthcare FSAs

Healthcare FSAs allow your employees to pay for qualified out-of-pocket medical expenses on a pre-tax basis. Eligible Healthcare FSA expenses are those that employees pay for out of pocket for qualified medical care that’s provided to the participant, their spouse, and eligible dependents. Generally, IRS rules state that medical care includes items and services that are meant to diagnose, cure, mitigate, treat, or prevent illness or disease. Transportation that is primarily for medical care is also included.

Health Reform Note: Under the Affordable Care Act, the definition of a dependent under Code Section 105(b) was expanded to include young adult children up to age 26 who are a natural child, adopted child, step-child, and/or eligible foster child. If your FSA plan adopts this definition, Healthcare FSA participants may be reimbursed for eligible expenses incurred by these dependents. A young adult dependent may be married and does not have to live with the employee, attend school, or be the employee’s tax dependent. However, dependents who turn age 27 during the tax year are excluded; dependents of dependents (employee’s grandchildren) are also excluded unless they are the employee’s tax dependents.


Healthcare FSA Special Rules and Restrictions The IRS regulates FSAs – setting the rules that we all have to follow. Here are the key rules and restrictions to keep in mind that govern your Healthcare FSA plan. Maximum Contribution Limits As a result of the Affordable Care Act (ACA), Healthcare FSA salary reductions have an annual maximum limit, which may be indexed for inflation each year.

The statutory maximum for Healthcare FSA 2017 salary reductions is currently $2,600.

You may choose to establish a lower maximum limit on your Healthcare FSA plan, if desired. The statutory limit does not apply to certain non-elective employer contributions made to an employee’s Healthcare FSA, and it does not apply to contributions made to other types of FSAs (such as a Dependent Care FSA), HSAs, or HRAs. If you decide to offer a short plan year, the maximum limit should be prorated. For example, let’s say your plan year begins July 1 and you want to shorten it so the new plan year begins January 1 the following year. That means you will need to prorate the annual contribution limit to $1,300 if you allow the statutory maximum set by the IRS. The statutory limit does not apply to certain employer contributions you made to an employee’s Healthcare FSA. Employer salary reduction contributions to cafeteria plans used to pay for an employee's share of health coverage premiums (or the corresponding employee share under a self-insured employer-sponsored health plan) are also not affected. In addition, if each spouse is eligible to make contributions to a Healthcare FSA, each spouse may elect to contribute up to the maximum limit to a Healthcare FSA. This applies even if both spouses participate in the same Healthcare FSA sponsored by the same employer.

Healthcare FSA Rules and Restrictions The following rules and restrictions are based on IRS regulations that apply to Healthcare FSAs:

Money contributed to an FSA must be used to reimburse qualified out-of-pocket expenses incurred during the coverage period.

- Expenses are incurred when medical care is provided; not when billed, charged, or paid.

Expenses may not be reimbursed under any other plan or program (no “double-dipping” allowed).

Reimbursed expenses may not be used to claim any federal income tax deduction or credit.

Participants must make their FSA elections prior to the beginning of the plan year and each election is irrevocable for the plan year unless there is a change in status or other qualified event as defined in the IRS regulations.

Claims must be paid at least monthly or when a reasonable claim total is reached (e.g., $50).

The entire annual election (less any previous reimbursements made during the plan year) must be available to the participant at any time during the plan year.

- Reimbursement may not be limited to the amount the participant has contributed to the plan (called the uniform coverage rule).


The participant must supply adequate supporting documentation to meet claims substantiation requirements.

The Healthcare FSA may include a carryover feature or grace period, but the plan cannot include both options. Please see the Optional Services section for additional details.

The unused portion of a Healthcare FSA may not be paid to the participant in cash or other benefits, including transferring money between FSAs.

Eligible Expenses There are a wide variety of eligible expenses for Healthcare FSAs. Your employees can use their FSA funds for numerous healthcare-related products and services for themselves, their spouse, and their qualifying dependent. Below are examples of eligible expenses.

Medical expenses: co-pays, co-insurance, and deductibles

Qualifying dental expenses: exams, cleanings, X-rays, and braces

Qualifying vision expenses: exams, contact lenses and supplies, eyeglasses, and laser eye surgery

Professional services: chiropractor and acupuncture

Prescription drugs and insulin as well as prescribed over-the-counter medicines

Over-the-counter healthcare items: bandages, pregnancy test kits, blood pressure monitors, etc.

A list of eligible and ineligible FSA expenses is available on our website at www.wageworks.com/conexis; however, you should refer your employees to the Summary Plan Description (SPD) to find out which expenses are eligible under your plan.

Limited-purpose FSA (HSA-compatible FSAs)

A limited-purpose FSA is much like a general-purpose Healthcare FSA. The main difference is that the limited-purpose account is set up to reimburse only eligible dental and vision expenses. Typical expenses include (but are not limited to):

Qualified dental expenses

- Cleanings and X-rays

- Fillings

- Crowns

- Orthodontia

Qualified vision expenses

- Eye exams

- Contact lenses

- Eyeglasses

- Vision correction procedures



HSA-compatible Plan You may want to offer a limited-purpose FSA for your employees who have HSAs since IRS rules do not allow individuals to contribute to an HSA if covered by any non-qualifying health plan, including a general-purpose Healthcare FSA. A limited-purpose FSA allows an employee to continue to contribute to an HSA, which allows them to maximize their savings and tax benefits by restricting their FSA reimbursement to only vision and dental expenses. By offering our limited-purpose FSA to your employees who are HSA account holders, you give them the power to use pre-tax dollars for eligible dental and vision expenses while saving HSA funds that can gain value over time. The CONEXIS Benefit Card is issued by UMB Bank, n.a. pursuant to a license from Visa U.S.A. Inc.

Limited-purpose FSA Rules and Restrictions The same standard Healthcare FSA rules and restrictions (those noted in the Healthcare FSA section) apply to limited-purpose FSAs, including irrevocable elections, maximum contribution limits, uniform coverage, etc. In addition, expenses are restricted to qualified dental and vision expenses only.

Dependent Care FSA

Also known as a dependent care assistance program (DCAP), a Dependent Care FSA allows your employees to pay for qualifying work-related dependent care expenses on a pre-tax basis. This plan allows your employees to use their pre-tax funds to pay for qualifying day care expenses so they (and their spouse if they’re married) can work or look for work. Typical eligible expenses include day care, preschool, and after-school care. For this FSA, a dependent is defined as someone who spends at least eight hours each day in an employee’s home and is one of the following:

A tax dependent child under age 13 for whom the employee has custody more than half the year.

An employee’s spouse or tax dependent who is physically or mentally incapable of self-care regardless of the dependent’s age.

Dependent Care FSA Maximum Contribution Limits The Dependent Care FSA maximum contribution amount is $5,000 per year, or if married and filing separately, the maximum is $2,500. The maximum dependent care allocation may not exceed the participant’s earned income limitation. If the participant is single, the earned income limitation is their salary (excluding contributions to the plan). If the participant is married, the earned income limitation is the lesser of the participant’s salary (excluding contributions to the plan) or their spouse’s salary. A spouse will be deemed to have earned income of $250 if the participant has one qualifying dependent and $500 if the participant has two or more qualifying dependents for each month in which the spouse is:

Physically or mentally incapable of caring for himself or herself, or

A full-time student (as defined by Code Section 21).


Dependent Care FSA Special Rules and Restrictions The following special rules and restrictions apply to Dependent Care FSAs:

Work-related expenses – The dependent care services must be used to allow the participant to work or actively look for work. Unpaid volunteer work or volunteer work for a nominal salary is not eligible. The participant’s spouse (if married) must either be working, be a full-time student for at least five months during the tax year, or be physically or mentally incapable of self-care. Short, temporary absences from work may be disregarded for taxpayers who are required to pay for dependent care during the absence. An absence of no more than two consecutive weeks is considered a temporary absence. Whether an absence in excess of two weeks is a temporary absence depends on the facts and circumstances of the situation.

Part-time employees – In general, participants who work part-time must allocate expenses between days worked and days not worked. However, participants who work part-time but are required to pay for dependent care expenses on a periodic basis are not required to allocate expenses between days worked and days not worked.

Divorced employees – Under Code Section 21(e)(5), the child of a divorced or separated employee who has custody of the child is treated as a qualifying individual of the employee no matter who is entitled to the tax exemption for the child. A divorced non-custodial parent cannot be reimbursed. The divorced, custodial parent can be reimbursed.

In addition, these regulations apply to Dependent Care FSAs:

Money contributed to the FSA must be used to reimburse eligible expenses incurred during the coverage period.

Unused funds are forfeited to the employer at the end of the plan year (the IRS use-it-or-lose-it rule). However, your Dependent Care FSA may include a 2.5-month grace period that follows the end of the plan year during which unused amounts allocated to the FSA may be used to reimburse eligible expenses incurred during the grace period. For more details on the grace period, see Optional Services.

The unused portion of a Dependent Care FSA cannot be paid to the participant in cash or other benefits, or transferred to a Healthcare FSA account.

Claims must be paid at least monthly or when a reasonable claim total is reached (e.g., $50).

Claims may not be paid until the expense has been fully incurred.

Claims for day care expenses in one month may not be reimbursed before the first day of the next month.

The participant must supply adequate supporting documentation to substantiate claims. Claims submission guidelines are detailed in Claims Guidelines and Procedures later in this section.

Reimbursed expenses may not be used to claim a federal income tax deduction and/or credit.

Dependent care expenses that are not reimbursed may be eligible for dependent care credit. Each participant should consult a tax advisor to determine if the tax credit is more advantageous than participating in a Dependent Care FSA.

Participants must identify all persons or organizations that provided dependent care services on

their federal tax return by filing IRS Form 2441 - Child and Dependent Care Expenses, or by

completing Schedule 2 of the Form 1040A.

Participants must enroll prior to the beginning of the plan year. The election is irrevocable for the plan year unless there is a change in status or other qualified event as defined by the IRS.


Eligible Expenses Eligible dependent care expenses must be for qualified individuals (see definition on the previous page) and include:

Before and after-school care

Expenses for day care, preschool, or nursery school

Nanny services

Baby sitter (in or out of the home)

Summer day camp for a qualifying child under the age of 13

Elder day care expenses of a qualifying individual Ineligible expenses include:

Amounts paid to a spouse, a child under age 19, a parent of a child who is not a spouse or an individual for whom the participant or spouse is entitled to a personal tax exemption as a dependent

Expenses related to a disabled spouse or tax dependent living outside the household

Educational expenses

Tuition for kindergarten and above

Food expenses (unless inseparable from the cost of care)

Incidental expenses (such as extra charges for supplies, special events, or activities unless inseparable from care)

Overnight camp A more comprehensive list of eligible and ineligible Dependent Care FSA expenses is available on our website at www.wageworks.com/conexis.

Other FSA Rules and Regulations

Healthcare FSAs are regulated by IRS rules for Section 125 plans. Some rules in this section are specific to a Healthcare FSA and do not apply to a Dependent Care FSA. Healthcare FSA Carryover You may (but are not required to) amend your Healthcare FSA plan to allow your participants to carry over up to $500 of unused funds into the following plan year. However, the Healthcare FSA plan may not include both a grace period and the $500 carryover, so it’s your choice whether to include either of these plan features. The $500 carryover of unused funds does not count toward the maximum amount of salary reduction contributions that your employees may elect. In addition, the use-it-or-lose-it rule does not impact Dependent Care FSAs. For additional details about the carryover feature, see the Optional Services section.

Run-out period – An FSA plan may include a run-out period. A run-out period is a pre-determined period after the plan year ends. During this time period, participants may file claims for expenses incurred during the plan year. It may also include a grace period extension that



can help your participants take full advantage of their FSA dollars. Keep this in mind: Not all FSA plans include these two features. Please see the Optional Services section for additional details about run-out periods.

Grace period – You may also choose to include a grace period extension. This feature creates a grace period that immediately follows the end of the plan year. During this time frame, your participants may incur expenses and use the funds remaining in their account towards eligible FSA expenses. The grace period begins on the first day immediately following the last day of the plan year, and the time frame may not exceed two months and 15 days. After the grace period ends, any remaining balances not depleted after the grace period, or if applicable, the run-out period, will be forfeited. A Healthcare FSA plan cannot include a grace period if the carryover option is included in the plan design. For additional grace period details, see Optional Services.

FSA excepted benefit – If your Healthcare FSA provides only “excepted benefits,” many of the group health plan mandates do not apply. These group health plan mandates include certain healthcare reform mandates, the HIPAA portability requirements, and other mandates. By offering a Healthcare FSA that is an excepted benefit, you may be able to take advantage of a special limited COBRA obligation. Most FSAs will qualify as excepted benefits if the FSA meets the following criteria:

- The group health plan (e.g., plan for medical coverage) is made available to all participants; and

- The arrangement is structured so the maximum benefit payable to any eligible participant cannot exceed two times the participant’s salary reduction election (or if greater, $500 plus the amount of the salary reduction election). For example: A Healthcare FSA can include a dollar-for-dollar match of each participant’s election ($600 employee; $600 employer) or include an employer contribution of $500 or less to satisfy the maximum benefit requirement.

Please consult with your legal counsel regarding making a determination if your Healthcare FSA qualifies as an excepted benefit or not. As a starting point, you may also use the FSA Excepted Benefit chart available in the Resources section. FSA Claims Guidelines and Procedures We closely scrutinize all FSA claims received to ensure eligibility. We are diligent in adhering to IRS guidelines regarding claim substantiation and rely on Internal Revenue Code guidance regarding claims eligibility. We process our claims both manually and systematically. The system automatically analyzes the claim to determine if the account is active, available balance is adequate, and if the date of service is within plan coverage dates. Claims processors check for expense eligibility by strictly following IRS regulations. Healthcare FSA Claim Guidelines Unless the eligible expense is purchased with the benefit card or received through a file from the carrier, participants must send in a completed Request for Reimbursement Form to submit eligible


expenses incurred by the participant, their spouse, or eligible dependents during the coverage period. Supporting documentation must be included with the claim. Such documentation includes:

For office visits and other services ‒ The health plan’s Explanation of Benefits (EOB) statement or an itemized receipt or bill from the provider that includes the patient’s name, a description of the service, the original date of service and the participant’s portion of the charge.

For prescription drugs ‒ A pharmacy statement or receipt including the patient’s name, the Rx number, the name of the drug, the date the prescription was filled, and the amount.

For over-the-counter medicines ‒ A written or electronic OTC prescription along with an itemized cash register receipt that includes the merchant name, name of the OTC medicine or drug, purchase date, and amount; or a printed pharmacy statement or receipt from a pharmacy that includes the patient’s name, the Rx number, the date the prescription was filled, and the amount.

For over-the-counter healthcare-related products ‒ An itemized cash register receipt with the merchant name, name of the item/product, date, and amount.

Typically, credit card receipts, canceled checks, and balance forward statements do not meet the requirements for acceptable documentation. For some expenses to be considered eligible, a Medical Determination Form from a doctor may be required. Submitting Reimbursement Requests We’ve made it easy for participants to send us their claims by offering several submission methods:

MyCONEXIS mobile app – Participants may take a photo of supporting documentation and submit reimbursement requests using our app. They may also use the app to substantiate card transaction requiring action. For further app details, see the Optional Services section.

Our participant website – Participants can submit claims through their online account at mybenefits.wageworks.com.

Fax – Participants may fax their reimbursement forms and supporting documentation to the address listed on the form.

Mail – Participants may submit their form and copies of supporting documentation to the address listed on the form.

Please note: Remind your participants to save all their itemized receipts, EOBs, and other supporting documentation along with their reimbursement forms. Because of IRS rules, we may ask them to verify their expenses with additional documentation.

Explanation of Benefits (EOB) Rollover Claims Offering the EOB rollover claims option to participants is a valuable benefit. With this feature, participants are automatically reimbursed for qualified out-of-pocket expenses (processed through approved carriers), without having to file paper claims. We have established relationships with a number of medical, dental, and vision carriers to receive electronic EOB claim files directly. The EOB file is submitted through our FTP site and processed by our EDI department. Once the file has completed processing, all eligible and approved claims are placed in approved, pending payment status and will be ready to pay on the next scheduled check run.

EOB Rollover Example:

John visits his doctor’s office and incurs an eligible medical expense. John’s provider files the claim with his insurance carrier. John is responsible for $25 of the total charges while the remaining portion is covered by the insurance carrier. Once the claim is processed, the carrier sends an electronic EOB file



directly to us for processing. John’s qualified out-of-pocket expense of $25 is automatically processed under his Healthcare FSA. Your employees should opt out of automatic claims rollover if they have secondary insurance coverage or if they carry an individual on the health plan that is ineligible for Healthcare FSA purposes (such as a same-sex domestic partner2). FSA participants may do this by logging in and updating their personal WageWorks account. The benefit card will not be an available option for your participants. For more information and a copy of our file specifications, please contact your relationship manager. Please note: Claims frequency can be much higher with EOB rollover files. To avoid additional fees, we request that groups utilizing this service require their employees to provide email addresses and sign up for direct deposit.

Dependent Care FSA Claim Guidelines

When submitting claims, participants must complete a Request for Reimbursement Form – available online to participants in their online accounts. If the provider certifications on the reimbursement request form are filled out and signed, they do not need to do anything else. If the provider certification is not completed and signed, the participant must submit an itemized statement from their dependent care provider. This statement must have the date(s) of service, the name(s) and date(s) of birth of their dependent(s), and an itemization of charges, and the provider’s name, address, and tax ID or Social Security number. Claims Appeal Procedures A detailed rejection notice is produced with every incomplete or denied claim. The rejection notice has specific information about what is needed to complete processing of the claim. A participant may appeal a rejected claim within 180 days of receiving the rejected claim notification. Your Summary Plan Description (SPD) should detail the claims appeal procedures your participants should follow. Include the following steps in your SPD.

Step 1: Participant receives a denial notice. If we deny a claim, the participant will receive written notice that explains the denial. The participant will receive the notice as soon as reasonably possible – no later than 30 days after receipt of the claim. For reasons beyond our control, we may take up to an additional 15 days to review the claim, and if so, we will send the participant written notification of the need for additional time prior to the end of the 30-day period.

Step 2: Participant reviews notice. Participants who receive a denial notice should be encouraged to read the information carefully. The notice will contain:

- The reason(s) for the denial and the plan provisions on which the denial is based;

- A description of any additional supporting documentation needed to substantiate the claim, why the information is necessary, and the time limit for submitting the information;

- A description of the appeal procedures and the applicable time limits; and

- A right to request all documentation related to the claim.

2 Generally, same-sex domestic partners are ineligible for health FSA coverage, unless the domestic partner is a qualifying

relative. In addition, Revenue Ruling 2013-17 defined a “spouse” and stated legally married same-sex spouses would be treated as married for tax purposes, regardless of the couple’s state or residence.


Step 3: Participant files an appeal. If the participant doesn’t agree with our decision, they may file an appeal no later than 180 days after receipt of the notice described in Step 1. The individual should submit all information identified in the denial notice that is needed to substantiate the claim and any additional information that would support the claim.

Step 4: Appeal denied. If the claim is again denied, we will notify the participant in writing as soon as possible but no later than 30 days after we receive the appeal.

Step 5: Participant reviews the appeal notice carefully. The participant should take the same action described in Step 2 above. The notice includes the same type of information that is provided in the first notice of denial that we provide.

Step 6: Participant files a second-level appeal. If the participant does not agree with the our decision and wishes to appeal, the individual must send the employer a written appeal within the time period set forth in the first-level appeal denial notice. The individual should gather any additional information explained in the denial notice that is needed to complete the claim as well as other information to support the claim. If the employer denies the second-level appeal, the employer must send the participant a written notice within 30 days after receiving the second-level appeal claim.

Additional Appeal Details Below is additional important information regarding the appeal process:

For Healthcare FSA claims, each level of appeal will be independent from the previous level (i.e., the same person(s) or subordinates of the same person(s) involved in a prior level of appeal will not be involved in the appeal);

On each level of appeal, the claims reviewer will review relevant information that is submitted even if it is new information; and

The participant cannot file suit in federal court until you have exhausted these appeals procedures.


Health Reimbursement Arrangement

A Health Reimbursement Arrangement (HRA) is an arrangement that is funded solely by an employer and reimburses an employee for eligible healthcare expenses as defined by the IRS under Section 213(d). The plan must also meet these regulatory requirements:

The plan must be in writing

The plan must be nondiscriminatory

Employees may not contribute funds As the plan sponsor, you decide who can participate, which eligible expenses are covered by the plan, your contribution amount, how the plan is structured, and many other key plan components. Please note: HRA plans are not allowed under a cafeteria plan.

Why Offer an HRA?

With the rising cost of healthcare, many employers are faced with finding cost-effective solutions to traditional health plans and are shifting consumer accountability to employees, their dependents, and retirees. Offering an HRA allows you to provide a valuable benefit to your employees or retirees, giving them access to funds to pay for their eligible out-of-pocket expenses. Your contributions are tax-free to your employees – and 100 percent of the reimbursements from the HRA are tax deductible to your organization. When integrated with a qualifying high deductible health plan (HDHP), an HRA shifts financial decisions and risk to your employees. They decide how and when to use the funds in their account and quickly learn the financial rewards of being savvy healthcare consumers. Making better healthcare choices means more money left in their accounts. And with the freedom to choose their healthcare services without the limitations of most managed care plans, HRAs are a highly valued employee benefit.

Employee Savings Examples

Employees aren’t taxed on the HRA contributions the employer provides nor are they taxed on their eligible reimbursements. Building on the example above, the following examples assume that ABC Company’s HRA includes:

Employer contribution of $1,000 for an individual employee and $2,000 for an employee with dependents

Rollover feature that allows participants to carry over unused funds

Reimbursement of eligible 213(d) expenses

Savings Example 1: Emily, a Single Professional Other than the occasional cold, annual checkup, and an annual eye exam, Emily rarely visits the doctor and doesn’t spend much on healthcare. However, her contacts, solutions, and other supplies can really add up throughout the year. Plan Year 1: Emily has an annual exam and eye exam, and since both are covered at 100 percent,

there’s no money deducted from her HRA. Throughout the year, she uses HRA funds to pay for contacts and other eligible supplies – totaling $450. Deduct that amount from the $1,000 beginning balance, and she’s left with $550 at the end of the plan year. She hasn’t spent a dime from her pocket all year.

Plan Year 2: Add $500 to the $1,000 provided by ABC Company, and Emily now has $1,550 in her HRA to use toward eligible healthcare expenses. That’s more than enough money toward her vision expenses and a cushion of savings if she gets sick.


Savings Example 2: Joe, Married with Two Kids Injuries, and shots, and strep throat, oh my! Joe never knows what will happen next with his active family. A sprained ankle one day and throat infection the next. He’s lucky ABC Company provides an HRA with funds totaling $2,000 that he can use to pay for eligible healthcare expenses. Plan Year 1: The year starts off with the entire family getting a respiratory infection, so Joe uses

$400 from his HRA to cover doctor visits and antibiotics. Since preventive well-child checkups, his wife’s OB/GYN exam, and his annual exam are covered 100 percent, Joe’s HRA dollars stretch even further. By the time the plan year ends, Joe has only spent $1,100 on various healthcare expenses and can carry over $900 to the next plan year.

Plan Year 2: In January, ABC Company adds $2,000, which boosts Joe’s HRA funds to $2,900. Saving money on healthcare expenses means Joe can put more money into his kids’ college savings accounts. He finds an HRA really pays off in the long run – it’s certainly a valued employee benefit.

HRA Integration with a Group Health Plan

Under the Public Health Service Act (PHSA), regulations restrict and prohibit dollar limitations on employee benefits each year, which made HRAs troublesome since their plan design creates limitations. When healthcare reform imposed new regulations, the plan design of many HRAs were affected to enable the annual limit and to comply with group health plan rules. For example, an HRA on its own cannot satisfy the annual limit mandated by the Affordable Care Act (ACA); however, when an HRA is integrated with a qualifying group health plan, ACA annual limitations can be met. In September 2013, the IRS issued Notice 2013-54, which all but eliminated the ability of employers to maintain defined contribution arrangements – such as HRAs – unless the plan is integrated with an employer’s defined benefit group health plan. An HRA is “integrated” if these conditions are satisfied:

Participation is limited to those who participate in an employer’s group health plan that is not a defined contribution plan

The employee must be permitted to opt out of the coverage

The employer’s group health plan must also provide minimum value if the HRA reimburses more than the following:

‒ Cost share under the employer’s plan ‒ Premiums under the employer’s plan ‒ Non-essential health benefits

The Affordable Care Act also eliminated lifetime or annual limits on the dollar value of essential health benefits for your employees. Please note: The integration requirement does not apply to retiree HRAs. And, there are additional allowed plan designs that may not be addressed in this guide. Please contact your Relationship Manager if you have any questions.

Permissible HRA Plan Types

Details on these various HRA plan types can be found in the Resources section of this guide. There has been much confusion about which HRAs are permissible, so if assistance is needed, we will help you make a plan design decision so you establish an HRA that’s tailor-made to your specifications and meets all compliance guidelines. As part of the setup process, our implementation team will provide necessary guidance, and using your plan information, we will create a model plan document needed to sponsor an HRA plan.


Additional Plan Options

HRAs are not subject to many of the restrictions imposed on Healthcare FSAs, and you are given more flexibility when defining your HRAs. Additional options include:

An HRA may reimburse eligible expenses incurred during an earlier coverage period if the employee was an HRA participant during that time and remains an HRA participant in the current coverage period

You may restrict the time period for submitting claims

You may allow participants to carry over funds to the following coverage period; you may also cap the carryover amount

Terminated employees may be allowed to spend down their HRA balance

If an HRA is stacked with an FSA, generally the HRA pays first unless specified differently in your plan documents

You may determine the maximum notional amount applied to each participant’s HRA

The uniform coverage rule does not apply the maximum reimbursement amount under an HRA does not have to be available in the account at all times during the coverage period; for example, contributions may be prorated during the coverage period

The IRS does not have a maximum amount set for reimbursements under an HRA To see how an HRA compares with an FSA or HSA, please see the FSA, HRA, and HSA Definition Chart that’s included in the Resources section.

Eligible Expenses

Your participants can use their account funds for numerous healthcare-related products and services for themselves, their spouse, and their qualifying child or relative. Your SPD outlines eligible expenses under your plan. Since not all expenses are eligible under all plans, participants should be encouraged to review their SPD carefully to find out which expenses are eligible.

Typical HRA Eligible Expenses

Medical expenses: co-pays, co-insurance, and deductibles

Dental expenses: exams, cleanings, X-rays, and braces

Vision expenses: exams, contact lenses and supplies, eyeglasses, and laser eye surgery

Professional services: chiropractor and acupuncture

Prescription drugs and insulin

Over-the-counter healthcare items: bandages, pregnancy test kits, blood pressure monitors, etc. Generally, eligible expenses include items that are meant to diagnose, cure, mitigate, treat, or prevent illness or disease. This also includes transportation for medical care. Expenses such as cosmetic surgery, personal grooming products, vitamins, and items for general well-being are not eligible expenses. HRAs are regulated by IRS rules that require us to review your participants’ HRA reimbursements. You should remind them to keep all receipts and supporting documentation in order to verify their HRA eligible expenses. Only qualified out-of-pocket expenses are eligible for reimbursement. Expenses previously reimbursed by the HRA or covered by any other plan or program, such as an FSA, are not eligible for reimbursement by your participants. There’s no “double-dipping” allowed. If participants are enrolled in an HRA and an FSA, your SPD will outline which account pays them first.


Over-the-counter Medicines and Drugs As part of the changes introduced by healthcare reform acts, as of January 1, 2011, over-the-counter (OTC) medicines and drugs are no longer eligible for reimbursement under an HRA unless prescribed by a doctor.

HRA Claims Guidelines and Procedures

We closely scrutinize all HRA claims received to ensure eligibility. We are diligent in adhering to IRS guidelines regarding claim substantiation and rely on Internal Revenue Code guidance regarding claims eligibility. We process our claims both manually and systematically. The system automatically analyzes the claim to determine if the account is active, available balance is adequate, and if the date of service is within plan coverage dates. Claims processors check for expense eligibility by strictly following IRS regulations.

HRA Claim Guidelines Unless the eligible expense is purchased with the benefit card or received through a file from the carrier, participants must submit a completed Request for Reimbursement Form to submit eligible expenses incurred by the participant, their spouse, or eligible dependents during the coverage period. Supporting documentation must be included with the claim. Such documentation includes:

For office visits and other services ‒ The health plan’s Explanation of Benefits (EOB) statement or an itemized receipt or bill from the provider that includes the patient’s name, a description of the service, the original date of service and the participant’s portion of the charge.

For prescription drugs ‒ A pharmacy statement or receipt including the patient’s name, the Rx number, the name of the drug, the date the prescription was filled, and the amount.

For over-the-counter medicines ‒ A written or electronic OTC prescription along with an itemized cash register receipt that includes the merchant name, name of the OTC medicine or drug, purchase date, and amount, OR a printed pharmacy statement or receipt from a pharmacy that includes the patient’s name, the Rx number, the date the prescription was filled, and the amount.

For over-the-counter healthcare-related products ‒ An itemized cash register receipt with the merchant name, name of the item/product, date, and amount.

For insurance or Medicare premiums3 – A copy of the insurance premium billing notice and proof of

payment (copy of front and back of check, credit card confirmation, etc.) for qualified insurance policies. Itemized bills must include the insurance carrier name, participant name, amount charged, and coverage dates.

Credit card receipts, canceled checks, and balance forward statements do not meet the requirements for acceptable documentation. For some expenses to be considered eligible, a Medical Determination Form from a doctor may be required.

Submitting Reimbursement Requests

We’ve made it easy for participants to send us their claims by offering several submission methods:

MyCONEXIS app – Participants may take a photo of supporting documentation and submit reimbursement requests using our app. They may also use the app to substantiate card transactions requiring action. For further app details, please see the Optional Services section.

Our participant website – Participants can submit claims through their online account at mybenefits.wageworks.com.

Fax – Participants may fax their reimbursement forms and supporting documentation to the address listed on the form.

3 Not all plan designs allow reimbursement of insurance premiums. Please refer to the permissible HRA plans chart in the

Resources section.



Mail – Participants may submit their form and copies of supporting documentation to the address listed on the form.

IMPORTANT: Please remind your participants to save all their itemized receipts, EOBs, and other supporting

documentation along with their reimbursement forms. Because of IRS rules, we ask them to verify their expenses.

A detailed rejection notice is issued for every incomplete or denied claim. The notice details specific information needed to complete the processing of the claim. Participants may appeal any claim rejection in accordance with the claims appeal procedures outlined in your the Summary Plan Description.

Explanation of Benefits (EOB) Rollover Claims

Offering the EOB rollover claims option to participants is a valuable benefit. With this feature, participants are automatically reimbursed for qualified out-of-pocket expenses (processed through approved carriers), without having to file paper claims. We have established relationships with a number of medical, dental, and vision carriers to receive electronic EOB claim files directly. The EOB file is submitted through our FTP site and processed by our EDI department. Once the file has completed processing, all eligible and approved claims are placed in approved, pending payment status and will be ready to pay on the next scheduled check run.

EOB Rollover Example: Adam visits his doctor’s office and incurs an eligible medical expense. Adam’s provider files the claim with his insurance carrier. Adam is responsible for $25 of the total charges while the remaining portion is covered by the insurance carrier. Once the claim is processed, the carrier sends an electronic EOB file directly to us for processing. Adam’s qualified out-of-pocket expense of $25 is automatically processed under his HRA. Your employees should opt out of automatic claims rollover if they have secondary insurance coverage or if they carry an individual on the health plan that is ineligible for HRA purposes (such as a same-sex domestic partner

4).

HRA participants may do this by logging in and updating their personal WageWorks account. The benefit card will not be an available option for your participants if you choose the EOB rollover option. For more information and a copy of our file specifications, please contact your relationship manager. Please note: Claims frequency can be much higher with EOB rollover files. To avoid additional fees, we request that groups utilizing this service require their employees to provide email addresses and sign up for direct deposit.

HRA Claims Appeal Procedures

An HRA participant may be entitled to an external review with an independent review organization if that HRA participant experiences a “rescission” as defined by the Patient Protection and Affordable Care Act. A rescission is a retroactive termination for coverage as a result of fraud or intentional misrepresentation, as determined by us, and your participants may contact us for more information regarding rescissions. Although eligible expenses must qualify as those for medical care, HRA claims do not require the plan to make a “medical judgment,” as defined by the applicable regulations. Therefore, your participants are not eligible for an external review with an independent review organization if their claim for benefits is denied under your HRA.

4 Generally, same-sex domestic partners are ineligible for HRA coverage, unless the domestic partner is a qualifying relative.

In addition, Revenue Ruling 2013-17 defined a “spouse” and stated legally married same-sex spouses would be treated as married for tax purposes, regardless of the couple’s state or residence.


Unused Funds

Generally, HRA funds are not forfeited at the end of the plan year and may be rolled over to the following year. However, this feature is not available for all HRA plans. As the employer, you can decide if you want to add this option to your plan. If you decide to include fund rollovers, you decide how much participants can carry over. If you do not include the rollover feature, your participants will not be able to cash out unused funds or roll over funds into another plan. In addition, participants cannot access the funds for any purpose other than reimbursement of eligible healthcare expenses. You will provide this information to your participants as part of your Summary Plan Description (SPD).


SECTION 6 – ELECTIONS, LEAVES OF ABSENCE, AND TERMINATIONS

Elections and Mid-year Election Changes

Depending on specific plan design, participants will most likely need to complete your election process prior to the beginning of the plan year. Some employers require employees to complete and sign a paper election form to elect or waive participation while other employers have an electronic process in place – we can accommodate both processes. The election process should be completed by those individuals waiving coverage in order to provide you with proof that a participant has been given the opportunity to participate. You should keep a copy of the paper election form or electronic record as it is your official record of the benefit elections made by each participant. Generally, the election record serves as a salary reduction agreement between the participant and the employer. These elections can be sent to us through our client website or by file transfer.

New Hires

New employees who want to participate in the plan must complete the election process to elect or waive participation in the plan prior to their eligibility (entry) date. The eligibility period is defined in the plan document and SPD. If eligibility is immediate upon hire there is a 30-day grace period to elect. The election may be retroactive to their date of hire. However, all salary reductions for this coverage come from salary that is not yet currently available or paid. For example, if an employee is hired on April 1 and the eligibility for the plan is the first day of the month following 90 days of service, the participant is eligible to participate on July 1 and the participant’s election form must be signed by June 30. If the participant does not elect coverage by July 1, they lose the opportunity to participate and cannot enroll until the next open enrollment period.

Mid-year Election Changes

During the open enrollment period, participants can change their election prior to the beginning of the new plan year. Thereafter, the election cannot be changed for the duration of the plan year unless the plan allows mid-year election changes. The information above assumes that your plan allows all changes permitted under the IRS rules. As an employer, you may restrict mid-year election changes by the way the plan is set up. The specific rules that apply to the plan are included in the SPD. If participants have a change in status or another qualified event, your human resources or benefits representative should supply the forms that participants need to complete. Please note: Sometimes election changes permitted under the cafeteria plan may not be permitted under the component benefit plan (e.g., the insurance carrier may not allow a change) and vice versa. A change is not permitted unless it is permitted under both the component benefit plan and the cafeteria plan.


The following are general rules regarding election changes established by the IRS for cafeteria plans:

1. Change in status – Elections cannot be changed during the plan year unless a participant, their spouse, or qualified dependent has a change in status or other qualified event – that’s an event defined by IRS rules – and your plan allows the changes. Qualified changes in status events include:

- A change in legal marital status (marriage, divorce, or death of your spouse)

- A change in the number of dependents (birth or adoption of a child, or death of a dependent)

- A change in employment status of participant, their spouse, or dependent

- An event causing a dependent to satisfy or cease to satisfy an eligibility requirements

- A change in residence of the participant, their spouse, or dependent Participants must also satisfy the following specific requirements in order to alter their election based on a change in status:

- Loss of dependent eligibility – For accident and health benefits, a special rule governs which types of election changes are consistent with the change in status. For a change in status involving a divorce, annulment or legal separation, the death of a spouse or dependent, or a dependent no longer eligible for coverage, the participant may only cancel accident or health coverage for the affected spouse or dependent. However, there are instances where the participant may be able to increase their pre-tax contributions to pay for COBRA coverage of a dependent.

Example: Mike, a married parent

Mike is married to Sharon, and they have one child. Mike’s employer offers a cafeteria plan allowing employees to elect employee-only coverage, employee-plus-one-dependent coverage, or family coverage. Employees also may waive coverage entirely. Mike elects family coverage. Mike and Sharon divorce during the plan year. Sharon loses eligibility, while the child is still eligible. The divorce constitutes a change in status and allows Mike to change his election.

Allowed: Mike may now elect employee-plus-one-dependent coverage since Sharon is no longer eligible.

Not Allowed: Mike may not drop his coverage, as the change in status did not affect his eligibility.

- Gain of coverage eligibility under another employer’s plan – For a change in status when a participant, spouse, or dependent becomes eligible under another employer’s cafeteria plan or benefit plan due to a change in marital status or employment status. If coverage becomes effective or is increased under the other employer’s plan, an election change to cease or decrease coverage for that individual would be consistent with the change in status.

Example: Steve, spouse is newly employed

Steve is married to Kathy and both are covered under the cafeteria plan of Steve’s employer. Kathy’s new employer offers better health coverage.

Allowed: Steve and Kathy can drop their current coverage offered by Steve’s employer.


- Dependent Care Reimbursement Plan Benefits – Dependent care FSA benefit election changes are permitted only if the change is made due to a change in status that affects eligibility or eligibility of Dependent Care FSA expenses for the available tax exclusion.

Example: Bill, parent of dependent who’s aging out

Bill has a 12-year-old child. Bill’s employer offers a Dependent Care FSA as part of a cafeteria plan. Bill elects $2,000 for the dependent care program. The child turns 13 in the middle of the plan year and is no longer eligible constituting a change in status.

Allowed: Bill may now cancel his Dependent Care FSA since the child is no longer eligible.

- Group term life insurance, disability income, or dismemberment benefits – If offered under the plan, refer to the list of benefit plan options offered. If a participant experiences any change in status, an election to either increase or decrease coverage is permitted (for group term life insurance, disability income and accidental death and dismemberment benefits only).

Example: Sarah, divorcing mid-term

Sarah is married to Frank, and they have one child. Sarah’s employer offers a cafeteria plan that funds group term life insurance and other benefits. Sarah elects $10,000 of group term life insurance. Sarah and Frank divorce during the plan year. The divorce constitutes a change in status and allows Sarah to change her election.

Allowed: Sarah may now increase or decrease her group term life coverage.

2. Special enrollment rights – If a participant, spouse, or dependent is entitled to special enrollment rights under a group health plan, an election change consistent with the special enrollment right is permitted. For example, if an eligible employee declined enrollment in medical coverage because of outside coverage and lost that coverage due to certain reasons (legal separation, divorce, death, termination of employment, reduction in hours, or exhaustion of COBRA period), the employee may be able to elect medical coverage under the employer’s plan for themselves and eligible dependents that lost coverage. If the employee gains a new dependent as a result of marriage, birth, adoption, or placement for adoption, they may be able to enroll themselves and the new dependent, provided the request for enrollment is made within the election change period. An election change that corresponds with a special enrollment must be prospective, unless the special enrollment is attributable to the birth, adoption, or placement for adoption of a child, which may be retroactive up to 30 days. In addition, group health plans subject to HIPAA special enrollment provisions must allow an employee to enroll himself and/or a dependent if (i) the employee or dependent loses coverage under Medicaid or a State Children’s Health Insurance Plan (SCHIP) due to loss of eligibility, or (ii) the employee or dependent becomes eligible for state funded group health plan premium assistance from a Medicaid or SCHIP program to the extent that the employee requests enrollment within 60 days. The participant should refer to the group health plan Summary Plan Description for an explanation of special enrollment rights.

3. Certain judgments, decrees, and orders – If a judgment, decree, or order from a divorce, separation, annulment, or custody change requires a dependent child (including a foster child who is a tax dependent) to be covered under the plan, an election change to provide coverage for the dependent child identified in the order is permissible. If the order requires that another individual (such as a former spouse) cover the dependent child, and coverage is actually provided, the participant may change their election to revoke coverage for the dependent child.


4. Entitlement to Medicare or Medicaid – If a participant or dependent becomes entitled to Medicare or Medicaid, an election to cancel that person’s accident or health coverage is permitted. Similarly, if a participant or dependent loses eligibility for Medicare or Medicaid, the participant may elect or increase that person’s accident or health coverage. A plan may be drafted to permit a participant to change elections mid-year due to a significant cost or coverage change (see below). However, according to the IRS Regulation 1.125-4, mid-year election changes due to a significant cost or coverage change do not apply to a Healthcare FSA.

5. Change in cost – If the cost of a component benefit plan significantly increases or decreases, a participant may choose to make an increase in contributions, revoke the election and receive coverage under another benefit plan that provides similar coverage; or drop coverage altogether if no similar coverage exists; or elect coverage under the component benefit plan that decreased in cost. For insignificant increases or decreases in the cost of component benefit plans, pre-tax contributions should be automatically adjusted to reflect the minor change in cost. The employer will have final authority to determine whether the requirements of this section are met.

Example: Mike, indemnity cost of coverage increase

Mike is covered under an indemnity option of his employer’s accident and health insurance coverage. The cost of the coverage significantly increases.

Allowed: Mike may now continue coverage and increase his contributions, elect alternative similar coverage or drop coverage if alternative coverage is not available.

6. Change in coverage – If coverage under a component benefit plan is significantly curtailed, a participant may revoke their election and elect coverage under another benefit plan that provides similar coverage. If there is a complete loss of coverage, the participant may drop coverage if similar coverage is unavailable. If the plan adds or significantly improves a benefit option, the participant may revoke their election and elect, on a prospective basis, the significantly improved option, so long as the option provides similar coverage. The participant may also make an election change due to a change made under another employer plan, so long as the other plan permits election changes permitted under the IRS regulations; or the plan year for the current plan is different from the plan year of the other employer plan. Finally, participants may change their election to add coverage if the participant, spouse, or dependent loses coverage under any group health coverage sponsored by a government or educational institution. The employer will have final discretion to determine whether the requirements of this section are met.


Election Change Chart

I. Change in Status

A. Change in Employee’s Legal Marital Status

Major Medical

Employee may enroll or increase election for newly eligible spouse and dependent children. (Note: Under IRS tag-along interpretation, new and pre-existing dependents may be enrolled); coverage option (e.g., HMO to PPO) change may be made; employee may revoke or decrease employee’s or dependent’s coverage only when such coverage becomes effective or is increased under the spouse’s plan). (Also, see VIII. HIPAA Special Enrollment Rights.)

Dental and Vision Same as major medical above. (Note: HIPAA special enrollment rights likely do not apply.)

Healthcare FSA Employee may enroll or increase election for newly eligible spouse or dependents, or likely decrease election if employee or dependents become an eligible dependent under new spouse’s health plan. (Note: HIPAA special enrollment rights likely do not apply.)

Dependent Care FSA Employee may enroll or increase to accommodate newly eligible dependents or decrease or cease coverage if new spouse is not employed or makes a Dependent Care FSA coverage election under spouse’s plan.

Employee Group Life, AD&D, and Disability Coverage

Employee may enroll, increase, decrease, or cease coverage even when eligibility is not impacted.

A-1. Lose spouse (divorce, legal separation, annulment, death of spouse) (See loss of dependent eligibility below for discussion of dependent eligibility loss following divorce, separation, etc.)

Major Medical

Employee may revoke election only for spouse; coverage option (e.g., HMO to PPO) change may be made; employee may elect coverage for self or dependents who lose eligibility under spouse’s plan if such individual loses eligibility as a result of the divorce, legal separation, annulment, or death. (Note: Under IRS tag-along interpretation, any dependents may be enrolled so long as at least one dependent has lost coverage under the spouse’s plan.)

Dental and Vision Same as major medical. (Note: HIPAA special enrollment rights likely do not apply.)

Healthcare FSA Employee may decrease election for former spouse who loses eligibility. (Note: HIPAA special enrollment rights likely do not apply. Employee may enroll or increase election where coverage lost under spouse’s health plan.)

Dependent Care FSA Employee may enroll or increase to accommodate newly eligible dependents (e.g., due to death of spouse) or decrease or cease coverage if eligibility is lost (e.g., because dependent now resides with ex- spouse).



B. Change in the Number of Employee’s Dependents

B-1. Gain dependent (birth, adoption)

Major Medical

Employee may enroll or increase coverage for newly eligible dependent (and any other dependents not previously covered under IRS tag-along rule); coverage option (e.g., HMO to PPO) change may be made; employee may revoke or decrease employee’s or dependent’s coverage if employee becomes eligible under spouse’s plan. (Also, see VIII. HIPAA Special Enrollment Rights.)


Healthcare FSA Same as major medical. (Note: HIPAA special enrollment rights likely do not apply.)

Dependent Care FSA Employee may enroll or increase to accommodate newly eligible dependents (and any other dependents not previously covered under IRS tag-along rule).




B-2. Lose dependent (death)

Major Medical Employee may drop coverage only for the dependent who loses eligibility; coverage option (e.g., HMO to PPO) change may be made.

Dental and Vision Same as major medical.

Healthcare FSA Employee may decrease or cease election for dependent who loses eligibility.

Dependent Care FSA Employee may decrease election for dependent who loses eligibility.



C. Change in Employment Status of Employee

C-1. Commencement of employment by employee, spouse, or dependent (or other change in employment status) triggering eligibility

a. Commencement of employment by employee or other change in employment status (e.g., PT to FT, hourly to salaried, etc.) triggering eligibility under component plan

Major Medical Provided eligibility was gained for this coverage, employee may add coverage for employee, spouse, or dependents and coverage option (e.g., HMO to PPO) change may be made.


Healthcare FSA Same as major medical.

Dependent Care FSA Same as major medical.



b. Commencement of employment by spouse or dependent or other employment event triggering eligibility under their employer’s plan

Major Medical Employee may revoke or decrease election as to employee’s, spouse’s, or dependent’s coverage if employee, spouse, or dependent is added to spouse’s or dependent’s coverage; coverage option (e.g., HMO to PPO) change may be made.


Healthcare FSA Employee may presumably decrease or cease FSA election if gains eligibility for health coverage under spouse’s or dependent’s plan.

Dependent Care FSA Employee may make or increase election to reflect new eligibility (e.g., if spouse previously did not work). Employee may revoke election as to dependent’s coverage if dependent is added to spouse’s plan.


Employee may enroll, increase, decrease, or cease coverage even when spouse’s or dependent’s eligibility is not impacted.

C-2. Termination of employment by employee, spouse, or dependent (or other change in employment status causing loss of eligibility)

a. Termination of employee’s employment or other change in employment status (e.g., unpaid leave, FT to PT, strike, salaried to hourly, etc.) resulting in a loss of eligibility

Major Medical Employee may revoke or decrease election for employee, spouse, or dependents who lose eligibility under the plan. In addition, other previously eligible dependents may also be enrolled under tag-along rule. Coverage option (HMO to PPO) change may be made.



Dependent Care FSA Employee may revoke or decrease election to reflect loss of eligibility.


Employee may enroll, increase, decrease or cease coverage even when eligibility is not affected.


i. Termination and rehire within 30 days

Major Medical Prior elections at termination are reinstated unless another event has occurred that allows a change (as an alternative, employer may prohibit participation until next plan year).





Same as major medical.

ii. Termination and rehire after 30 days

Major Medical Employee may make new elections.






b. Termination of spouse’s or dependent employment (or other change in employment status resulting in a loss of eligibility under their employer’s plan)

Major Medical

Employee may enroll or increase election for employee, spouse or dependents who lose eligibility under spouse’s or dependent’s employer’s plan. In addition, other previously eligible dependents may also be enrolled under tag-along rule. Coverage option (e.g., HMO to PPO) change may be made. Also see VIII. HIPAA Special Enrollment Rights.).


Healthcare FSA Employee may enroll or increase FSA election if spouse or dependent loses eligibility for health coverage. (Note: HIPAA special enrollment rights likely do not apply.)

Dependent Care FSA Employee may enroll or increase if spouse or dependent loses eligibility for Dependent Care FSA. Employee may decrease or cease Dependent Care FSA election if spouse’s loss of employment renders dependents ineligible.


Employee may enroll, increase, decrease, or cease even when eligibility is not affected.

D. Event Causing Employee’s Dependent to Satisfy or Cease to Satisfy Eligibility Requirements (also see discussion of gain/loss of eligibility under dependent or spouse’s employer’s plan)

D-1. Event by which dependent satisfies eligibility requirements Under Employer’s Plan (attaining a specified age, becoming single, becoming a student, etc.)

Major Medical Employee may enroll or increase election for affected dependent. In addition, employee may presumably add previously eligible (but not enrolled) dependents under tag-along rule; coverage option (e.g., HMO to PPO) change may be made.


Health FSA Employee may increase election or enroll only if dependent gains eligibility under health FSA.

Dependent Care FSA Employee may increase election or enroll to take into account expenses of affected dependent.


Employee may enroll, increase, decrease or cease even when eligibility is not affected.


D-2. Event by Which Dependent Ceases to Satisfy Eligibility Requirements Under Employer’s Plan (attaining a specified age, getting married, ceasing to be a student, etc.)

Major Medical Employee may decrease or revoke election only for affected dependent. Coverage option (e.g., HMO to PPO) change may be made.


Health FSA Employee may decrease election to take into account ineligibility of expenses of affected dependent, but only if eligibility is lost.

Dependent Care FSA Employee may decrease or drop election to take into account expenses of affected dependent.


Employee may enroll, increase, decrease, or cease coverage even when eligibility is not affected.

E. Change in Place of Residence of Employee, Spouse, or Dependent

E-1. Move Triggers Eligibility

Major Medical Employee may enroll or increase election for newly eligible employee, spouse, or dependent. Also, other previously eligible dependents may be re-enrolled under tag-along rule; coverage option (e.g., HMO to PPO) change may be made.


Health FSA No change allowed, even if underlying health coverage change occurs.

Dependent Care FSA N/A. Dependent care eligibility is not generally affected by place of residence (but see VI. Change in Coverage Under Other Employer’s Cafeteria Plan or Qualified Benefits Plan).


Employee may increase or decrease even if spouse’s or dependent’s eligibility is not affected.

E-2. Move Causes Loss of Eligibility (e.g., employee or dependent moves outside HMO service area)

Major Medical Employee may revoke election or make new election if the change in residence affects the employee’s, spouse’s, or dependent’s eligibility for coverage option.


Health FSA No change allowed, even if underlying health coverage change occurs.

Dependent Care FSA N/A. Dependent care eligibility is not generally affected by place of residence (but see VI. Change in Coverage Under Other Employer’s Cafeteria Plan or Qualified Benefits Plan).


Employee may enroll, increase, decrease or cease even when eligibility is not affected.

II. Cost Changes With Automatic Increase/Decrease in Elective Contributions (including employer motivated

changes and changes in employee contribution rates)

Major Medical Plan may automatically increase or decrease (on a reasonable and consistent basis) affected employees’ elective contributions under the plan, so long as the terms of the plan require employees to make such corresponding changes.


Health FSA No change permitted.

Dependent Care FSA Application is unclear. Presumably, plan may automatically increase or decrease (on a reasonable and consistent basis) affected employees’ elective contributions under the plan, so long as the terms of the plan require employees to make such corresponding changes.




III. Significant Cost Changes

Major Medical

Significant cost increase: Affected employee may increase election correspondingly OR revoke election and elect coverage under another benefit package option providing similar coverage. (If no option providing similar coverage is available, employee may revoke election.)

Significant Cost Decrease: Employees may elect coverage (even if had not participated before) with decreased cost, and may drop election for similar coverage option. Though unclear, it appears that tag-along concepts may apply.


Healthcare FSA No change permitted.

Dependent Care FSA Same as major medical for significant cost increase, except no change can be made when the cost change is imposed by a dependent care provider who is a relative of the employee.



IV. Significant Coverage Curtailment (with or without loss of coverage)

Major Medical

Without loss of coverage: Affected participant may revoke election for curtailed coverage and make new prospective election for coverage under another benefit package option which provides similar coverage.

With loss of coverage: Affected participant may revoke election for curtailed coverage and make new prospective election for coverage under another benefit package option which provides similar coverage or drop coverage if no similar benefit package option is available.



Dependent Care FSA Election change may presumably be made whenever there is a change in provider or a change in hours of dependent care.



V. Addition or Significant Improvement of Benefit Package Option

Major Medical Eligible employees (whether currently participating or not) may revoke their existing election and elect the newly added (or newly improved) option. Though unclear, it appears that tag-along concepts may apply.



Dependent Care FSA Eligible employees (whether currently participating or not) may revoke their existing election and elect the newly added (or newly improved) option.


Same as Dependent Care FSA.


VI. Change in Coverage Under Other Employer’s Cafeteria Plan or Qualified Benefits Plan

For election changes to be permitted under this exception, the election change must be on account of and correspond with the change in coverage under the other employer’s cafeteria plan or qualified benefits plan. In addition, either: (1) the plan of the other employer must permit elections specified under the IRS regulations and an election must actually be made under such plan; or (2) the employee’s cafeteria plan must permit elections for a period of coverage different from that under the other employer plan (Election Lock rule).

Major Medical Employee may decrease or revoke election for employee, spouse or dependents if employee, spouse, or dependents have elected or received corresponding increased coverage under other employer plan.






A. Other Employer’s Plan Increases Coverage

Major Medical Employee may decrease or revoke election for employee, spouse, or dependents if employee, spouse, or dependents have elected or received corresponding increased coverage under other employer’s plan.






B. Other Employer’s Plan Decreases or Ceases Coverage

Major Medical Employee may enroll or increase election for employee, spouse, or dependents if employee, spouse, or dependents have elected or received corresponding decreased coverage under other employer’s plan.






C. Open Enrollment Under Plan of Other Employer

Major Medical Corresponding changes can be made under employer’s plan.







VII. FMLA Leave

Employees can fund this coverage by: (1) pre-paying their contribution obligations on a pre-tax basis (so long as the leave does not straddle two plan years); (2) making contributions on a month-by-month basis (pre-tax if they are receiving salary continuation payments); or (3) catching up on their contributions upon returning from the leave.

A. Employee’s Commencement of FMLA Leave

Major Medical

Employee can make same elections as employee on non-FMLA leave. In addition, an employer must allow an employee on unpaid FMLA leave either to revoke coverage or to continue coverage but allow employee to discontinue payment of their share of the contribution during the leave (the employer may recover the employee’s share of contributions when the employee returns to work). FMLA also allows an employer to require that employees on paid FMLA leave continue coverage if employees on non-FMLA paid leave are required to continue coverage.



Dependent Care FSA Employee may revoke election and make another election as provided under FMLA.



B. Employee’s Return from FMLA Leave

Major Medical Employee may make a new election if coverage terminated while on FMLA leave. In addition, an employer may require an employee to be reinstated in his or her election upon return from leave if employees who return from a non-FMLA paid leave are required to be reinstated in their elections.


Healthcare FSA Same as major medical. Note that, upon return, an employee whose coverage has lapsed has the right to resume coverage at prior coverage level and make up unpaid premiums at a reduced level, prorated for missed contributions.

Dependent Care FSA Employee may make a new election if coverage terminated while on FMLA leave. In addition, an employer may require an employee to be reinstated in his or her election upon return from leave if employees who return from a non-FMLA leave are required to be reinstated in their elections.



VIII. HIPAA Special Enrollment Rights

See related exception for addition of new dependents

A. Special Enrollment for Loss of Other Health Coverage

Major Medical

Employee may elect coverage for employee, spouse, or dependent who has lost other coverage (COBRA coverage exhausted or terminated, no longer eligible for non-COBRA coverage or employer contributions for non-COBRA coverage terminated, etc.) Though unclear, it appears that tag-along concepts may apply.

Dental and Vision No change permitted, unless plan is subject to HIPAA.

Healthcare FSA No change permitted, unless Healthcare FSA is subject to HIPAA.

Dependent Care FSA No change permitted.


No change permitted.


B. Special Enrollment for Acquisition of New Dependent by Birth, Marriage, Adoption, or Placement for Adoption

If newborn or newly adopted child is enrolled under HIPAA special rules, child’s coverage may be retroactive to date of birth, adoption, or placement for adoption; employee may change salary reduction election to pay for extra cost of child’s coverage retroactive to date of birth, adoption, or placement for adoption. For marriage, coverage is effective prospectively.

Major Medical Employee may elect coverage for employee, spouse, or dependent. Example provides that election of coverage may also extend to previously eligible (but not yet enrolled) dependents.


Healthcare FSA No change permitted, unless Healthcare FSA is subject to HIPAA.




C. Special Enrollment for Loss of Medicaid or SCHIP Coverage

Note: There is a 60-day special enrollment period for this event.

Major Medical Employee may elect coverage for employee or dependent who has lost Medicaid or SCHIP coverage.


Healthcare FSA No change permitted, unless plan is subject to HIPAA.




D. Special Enrollment Due to Eligibility for State Premium Assistance Subsidy From Medicaid or SCHIP Coverage

Note: There is a 60-day special enrollment period for this event.

Major Medical Employee may elect coverage for employee or dependent who has become eligible for premium assistance subsidy from Medicaid or SCHIP coverage.


Healthcare FSA Premium assistance subsidy does not apply.


Employee Group Life, AD&D and Disability Coverage


IX. COBRA Events

Major Medical

Employee may increase pre-tax contributions under employer’s plan for coverage if COBRA event (or similar state law continuation coverage event) occurs with respect to the employee, spouse, or dependents with respect to which the COBRA qualifying event occurred (such as a loss of eligibility for regular coverage due to loss of dependent status or a reduction in hours, etc.) and if applicable, the individual still qualifies as a tax dependent of employee.







X. Judgment, Decree, or Order

A. Order That Requires Coverage for the Child Under Employee’s Plan

Major Medical Employee may change election to provide coverage for the child. Though unclear, it appears that tag-along concepts may apply.






B. Order That Requires Spouse, Former Spouse, or Other Individual to Provide Coverage for the Child

Major Medical Employee may change election to cancel coverage for the child.






XI. Medicare or Medicaid

A. Employee, Spouse, or Dependent Enrolled in Employer’s Accident or Health Plan Becomes Entitled to Medicare or Medicaid (other than coverage solely for pediatric vaccines)

Major Medical Employee may elect to cancel or reduce coverage for employee, spouse, or dependent, as applicable.

Dental and Vision Unlikely that employee can elect to drop dental or vision coverage; presumably, employee must retain coverage.

Healthcare FSA Employee may presumably decrease or revoke election or increase election if Healthcare FSA is dropped due to Medicare/Medicaid and prior employer coverage was more comprehensive.




B. Employee, Spouse, or Dependent Loses Eligibility for Medicare or Medicaid (other than coverage solely for pediatric vaccines)

Major Medical Employee may elect to commence or increase coverage for employee, spouse, or dependent, as applicable. Though unclear, it appears that tag-along concepts may apply.

Dental and Vision Unlikely that employee can elect to add dental or vision coverage; presumably, employee cannot.

Healthcare FSA Employee may presumably increase or decrease or revoke election where employer plan elected due to loss of eligibility for Medicare/Medicaid is more comprehensive than Medicare/Medicaid.





Leaves of Absence (LOA)

The information below provides a basic overview of how important rules (FMLA and USERRA) may impact Healthcare FSA and Dependent Care FSA elections if an employee takes a leave of absence (LOA). Leaves of absence fall into these three main categories:

Leaves subject to the Family and Medical Leave Act (FMLA)

Non-FMLA leaves (other than USERRA)

Uniform Services Employment and Reemployment Rights Act (USERRA) leaves

Your plan terms should state whether your employees’ participation in the Healthcare FSA or Dependent Care FSA continues during a paid or unpaid LOA.

Leaves of Absence Associated with FMLA

With FMLA leaves, there are two options to choose from:

1. You must generally give employees the opportunity to continue Healthcare FSA coverage during the FMLA leave of absence period, with the same terms and conditions as before the leave; or

2. You must discontinue Healthcare FSA coverage altogether during the leave and allow those employees to reinstate the coverage upon their return from leave.

Please note: When employees are on FMLA leaves, you are not required to continue non-health benefits, such as Dependent Care FSA. The continuation of this type of coverage throughout an FMLA leave of absence should be based on how those benefits are treated during non-FMLA leaves. Action required: You must notify us if an employee’s participation terminates. Notification can be made through our website or via a file transfer.

FMLA – Paid Leave

You may require employees taking an FMLA paid leave to continue Healthcare FSA coverage throughout their absence. If they do, then IRS regulations do not allow election changes to the Healthcare FSA when the employee returns to work.

FMLA – Unpaid Leave

During an unpaid FMLA leave, you have two options:

1. Offer each employee the choice between canceling and continuing Healthcare FSA coverage. When the employee returns to work, you may either prorate coverage based on missed contributions, or you may reinstate the original coverage levels (see payment details below).

2. Require an employee to continue Healthcare FSA coverage. You may either allow the employee to discontinue contributions and make catch-up contributions when they return to work, or you may use the pay as scheduled method (see payment details below).

Action required: You must notify us if an employee’s participation terminates. Notification can be made through our website or via a file transfer. Please note: While the regulations are unclear, it appears that employers can also use these payment methods for unpaid, non-FMLA leaves as well.


Unpaid Leave Reinstatement Options

If an employee cancels Healthcare FSA coverage throughout the unpaid leave (or chooses the pay-as-scheduled option and then fails to pay), the employer may automatically reinstate the employee’s Healthcare FSA coverage upon the employee’s return. If this happens, the employee has two coverage options:

1. Prorate coverage based on the missed contributions. By choosing this option, the employee may elect to reinstate a level of coverage that’s reduced by the amount of contributions missed during the leave, at the original contribution amount.

Example:

Bob elects $1,200 in Healthcare FSA coverage for the calendar plan year and pays $100 per month for the coverage. On April 1, Bob has yet to submit any claims, and he begins a three-month FMLA leave. He does not elect to continue coverage and his employer does not continue it on his behalf. When Bob returns on July 1, he may elect to have $900 reinstated ($1,200 minus $300 in missed contributions) at a cost of $100 per month for the remainder of the year.

2. Reinstate the original coverage level. This option allows an employee to elect to reinstate the level of coverage that was in effect when the leave began, provided that the missed contributions are paid.

Example:

Let’s use the same facts in the example above, except Bob elects reinstatement of his original coverage level. Then he would have $1,200 in annual reimbursement at a cost of $150 per month for the remainder of the year – that’s the $100 original monthly premium plus an additional $50 per month to make up the $300 in missed contributions.

Please note: You must offer the same election options at the time of reinstatement to an employee taking an FMLA leave of absence as to an employee taking a non-FMLA leave.

Paying for FSA Coverage During an LOA

There are three ways employees taking LOAs may pay for permitted coverage:

1. Pre-funding: If an employee elects this option, you will deduct pre-tax contributions prior to the LOA that equals the total contribution amount for the entire LOA period for that plan year (and grace period if applicable). This can’t be the only payment option for an FMLA leave.

2. Pay as scheduled: By electing this option, the employee continues to pay for coverage using post-tax dollars. The pay schedule may be per pay period or on a monthly basis. In addition, if this option is offered to employees on non-FMLA leaves, it must be offered to employees on FMLA leaves as well.

3. Pay upon return: Some employees may prefer to pay for their FSA coverage when returning to work from LOAs. In this case, the employee may retroactively fund their FSA. You may offer this as the sole option to employees on FMLA leaves if it is the only option offered to employees on non-FMLA leaves.

Non-FMLA Leaves of Absence

While there are similarities with FMLA leaves, there are a few differences in how non-FMLA leaves are handled. Your plan dictates whether participation in a Healthcare FSA or Dependent Care FSA continues during paid and unpaid LOAs.

Non-FMLA – Paid Leave

Healthcare FSA rules are discussed below and rules for Dependent Care FSAs are summarized in a following section on the next page.


If Healthcare FSA participation does not terminate, the beginning of paid leave is not considered a qualifying change in status event, and the employee can’t make election changes when returning to work. If Healthcare FSA coverage terminates after a paid leave begins, the participant may be eligible for COBRA continuation coverage. In addition, the uniform coverage and use-or-lose rules apply. However, if the Healthcare FSA is discontinued due to an employee’s LOA and it is later reinstated when the employee returns to work, then the employee may make new elections. You may offer one of these two options for employees to reinstate the coverage:

1. Prorate the coverage based on the missed contributions, or

2. Reinstate the original coverage levels.

See specific details in the FMLA leaves of absence section above. Action required: You must notify us if an employee’s participation terminates. Notification can be made through our website or via a file transfer. See special rules for Dependent Care FSA below for additional information about these types of plans.

Non-FMLA – Unpaid Leave

If Healthcare or Dependent Care FSA coverage continues throughout the LOA, the start of an LOA is considered a change in status event, and the employee may cancel an election if they choose to do so. If the Healthcare FSA or Dependent Care FSA participation does not continue during an unpaid LOA, a new election may be made upon the employee’s return from leave and you may offer one of these two options to reinstate the coverage:

1. Prorate the coverage based on the missed contributions, or

2. Reinstate the original coverage level.

See specific details in the FMLA leaves of absence section above. Action required: You must notify us if an employee’s participation terminates. Notification can be made through our website or via file transfer.

COBRA Coverage Associated with Leaves

If participation in a Healthcare FSA does not continue throughout a paid or unpaid leave, the employee may be eligible for COBRA continuation coverage. COBRA is not available for Healthcare FSA coverage if an employee canceled or declined Healthcare FSA participation prior to taking a leave of absence. In addition, the uniform coverage and use-it-or-lose-it rules apply.


Special Rules for Dependent Care FSAs

Per IRS rules, qualified dependent care expenses must be incurred while both the employee and spouse are actively working or looking for work. During the period of leave, an employee is not considered actively working (unless it is a “temporary” absence that lasts less than two consecutive calendar weeks). Therefore, the employee may not be reimbursed for dependent care expenses incurred during the leave of absence. This is why many employers discontinue Dependent Care FSA participation once the leave of absence begins. Action required: You must notify us if an employee’s Dependent Care FSA coverage terminates due to a leave of absence. Notification can be made through our website or via file transfer.

USERRA Leaves of Absence

If an employee takes a leave of absence covered by the Uniformed Services Employment and Reemployment Rights Act (USERRA), then you are required to follow certain rules regarding employees’ benefit elections made under a cafeteria plan.

Health Plans (Includes Healthcare FSAs) If an employee takes a leave of absence that lasts 30 days or less, you must offer the same coverage as before the leave began. In this case, no election changes are generally allowed upon the employee’s return. If an employee takes a leave of absence that lasts 31 days or longer, you have the option to discontinue that employee’s coverage. If you choose to do so, you must offer that employee comparable continuation coverage (similar to COBRA), and the employee is entitled to make a new election when reinstated to a position that is eligible for benefits. Please note: We encourage you to consult with legal counsel to determine how IRS regulations apply to a Healthcare FSA that terminates COBRA continuation at the end of the plan year in which the qualifying event occurs. According to USERRA, employers must generally offer non-health benefits (such as a Dependent Care FSA) with the same terms and conditions to employees who are in uniformed services as the non-health benefits offered to other employees.

Please note: Flexibility may exist with some or all of these rules. If you have any questions about how

to interpret these rules, please seek the advice of your legal counsel.

Terminations

Employee Terminations and COBRA

When employees’ jobs are terminated or at retirement, mandated COBRA requirements begin. Because of strict time frames and action required by you, it’s imperative that you inform us of the terminations in a timely manner.


Action Required by the Employer

You should process participant terminations on our client website or by sending an EDI file feed. It is important that you notify us immediately so that the participant does not receive reimbursements past the coverage end date on the account. If you offer the CONEXIS Visa Benefit Card, the card will also be deactivated at this time. Participants will be able to submit manual claims in order to access their FSA or HRA funds if the eligible expenses were incurred during the coverage period. Claims may only be submitted during the run-out period. Please note: If your HRA plan includes a spend-down feature, see the information on page 45.

COBRA Guidelines for Healthcare FSAs

The following general guidelines are for coordinating mandated employer legislation as set forth in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) as the law relates to cafeteria plans. WageWorks is not engaged in rendering legal advice. If legal advice or other expert assistance is required, seek guidance from qualified legal counsel. COBRA is a federal law mandating employers with 20 or more employees to provide continuation coverage of group health benefits to any employee, spouse, or dependent child who would otherwise lose coverage due to certain qualifying events. Individuals eligible for COBRA continuation coverage (qualified beneficiaries), generally must pay 102 percent of the premium (150 percent for a disability extension) and may be entitled to benefits for up to 18, 29, or 36 months depending on the qualifying event. The most common qualifying events include termination of employment and reduction in hours of employment. Employers who maintain Healthcare FSAs may limit the COBRA coverage period, with respect to certain Healthcare FSAs to the end of the year in which a qualifying event occurs (see Exception 1, below) or deny COBRA altogether (where the employee has overspent his account; see Exception 2, below). There are two limited exceptions from COBRA for Healthcare FSAs:

Exception 1 – applies if a Healthcare FSA satisfies three conditions. With this exception, the Healthcare FSA need not make COBRA coverage available to a qualified beneficiary for any plan year after the plan year in which the qualifying event occurs.

Exception 2 – provides that COBRA should not be offered to a qualified beneficiary for the current plan year unless the benefits available during the remainder of the year will exceed the amount the FSA can charge for the coverage.

Example:

ABC Company offers its employees a calendar year Healthcare FSA in addition to a major medical plan. Employees can elect up to $1,200 in salary reductions to contribute to their Healthcare FSA. Therefore, ABC Company which has determined that a reasonable estimated cost of providing the Healthcare FSA coverage is equal to the employee’s salary reductions for the year, can charge 102 percent of that amount as a COBRA premium for that year.


If Jane, an ABC Company employee, elected to make the maximum contribution of $1,200, the annual COBRA premium is $1,224 (+$1,200 x 102%); the monthly COBRA premium is $102. If Jane has received reimbursements of $1,000 at the time of her termination on June 30, she is eligible to receive an additional $200 of benefits for that year. However, ABC Company can charge Jane $612 (=$102 x 6) for her COBRA coverage for the remainder of the year. ABC Company does not have to offer Jane COBRA continuation of her Healthcare FSA for the remainder of that year because the plan can charge her more for the coverage ($612) than her remaining benefit ($200).

To meet either of the exceptions above, all of these conditions must be met:

- Condition 1: The Healthcare FSA must not be subject to HIPAA portability provisions. A Healthcare FSA is not subject to HIPAA portability provisions when the employer also provides other group health plan coverage for the year and the other coverage is not limited to excepted benefits (e.g., limited-purpose dental and vision).

- Condition 2: The maximum reimbursement under the Healthcare FSA is not greater than two times the employee’s salary reduction election (or if greater, the employee’s salary reduction election plus $500).

- Condition 3: During the plan year that the qualifying event occurs, the maximum amount that the Healthcare FSA could require to be paid for a full plan year of COBRA coverage equals or exceeds the maximum benefit available under the Healthcare FSA for that year. This is typically met by most Healthcare FSAs. For example, if a Healthcare FSA limits reimbursements to employees’ salary reduction amounts, this condition is always met because the maximum amount that the Healthcare FSA could require as payment for the full plan year of COBRA (102 percent of salary reduction) always exceeds the maximum benefit for the year (100 percent of salary reduction).

The practical effect of these COBRA rules is that many employers who maintain HIPAA-excepted Healthcare FSAs may find it easier simply to always offer COBRA coverage for the rest of the year in which a qualifying event occurred. That way, you will not have to decide which of the two FSA exceptions applies. COBRA Election Limitations The Healthcare FSA election options that apply to FSA also apply to COBRA, except that under COBRA, changes to FSA elections are prohibited for the remainder of the plan year. Under COBRA, choices are limited to either maintaining or revoking current annual election amounts.

COBRA Guidelines for HRAs

If your plan is subject to COBRA, you must offer qualified beneficiaries who lose their HRA coverage due to a COBRA qualifying event – such as job termination or divorce – the opportunity to continue their HRA coverage for the applicable COBRA eligibility period. This is true even if the HRA offers a spend-down feature.


When Employees Don’t Elect COBRA According to IRS guidance, an HRA may continue to reimburse former employees or retirees for medical care expenses after termination of employment or retirement (even if the employee does not elect COBRA continuation coverage). For example, an HRA may have a provision that reimburses a former employee for medical care expenses only up to an amount equal to the unused funds remaining in the HRA at retirement or other termination of employment. For further details, see IRS Notice 2002-45, 2002-28 I.R.B. 93, Part III. Please note: The spend-down feature is optional. When Employees Elect COBRA If COBRA is elected, the qualified beneficiary has access to the unspent HRA balance and is also entitled to the monthly or annual HRA accruals that active employees receive. IRS Notice 2002-45 further clarifies that the COBRA qualified beneficiary’s HRA coverage amount is increased “at the same time and by the same increment that is increased for similarly situated non-COBRA beneficiaries (and by decreasing it for claims reimbursed).” COBRA defines an “applicable premium” as the cost to the plan of providing coverage to similarly situated beneficiaries who have not experienced a qualifying event. The applicable premium must be determined prior to each 12-month determination period. For self-insured plans (such as most HRAs), the premium must be actuarially determined or, the applicable premium may be determined by using a “past-cost” method. A plan is permitted to charge a qualified beneficiary up to 102 percent of the applicable premium.

Actuarial method: The applicable premium must be equal to a reasonable estimate of the cost of providing coverage for such period for similarly situated beneficiaries which … is determined on an actuarial basis, and … takes into account such factors as the Secretary may prescribe in regulations. [Code Section 4980B(f)(4)(B)(i)]

Past-cost method: The applicable premium is the cost to the plan for similarly situated beneficiaries for the same period occurring during the preceding determination period … adjusted by … the percentage increase or decrease in the implicit price deflator of the gross national product. [Code Section 4980B(f)(4)(B)(ii)]

The past-cost method cannot be used “in any case in which there is any significant difference between the determination period and the preceding determination period, in coverage under, or in employees covered by, the plan.” [Code Section 4980B(f)(4)(B)(iii)]

New HRAs cannot use the past-cost method since these plans do not have the past cost for a prior year, and if you have a new HRA, you must use the actuarial method instead. Even HRAs that have been around for a while might not be able to use the past-cost method because the rollover feature may produce a significant difference in coverage from one year to the next (i.e., higher or lower coverage limits in a subsequent year). The COBRA participant is paying premium towards the cost of coverage, not directly to contributing to their own account. According to IRS guidance, an HRA is a group health plan generally subject to the COBRA continuation coverage requirements. If an individual elects COBRA continuation coverage, an HRA complies with these COBRA requirements by providing for the continuation of the maximum reimbursement amount for an individual at the time of the COBRA qualifying event and by increasing that maximum amount at the same time and by the same increment that it is increased for similarly situated non-COBRA beneficiaries (and by decreasing it for claims reimbursed). Premiums are determined under the existing rules in Section 4980B. An HRA complies with the COBRA requirements


for calculating the applicable premium under Section 4980B if the applicable premium is the same for qualified beneficiaries with different total reimbursement amounts available from the HRA (and otherwise also satisfies the requirements of Section 4980B).

Example:

If the annual additional reimbursement amount credited under an HRA is $1,000 and the maximum reimbursement amount remaining for two similarly situated qualified beneficiaries at the time of their qualifying events is $500 and $5,000, the applicable premium is the same for each individual.

HRA Plan Rules The plan rules of an HRA may provide for continued reimbursements after a COBRA qualifying event, regardless of whether a qualified beneficiary elects continuation coverage. For example, an HRA might allow reimbursements up to the unused maximum reimbursement amount following termination of employment. In such a situation, an HRA subject to COBRA must still comply with the COBRA continuation coverage requirements. If a qualified beneficiary elects COBRA continuation coverage in addition to the continued reimbursement amount already available, an HRA complies with the COBRA requirements by increasing the maximum reimbursement amount at the same time and by the same increment that it is increased for similarly situated non-COBRA beneficiaries (and by decreasing it for claims reimbursed). For additional information, see IRS Notice 2002-45, 2002-28 I.R.B. 93, Part VII. Many employers make HRA coverage available only to employees who participate in the employer’s high deductible health plan. If your organization has this arrangement, you can design the COBRA practices so a qualified beneficiary who chooses to elect COBRA continuation coverage may only elect the HRA in conjunction with the major medical plan. [Rev. Rul. 2002-41, 2002-28 I.R.B. 75] If you have such a plan design, the COBRA premium for this would be the total of the HDHP premium component and the HRA component. Please note: We recommend employers consult legal counsel related to HRA and COBRA to ensure information is accurately disseminated to employees.

Form 5500

While cafeteria plans are not subject to ERISA reporting requirements, many benefits offered through a cafeteria plan are ERISA welfare benefit plans and subject to applicable ERISA filing requirements. Under IRS Notice 2002-24, the Department of Labor (DOL) no longer requires employers that sponsor a cafeteria plan to file a Form 5500 Schedule F Annual Information Return under IRC Section 6039D. However, any employer sponsoring an employee benefit plan subject to ERISA must file applicable plan information every year (unless exemptions apply). HRAs fall under this requirement as well (even though HRAs are not a benefit under a cafeteria plan). Exemptions Since a Healthcare FSA and an HRA are plans subject to ERISA, the employer (or plan sponsor) is required to file Form 5500, unless a regulatory exemption applies. You can find out applicable exemptions in the instructions section of Form 5500. Some exemptions include:

Plans with fewer than 100 participants and are unfunded, fully insured, or a combination of the two

Government plans

Church plans under ERISA Section 3 (33)

In addition, a Dependent Care FSA that is funded by salary reductions is generally not considered an ERISA welfare benefit plan, which means the Form 5500 reporting requirements don’t apply. Plus, even


though employer-sponsored day care centers are ERISA plans, the Form 5500 reporting requirements don’t apply. Full Plan Year Reporting Schedules Form 5500 and schedules are due by the last day of the seventh month after the plan year ends. An extension may be requested by filing Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, by the original due date. The DOL may impose substantial penalties (up to $1,100 per day with no maximum penalty limitation) for failure to file a Form 5500. Criminal penalties also may apply under ERISA law. Short Plan Year Reporting Schedules Like full reporting requirements, Form 5500 and applicable schedules are due by the last day of the seventh month after the short plan year ends. When filing, you should note that the plan year’s begin and end dates on the applicable line at the top of the form, and you should check the applicable box under the form’s Part 1, Line B. Unfortunately, you can’t extend the due date using an automatic extension since the short plan year more than likely won’t match the your corporate tax year. Termination of Plan If you are required to file Form 5500 and decide to terminate your FSA or HRA plan, you must file an annual Form 5500 when you end the plan. As the plan administrator, you are required to notify plan participants of the termination by using a Summary of Material Modification (SMM), and you must furnish a final Summary Annual Report (SAR). The SMM must be given to participants within 60 days of plan termination; however, it’s best to give participants ample notification and provide the SMM as far in advance of the termination date as reasonably possible. Please note: 5500 filings are the legal responsibility of the employer sponsoring the plan. We do not provide this service. We will assist you in preparing the applicable Form 5500 for the reimbursement accounts by providing, upon request, any information maintained in our database that is required to be included on the Form 5500. The employer is responsible for determining if a Form 5500 filing is required. If you have questions concerning 5500 annual reports, or require assistance in determining your plan’s ERISA reporting requirements, contact your tax advisor accordingly.


HRA Reporting under Section 111

The Centers for Medicare & Medicaid (CMS) requires certain reporting for group health plans, including but not limited to, defined contribution medical expense reimbursement arrangements that are funded solely by the employer (referred to as Health Reimbursement Arrangements, or HRAs). The reporting requirements were included in Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Section 111 Reporting). Required reporting entities (as defined below) began reporting HRA coverage to CMS in accordance with Section 111 in the fourth calendar quarter of 2010; however, Section 111 reporting was not required for HRAs with plan years beginning prior to October 1, 2010, until their plan year began in 2011. Exceptions to the Rule The following defined contribution medical expense reimbursement arrangements are not subject to Section 111 reporting:

Healthcare FSAs funded in whole or in part with salary reductions under Code Section 125.

HRAs with an annual benefit amount less than $5,000. Effective October 3, 2011, this amount was increased from the previous amount of $1,000. Additional information is available on the CMS website at https://www.cms.gov/MandatoryInsRep/Downloads/HRACoverage.pdf.

Responsible Reporting Entity Requirements The responsible reporting entity (RRE) is required to satisfy the Section 111 Reporting requirements. For the purposes of Section 111 reporting, the RRE is the insurer or third party administrator for a group health plan; however, in the case of a group health plan that is self-insured and self-administered, the plan administrator or fiduciary is the RRE. If you sponsor an HRA that is administered by us, we are the RRE. Generally, RREs are required to report information for Medicare beneficiaries who have group health plan coverage that is primary to Medicare and for which Medicare is the secondary payer. Under Section 111, RREs must report certain information related to all “active covered individuals” (see below). Active Covered Individuals An active covered individual includes a person who may be Medicare eligible but is considered in “current employment status,” or the spouse or other family member of an employee who is covered by the employee’s group health plan and who may be eligible for Medicare. Active covered individuals are specifically defined as:

All individuals covered under an HRA, age 45 through age 64, who have coverage based on their own or a family member’s current employment status are considered “active covered individuals.”

All individuals covered under the HRA age 65 and older who have coverage based upon their own or a spouse’s current employment status.

All individuals covered under the HRA who have been receiving kidney dialysis or who have received a kidney transplant (individuals with End Stage Renal Disease (ESRD)), regardless of their own or a family member’s current employment status and regardless of their age.

All individuals covered under the HRA, who are under age 45, are known to be entitled to Medicare, and have coverage in the plan based on their own or a family member’s current employment status.

https://www.cms.gov/MandatoryInsRep/Downloads/HRACoverage.pdf


Required Data Needed from Clients In order to satisfy our requirements under Section 111, we must obtain and report information about each active covered individual (ACI) covered under the HRA, including (but not limited to):

Name

Gender

Date of birth

Medicare Health Insurance Claim Number (HICN) or Social Security number (SSN)

Effective date of group health plan coverage

Insurance coverage type (self, spouse, dependent, etc.)

Patient Relationship Code (self, spouse, dependent, etc.)

MSP type (reason coverage is primary – working aged, ESRD, disability, etc.)

Policy holder’s name (if different)

Policy holder’s SSN (if different)

Size of the company

ACI’s group policy number

ACI’s individual policy number

Employee coverage election (individual, family, individual & dependents (not spouse))

Employee status (employed, currently unemployed) Financial Penalties for Noncompliance An RRE that fails to comply with the Section 111 reporting requirements will be subject to a civil money penalty equal to $1,000 for each day of noncompliance for each individual for which information should have been submitted. The civil money penalty applies in addition to any other penalties prescribed by law and in addition to any Medicare secondary payer claim.


SECTION 7 – OPTIONAL SERVICES

Optional Services

We offer a variety of optional services to help ensure compliance, boost plan enrollment, and educate your employees to make the best use of their benefits. These optional services (described in detail below) include the following:

CONEXIS Visa Benefit Card

Healthcare FSA carryover

FSA grace period extension and run-out period

New participant welcome kits

Nondiscrimination testing

CONEXIS Visa Benefit Card (Healthcare FSA and HRA)

The CONEXIS Visa Benefit Card is a stored-value card that makes it easy for participants to pay for eligible expenses under their FSA and HRA. By offering the benefit card you can significantly increase participation rates and contribution levels, which leads to additional FICA tax savings. The benefit card is fully integrated with our system, which provides you and your employees with access to real-time card transaction reporting through secure accounts on our website. In addition, your employees can enroll in Real-time Alerts so they can easily keep tabs on their card activity. Participants may use their benefit cards at qualifying healthcare providers and merchants where Visa is accepted. The card system will confirm the account status, the status of the benefit card, the merchant category code, and the funds that are in the account. The amount of purchase is deducted automatically from their FSA or HRA, and the funds are transferred electronically to the provider or merchant for instant payment. Plan Stacking Capabilities (Healthcare FSA and HRA) Our proprietary benefit card allows for stacking capabilities with our account-based plans. This feature eliminates the need for multiple cards associated with various plans, and it allows you to determine which plan pays first. If the balance is exhausted or the expenses are not listed as eligible on the primary plan, the system would automatically look to the secondary plan to determine if an expense can be reimbursed. Saving Receipts (Healthcare FSA and HRA) Participants must save all itemized receipts or other supporting documentation for all benefit card transactions. That’s because at times, participants may be required to verify that funds were used toward eligible expenses. Proper supporting documentation shows specific details related to the healthcare received or the items purchased, such as the name of the healthcare provider, or merchant, patient name, date of service or purchase, Rx number, description of service or product, etc. Examples include health plan explanation of benefits (EOB), pharmacy receipts, and itemized merchant receipts. Credit card receipts and canceled checks are not allowed because they don’t have the specific details needed to verify the eligible expense.


Auto-substantiated Transactions (Healthcare FSA and HRA) In many cases, the transaction is substantiated automatically by the card system using one of the IRS-approved methods below:

Co-pay match: Additional substantiation may not be necessary if the benefit card payment matches the participant’s co-pay under the employer’s component medical plan for the particular service that was provided. The co-pay must match the participant’s specific co-pay under the employer’s plan. It is not sufficient if the transaction amount matches a co-pay amount under any health plan option provided by the employer; it must equal a multiple of the specific co-pay applicable to the participant.

If expenses match a specific co-pay under the participant’s medical, vision, or dental plan, the participant may swipe their card for an amount up to five times the maximum co-pay amount.

- Single co-pay for a specific benefit – If the transaction equals a multiple of specific co-pay, then no additional documentation is required. However, if the transaction exceeds five times the applicable co-pay amount, documentation is required.

- Different co-pay for a specific benefit – If the transaction equals a multiple of a co-pay for a particular benefit, or a combination of the co-pays for a certain benefit, then no additional documentation is required. However, if the transaction amount exceeds five times the maximum co-pay for a particular benefit, documentation is required.

Please note: If the transaction amount exceeds five times the maximum co-pay for that type of benefit or it is not a multiple of the co-pay or combination of co-pays for a benefit, additional substantiation is required for the entire transaction. Participants are informed of transactions requiring action through Real-time Alerts (if enrolled), their monthly benefit card transaction statements, and online notices. Benefit cards are suspended if participants fail to resolve transactions requiring action.

IMPORTANT: We must receive co-pay information on any new enrollees added during the plan year as well as any co-pay changes for current participants.

Previously Approved Claim Match: Additional substantiation may not be required if the expense is the same amount and merchant type as a previously approved expense (approved by supporting documentation). Each time the card is swiped for subsequent office visits, the receipt will not need to be provided if the expense incurred is the same amount and for the same merchant type. However, substantiation will be required for the initial office visit charge.

Carrier files: Additional substantiation may not be required if an electronic claim file is accompanied by an electronic or written confirmation from the healthcare provider (e.g., health insurance carrier) that identifies the nature of the expense and verifies the amount.

Inventory Information Approval System (IIAS) (available at participating merchants with or without a healthcare-related merchant category code): Under the IIAS, the merchant retains a list of eligible medical items sold by the merchant. The merchant only allows the benefit card to purchase items identified on that list of eligible items. Expenses not on the merchant's eligible list must be purchased with another form of payment (cash, personal credit or debit card, etc.). A participant will not be permitted to use the benefit card at a merchant that does not have a healthcare-related merchant category code or an IIAS.

As many transactions as possible (within compliance with the IRS guidance) will be auto-substantiated. If a claim cannot be auto-substantiated, the participant must submit documentation to substantiate the transaction. The required documentation is the same as required for traditional paper claims (see claims guidelines and procedures).


Cardholder Agreement (Healthcare FSA and HRA) Participants receive a cardholder agreement with their benefit cards. Each participant reads the cardholder agreement and signs the back of the card, agreeing to abide by the terms and conditions of the cardholder agreement. The participant certifies they will use the card for qualified healthcare expenses only and will not seek reimbursement under any other health plan. Each time the participant uses the card, they reaffirm the provisions of the cardholder agreement. Keeping Participants Informed (Healthcare FSA and HRA) Participant education is a key factor in creating a successful benefit card experience, and we have developed communication materials to assist in the employee education process. Our benefit card program includes a monthly comprehensive activity statement), real-time activity alerts, online repayment, and comprehensive communications to help your employees understand how to use the card and maximize their savings. Real-time Alerts (Healthcare FSA and HRA) Real-time Alerts are immediate messages that keep participants informed of their benefit card activity. With this service, participants can decide which events they’d like to know about – they can select all Real-time Alerts or just pick those that inform them of transactions requiring action. To sign up, here’s what participants need to do:

Log in to their online account.

Click the Real-time Alerts quick link in the menu on the left.

Select the messages they want to receive. MyCONEXIS Mobile App (Healthcare FSA and HRA) The MyCONEXIS app makes it easy to clear card transactions requiring action and request reimbursement from a WageWorks FSA or HRA. With this app on a participant’s mobile device, the individual can:

Check account balances and important plan details

Use the camera on their device to take and submit photos of itemized receipts or other supporting documentation

Submit a reimbursement request for eligible healthcare or dependent care expenses

Clear up unresolved benefit card transactions

Receive and review Real-time Alerts FSA and HRA participants with an iPad®, iPhone®, and iPod touch® can search and download the MyCONEXIS app by visiting the App StoreSM. Individuals with Android™ devices should look for the MyCONEXIS app in the Google Play™ Store. For more information, visit the website. Apple, the Apple logo, iPhone, iPad, and iPod touch are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android and Google Play are trademarks of Google, Inc.


Online Repayment (FSA and HRA) Our online repayment feature allows participants to resolve transactions and reactivate their cards. If a participant’s card has been deactivated, they can log into their online account to make a real-time online payment with an electronic check. Making an online payment for all their outstanding transactions will immediately pay back their Healthcare FSA or HRA plan and will reactivate their benefit card. Additional Cards (Healthcare FSA and HRA) Your participants are able to request replacement cards when benefit cards are lost or stolen. Participants can also order additional cards for their spouse and/or qualified dependents (ages 18 years or older) through their online account.

Healthcare FSA Carryover Feature

Employees may consider enrolling in a Healthcare FSA, which means increased tax savings – for them and you. Plus, the carryover provision gives additional flexibility and more plan options to consider. Participants may also perceive an FSA with a carryover as a way to have more control over their healthcare spending since the risk of losing money decreases. As the plan sponsor, you are permitted (but not required) to amend your Healthcare FSA plan(s) to allow your participants to carry over up to $500 of unused funds into the following plan year. However, Healthcare FSA plans may not include both a grace period (see below) and the $500 carryover – you must decide whether to include either of these plan features. The $500 carryover of unused funds does not count toward the maximum amount of salary reduction contributions that the employee may elect. In addition, the guidance did not change the maximum amount of employee salary reduction contributions, which is $2,550 per plan year (this amount may be indexed for inflation in the future). Employers may also set a lesser maximum limit if desired, and if so, that amount must be disclosed to participants. The use-it-or-lose-it rule does not impact a Dependent Care FSA, and funds remaining in this account are forfeited after the plan year, or if applicable, the run-out period. You can offer a carryover provision for your Healthcare FSA plan and a grace period for the Dependent Care FSA – it’s your choice. Action Required Two action items are required if you choose to include the carryover provision in your Healthcare FSA plan:

1. Amend your cafeteria plan documents and adopt the carryover provision before the end of the plan year to which the carryover applies. The Summary of Materials Modification (SMM) is a regulatory requirement. If needed, please contact your relationship manager for a sample amendment.

2. Inform participants of the plan changes. Give adequate, timely notification, particularly if your plan now includes a grace period that was adopted previously for the plan year.


Two-month and 15-day Grace Period and Run-out Period (FSA) IRS guidance issued in 2005 allows an FSA plan sponsor to include, as part of its plan design, an extended grace period during which FSA participants may access unused funds remaining in their accounts at the end of the plan year to pay for eligible expenses. This grace period is exactly two months and 15 days long and begins on the first day of the next plan year. As the plan sponsor, you may choose to include this feature as part of your FSA plan; however, if this option is selected, your plan can’t include the Healthcare FSA carryover feature mentioned previously. Your plan may include the carryover feature for the Healthcare FSA and a grace period for the Dependent Care FSA. Additionally, you may establish a run-out period concurrent with the grace period. The run-out period for claims incurred during the plan year and claims incurred during the grace period will end on the same day. In no event can the grace period exceed two months and 15 days following the end of the plan year. The plan document must be amended in advance if you wish to provide this optional grace period. Some people get a run-out period confused with a grace period extension, so here’s an example that shows the difference. Let’s say your plan year begins on January 1 and ends on December 31.

The run-out period gives participants extra time to submit reimbursement requests for eligible expenses incurred during the plan year. If Steve visits the doctor in December (the last month of the plan year), he may submit a reimbursement request for that expense during the run-out period. Steve will be reimbursed from the funds left in his Healthcare FSA from the previous year.

A grace period extension gives participants extra time to spend funds left in their accounts from the previous year. If Lisa buys eyeglasses in January (the month after the plan year ends), she may use the remaining funds from the previous year to cover that expense. The grace period lasts two months and 15 days, so in this example, the grace period ends on March 15.

Please note: The grace period is an optional plan feature set by the employer. The grace period details, including the time limit for incurring and filing claims, must be included in the Summary Plan Description. The Standard Solution The standard solution includes the following:

The grace period will end two months and 15 days after the end of the plan year.

The grace period can be applied to both the health and Dependent Care FSA.

The run-out period for claims incurred during the plan year and claims incurred during the grace period must end on the same day.

Eligible expenses incurred during a grace period and approved for reimbursement will be paid first from available amounts remaining at the end of the plan year to which the grace period relates and then from any amounts that are available to reimburse expenses incurred during the current plan year.

- Claims are paid in the order they are received. This may impact the potential reimbursement of eligible expenses incurred during the plan year to which the grace period relates to the extent the expenses have not yet been submitted for reimbursement.

- If claims are submitted out of order, a one-time reallocation may be provided at the end of the run-out period.


To allow your participants to use the benefit card to access funds left over from the previous plan year, your Healthcare FSA must allow card usage during the grace period. Any Healthcare FSA funds that remain in the account will be applied toward card transactions made during the grace period. When the remaining funds are depleted, FSA dollars from the current plan year will be used toward the card purchases.

If your Healthcare FSA does not allow benefit card usage during the grace period, participants may use another form of payment (cash, personal debit or credit card, etc.) to pay for eligible expenses during the grace period, and submit a manual claim and supporting documentation. Otherwise, any eligible benefit card purchases made during the grace period are considered transactions under the current plan year, and the funds will be pulled from the new plan year account.

100 percent of each participant’s remaining account balances will be available during the grace period.

- The expense may be split between the previous plan year and the current plan year. However, expenses may not be paid out of both plan years (i.e., no “double-dipping”).

- There will be no cap or limited benefit definition applied to the funds from the previous plan year.

Example: Emma, a participant

Emma has $300 remaining in her Healthcare FSA from the previous plan year. She buys a pair of $500 eyeglasses in January – the month after the plan year ends. When Emma submits her claim, we will apply the $300 of unused funds from the previous plan year and then use funds from the current plan year to cover the remaining portion of the expense.

In order for your participants to take advantage of the grace period, each must be:

A participant in the applicable FSAs on the last day of the plan year to which the grace period relates, or

A qualified beneficiary who is receiving COBRA coverage under the Healthcare FSA on the last day of the plan year to which the grace period relates.

Welcome Kit Options (FSA and HRA Benefits)

Upon receipt of your enrollments, you may choose to send an enrollment confirmation to your participants as well as additional helpful plan information. This communication can include the following choices:

Participant Election Confirmation Statements – provides confirmation details of the plan(s) in which the participant is enrolled; their unique account number; instructions on how to access personal account information, online resources and reimbursement requests; and our contact information for assistance.

“Lite” Welcome Kit – includes the confirmation statement noted above, as well as your choice of the following (two pages total allowed in addition to your confirmation letter):

- Healthcare FSA/Dependent Care FSA Frequently Asked Questions (FAQs)

- Healthcare FSA FAQs

- Dependent Care FSA FAQs

- HRA FAQ

- Benefit Card flyer

- Auto-rollover FAQ

- Grace Period FAQ

- Healthcare FSA Carryover FAQs


Full Welcome Kit – includes the confirmation statement mentioned above, as well as your choice of the following (five pages total allowed in addition to your confirmation letter):

- Healthcare FSA/Dependent Care FSA FAQ

- Healthcare FSA FAQ

- Dependent Care FSA FAQ

- HRA FAQ

- Benefit Card Flyer

- Auto-rollover FAQ

- Grace Period FAQ

- Healthcare FSA Carryover FAQs

Nondiscrimination Testing

In general, account-based plans cannot discriminate in favor of highly compensated or key employees as defined by Internal Revenue Code (IRC). Although discrimination does not automatically result in disqualification of the plan, participants who are highly compensated or key employees may lose some or all of the tax advantages. If you would like for us to perform non-discrimination testing on your behalf to meet compliance requirements, please reach out to your Relationship Manager for additional details.

account based plans - wageworks · 2017. 9. 18. · organization saves money through reduced fica...

Documents