Kilpatrick Townsend Health & Welfare Blog

Legal, Regulatory and Policy Perspectives regarding employer-sponsored health and welfare benefits, including the impact of the Affordable Care Act.

Posted on Wednesday, April 23 2014 at 12:27 pm by Mark Stember

2015 HSA Limitations

 This morning the IRS released the health savings account (HSA) inflation adjusted amounts for the 2015 calendar year. Both the current 2014 amounts and the new 2015 amounts are set forth below.

 The HDHP minimum annual deductible for self-only coverage increases from $1,250 in 2014 to $1,300 in 2015. The HDHP out-of-pocket maximum for self-only coverage increases from $6,350 in 2014 to $6,450 in 2015.

 The HDHP minimum annual deductible for family coverage increases from $2,500 in 2014 to $2,600 in 2015. The HDHP out-of-pocket maximum for family coverage increases from $12,700 in 2014 to $12,900 in 2015.

 The HSA maximum contribution limit for self-only coverage increases from $3,300 in 2014 to $3,350 in 2015. The HSA maximum contribution limit for family coverage increases from $6,550 in 2014 to $6,650 in 2015.

 The maximum catch-up contribution remains at $1,000 for 2015.

Posted on Wednesday, April 9 2014 at 11:37 am by Mark Stember

Provider Nondiscrimination

Section 2706 of the Public Health Service Act (as amended by the ACA) provides that a group health plan shall not discriminate with respect to participation under the plan or coverage against any health care provider who is acting within the scope of that provider’s license or certification under applicable state law. This provision was effective for 2014 and applies to non-grandfathered group health plans. In FAQ guidance issued by the Agencies last year, the Agencies took the position that this provision was “self-executing” and that they would not issue any guidance on this requirement. Since that time, many group health plans have ignored this requirement, feeling that it was really an issue for their third party administrators who are responsible for maintaining the networks and handling provider issues.

However, in a curious turn of events, the Agencies are now asking for public comments on this issue. Typically, the Agencies do not request information from the public unless they plan on issuing detailed guidance in the near future. Interested parties must submit comments by June 10, 2014. A link to the request is below.

Link to RFI

Posted on Monday, March 31 2014 at 10:30 am by Mark Stember

Correction of Health FSA Payments

The IRS recently released, CCA 201413006, which is an IRS Chief Counsel Advice memorandum. It is informal guidance only.

This CAA addresses correction procedures for improper health FSA payments. It provides that the correction procedures for debit cards in the proposed cafeteria plan regulations may be applied to any improper health FSA payment. In applying these procedures, an employer may contract with a third party administrator to perform the correction procedures. The CCA also provides that improper payments can be reported as income to the employee, but only as a last resort, and only after applying the proper debit card procedures first. If an employer reports income numerous times as a result of improper payments, such reporting would tend to show that the employer’s health FSA is not applying the proper substantiation procedures. Last, any reporting of income to the employee must be on a Form W-2, and not a Form 1099 as many employers have used in the past.

Link to Memo

Posted on , March 31 2014 at 10:28 am by Mark Stember

Interaction Between HSA and Health FSA

The IRS recently issued CCA 201413005, which is an IRS Chief Counsel Advice memorandum. It is informal guidance only.

The CCA addresses seven separate issues with respect to HSAs and health FSAs. One of the issues provides that an individual who participates in a general purpose health FSA and voluntarily elects to participate in an HSA-compatible health FSA for the following year, can have unused amounts from the general purpose health FSA carried over to the HSA-compatible health FSA and is eligible to contribute to an HSA for the entire following year. In a related issue, the employer may also provide that anyone who elects an HDHP for the following year, will automatically be treated as electing an HSA-compatible health FSA so that such account can receive any rollovers from the general purpose FSA. Both of these statements are helpful to employers because they allow participants to easily transition from a non-HDHP medical option to an HDHP medical option without the typical forfeiture of HSA contribution rights, or the forfeiture of health FSA funds. Speaking of forfeitures, the CCA guidance also allows individuals to voluntarily decline a carryover of unused health FSA amounts, thereby also allowing the individual to contribute to an HSA starting January 1.

Link to Memo

Posted on Tuesday, March 25 2014 at 1:01 pm by Mark Stember

Severance Payments are FICA Wages

This morning the US Supreme Court issued a ruling providing that severance payments are taxable FICA wages. In United States vs. Quality Stores, Quality Stores made severance payments to employees who were involuntarily terminated as part of Quality Stores’ Chapter 11 bankruptcy. Quality Stores paid and withheld income and FICA taxes from the severance payments. Later, Quality Stores sought a refund on behalf of itself and former employees for FICA taxes withheld and paid. When the IRS did not allow the refund, Quality Stores initiated proceedings in Bankruptcy Court, which eventually reached the Supreme Court.

After an exhaustive review of the historical aspects of the Tax Code and FICA, dating back to 1939, the Supreme Court determined that the definition of FICA wages is meant to be as broad as possible. Section 3121(a) defines “wages” broadly as “all remuneration for employment.” Severance payments fit this definition because they are a form of remuneration made only to employees in consideration for employment. Therefore, severance payments are FICA wages and are subject to FICA tax withholding.

A copy of the ruling can be found on the court’s webpage.

Topics

Subscribe to Kilpatrick Townsend's Legal Alerts to help you stay current of new and noteworthy legal issues that may affect your business.

Resources