Compliance Watch

When an employee who has a balance in their health reimbursement arrangement (HRA) terminates from the plan (either due to termination of employment or any other reason that would cause them to lose eligibility, like a reduction in hours), the employer is not permitted to “cash out” the HRA. In other words, the employer is not allowed to provide cash or other benefits in an amount equal to some or all of the HRA balance. This is because cashing out would trigger taxation of all HRA distributions, even if they were used to pay qualified medical expenses.

On June 22, 2022, Philadelphia Mayor Jim Kenney, signed the Employee Commuter Transit Benefit ordinance. The ordinance takes effect on December 31, 2022, and requires employers with 50 or more covered employees to provide commuter transit benefits for their workers.

Flexible Spending Account (FSA) plans must be designed to meet the requirements defined in federal tax code, but employers have several opportunities to choose features that best fit the needs of their organization.

September 27, 2022

In light of the security and privacy incidences we hear about in the news on a daily basis, it seems to be a good time to highlight Cyber Security in this quarter’s Compliance Watch. On March 21, 2022, President Joe Biden gave an official statement regarding Russian cyberattacks against the U.S. — making his most prominent alert yet about what he called new intelligence concerning the Putin regime’s plans.

Most of you have probably experienced the following scenario: An employee comes to you and says that they made a mistake during open enrollment, and they would like to make a change to their elections. If they realize their mistake and notify you before the beginning of the FSA or HRA plan year, you are permitted to make any change that they would like to make.

With changes to workplace arrangements and working conditions following the COVID pandemic, employers are seeking ways to allow their employees to use already contributed commuter benefits funds, and to differentiate their welfare benefits package. Questions surround the use of dollars allocated for 2021 plan years, and what to do for 2022 and 2023 with many unknowns about the future.

Most private sector employers, including non-profit organizations, are subject to ERISA. Most government plans, as well as church and church-related plans are excluded.

On April 29, 2022, the Internal Revenue Service released the 2023 maximum amounts for high deductible health plans (HDHPs) and Health Savings Accounts.

Normally the IRS adjusts the standard mileage rates at the beginning of each year, but occasionally they announce changes at other times to correspond with current costs.

Group health plans and health insurance issuers must provide benefits for certain items and services related to testing for the detection and diagnosis of COVID-19, including over-the-counter (OTC) COVID-19 tests. Effective January 15, 2022, the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act require that these services be provided without imposing cost-sharing requirements, prior authorization, or other medical management requirements.

While the guidance significantly expands access to low-cost or no-cost COVID-19 at-home tests, the various range of solutions and implementation creates a communication challenge to employers. Sponsors of group health plans must review and carefully guide participants through the coverage details such as “direct coverage” or “reimbursement” options. Clear communication is especially important if the employer offers plans from multiple carriers.

On February 4, 2022, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued Frequently Asked Questions (FAQs). These FAQs provide additional guidance on the requirement to provide coverage for OTC COVID-19 tests without a prescription or individualized clinical assessment from a health care provider.

Prior to the expansion of the health plan free testing mandate to include OTC COVID tests, the IRS issued a reminder that at-home testing expenses are eligible expenses under a health FSA, HRA, or HSA. The guidance confirmed that COVID testing is an eligible expense because the cost to diagnose COVID is a Section 213(d) medical expense.

Worth noting however, the IRS imposes a blanket rule prohibiting individuals from “double dipping” with account-based plans that prevents using the account for expenses reimbursed by the health plan. The prohibition also includes tax deductions. Now that OTC COVID tests are generally covered by the health plan, employees will need to carefully consider the best way to be reimbursed for OTC tests, considering that health plans will pay in full and leaving health FSA, HRA, or HSA dollars for other expenses. Employers are responsible to communicate all necessary facts to aid in the decision.

Notable guidance within the FAQs include:

Limits on Coverage: Plans or issuers may limit reimbursement to the lesser of the actual price of the test, or $12 per test. Each covered participant, beneficiary, or enrollee may be reimbursed for at least eight tests per 30-day period (or per calendar month). The plan or issuer must calculate the reimbursement based on the number of tests in a package.

Direct-to-Consumer Coverage: Plans or issuers that provide direct coverage of OTC COVID-19 tests through both a pharmacy network and a direct-to-consumer program, and otherwise limits reimbursement for OTC COVID-19 tests from nonpreferred pharmacies or other retailers to the lesser of the actual price of the test, or $12 per test, will not be subject to enforcement action. To provide adequate access, the plan or issuer must make OTC COVID-19 tests available through at least one direct-to-consumer shipping mechanism and at least one in-person mechanism. The direct-to-consumer mechanism may include online or telephone ordering, but the plan or issuer must cover the cost of shipping.

FSA/HRA/HSA: The cost of OTC COVID-19 tests purchased after January 15, 2022, are eligible for reimbursement from a group health plan or issuer. Individuals may not seek reimbursement more than once for the same medical expense. When notifying individuals about any direct coverage or reimbursement, the plan or issuer must include a reminder stating that the same medical expense may not be submitted to a health flexible spending account (FSA), health reimbursement arrangement (HRA), or health savings account (HSA).

Impact of Supply Shortage: Plans or issuers will not be out of compliance if they temporarily cannot provide adequate access because of a supply shortage.

Fraud or Abuse: Plans or issuers may take reasonable steps to prevent, detect, and address fraud and abuse. For example, a plan or issuer can require tests to be purchased from an established retailer, substantiate the purchase by carefully reviewing receipts and documentation, and require the individual to attest that the product will not be resold.

Self-Collected Sample with Lab Processing: OTC COVID-19 tests must be self-administered and self-read without the involvement of a health care provider. The OTC COVID-19 coverage rules do not apply when an individual sends the specimen to be processed in a laboratory. These tests must be ordered by a healthcare provider.