Cafeteria Plans

Under IRS Code 125, the employer can sponsor an employee benefit program known as a Cafeteria Plan (“Plan”) for their employees. The employer gives this opportunity to use a salary conversion arrangement through which you can use pre-tax dollars to pay for your benefits instead of paying for the benefits through after-tax payroll deductions. By paying for the benefits with pre-tax dollars, you save money by not having to pay social security and income taxes on your salary reduction.

There are several components within a Section 125 Café Plan that can be offered as stand alone or combined together:

 

Premium Plan: This plan is often called a Premium Only Plan (POP Plan) if it is offered as a stand alone component within the Café Plan.  The component does not offer reimbursement of any payroll deductions. It merely acts as a mechanism to allow the employee to pay for their portion of the employer sponsored benefits tax free.  The employer will forward payroll deducted premiums to the proper insurer on behalf of the each employee enrolled.

 

Flexible Spending Accounts (FSA): FSA’s allow for an employee to set aside dollars which are payroll deducted pre-tax to pay for certain qualified expenses and receive reimbursement of their dollars for each qualified expense.  There are three types of FSA’s which can be offered.  An employer may offer one, two or all three.  Employees must be careful in planning how much they are going to set aside because if they do not use their dollars by the end of the plan year, they will lose it.

Medical FSA.: allows for the employee to set aside pre-tax dollars to pay for qualified medical expenses not reimbursed from insurance benefits, employer dollars or other reimbursement programs.  The expenses which are qualified fall under Section 213 of the Internal Revenue Code.

 

There are three types of Medical FSAs:

1. The General Purpose is for all medical expenses applicable to Section 213(d) of IRC.  This FSA is not compatible with an HSA.

 

2. The Limited Purpose FSA is compatible with an HSA.  Applicable expenses within Section 213(d) of the IRC are limited to dental and vision and preventive.

 

3. The Post Deductible FSA is also compatible with an HSA.  Medical expenses qualified under Section 213(d) of IRC are allowed once the minimum deductible amount allowed has been met by the HSA health plan.  For the tax year 2015, the minimum deductible for a single person is $1300 and $2600 for family.

Dependent Care FSA: allows for the employee to set aside pre-tax dollars to pay for daycare expenses of a qualified dependent under the age of 13 or an elder person.  This can be a huge tax savings for the employee who has daycare expenses.

 

Section 132 Transportation Plan:  This allows for an employee to payroll deduct pre-tax costs for parking and transportation to and from work.  Expenses such as commuter train, parking and commuter bus fares are included.

 

EBAS will work personally with your employees as an advocate for their medical claims.

FSA Eligible Expenses and Items

HSA Plans

HSA Reference Manual

 

An HSA is a tax-exempt account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who, for the months for which contributions are made to an HSA, is covered under a high-deductible health plan.

 

The IRS sets contribution limits each tax year.  For 2017 the contribution limits are:  $3,400 for a Single Insured person and $6,750 for a Family Insured person.  An account owner who is age 55 or older can add an additional $1,000 per tax year contribution.

 

Who is eligible to establish an HSA?

 

An “eligible individual” can establish an HSA. An “eligible individual” means, with respect to any month, any individual who: (1) is covered under a high-deductible health plan (HDHP) on the first day of such month; (2) is not also covered by any other health plan that is not an HDHP (with certain exceptions for plans providing certain limited types of coverage); (3) is not entitled to benefits under Medicare (generally, has not yet reached age 65); and (4) may not be claimed as a dependent on another person's tax return.

 

HSAs and FSA Cafeteria Plans

 

For group benefit plans, HSAs are NOT replacing Cafeteria Plan Medical FSAs (Flexible Spending Accounts).  They can work together in the same benefits program.   Since HSAs are only available to those who have a qualified high deductible health plan, the employees who are not participating in the group health plan can participate in the General Use Medical FSA.  There is also a Limited Use Medical FSA or Post Deductible Medical FSA available for HSA participants.

 

 HSAs and HRA Plans

 

HRA (Health Reimbursement Arrangements) can also work with an HSA in a benefits program as long as the minimum IRS requirements are met for the HSA.  EBAS can help you with administration of HSAs and recommends them to employer groups and individuals depending upon the situations for each client.

 

 HSAToday® Claims VaultSM

 

EBAS will service the HSA for each account holder and process the claims accordingly.  Our system has a unique Claims VaultSM  feature which allows for an account holder to have options within their account for recordkeeping purposes.  This technology is not supported by most banks.  It is offered by few Plan Service Providers who are committed to assist the account holder with recordkeeping of qualified or non qualified claims.

 

The platform for the Claims VaultSM allows the account holder options to meet their personal needs.  EBAS, as the Plan Service Provider, can offer two options to the account holder to assist them with their personal needs:

 

Option 1… This option allows individuals to store their own claims and receipts in the Claims VaultSM and self –attest the validity of their claims OR request personal assistance from EBAS for verification of the claims.

 

Option 2 … This option provides greater integrity of the data being stored in the Claims VaultSM.  EBAS serves as a true service –oriented client advocate by providing certification on all claims entered by the account holder.   This certification provides the account holder with the peace of mind of knowing their information is accurate when it comes time to file taxes or if the account is ever audited.  Besides peace of mind, here are other reasons the services by EBAS are beneficial:

 

• There is a 20% penalty plus applicable Federal and State taxes if the withdrawal from the HSA is deemed non-qualified. EBAS can help avoid these penalties.

• Relief from the worry of having to track and keep up with receipts. Copies of the receipts are readily available whenever needed.

• Account holders can see the status of their Requests for Withdrawal and Claim Receipts online, anytime.

 

On-line Access Gives Complete Account Management At Your Fingertips

 

A secure on-line account management tool empowers clients with the tools and information they need to make wise and informed decisions about their healthcare. This web portal gives you and your clients 24/7 access to:

 

• Account Balances and History

• On-line Claims Storage Through the Claims VaultSM

• Deposit & Withdrawal Capabilities

• Important Forms & Documents

• Up-to-Date Payment History

• Recent News and Benefits Updates

• Account Statements

• Tax forms updated on-line with each deposit and distribution

 

Investments

What Are the Benefits of Investing?  The HSAToday® Investment Program offers qualified account holders a diverse range of investment alternatives to choose from, along with four professionally managed model portfolios that support varied investment objectives and risk tolerance.  Utilizing an HSA as a long-term investment vehicle is an excellent way for clients to add to their retirement strategy. Here are just a few reasons why:

 

HRA Plans

The HRA is a reimbursement program which the employer sets aside dollars for each employee in a non-discriminatory way to help pay for medical expenses.  The money stays with the employer until it is claimed by the employee for qualified medical expenses outlined in the plan design.  To best describe the available money is to refer to it as ‘Employer exposure of funds’ for reimbursement of qualified medical expenses determined by the plan designed by the employer which were chosen from the eligible expenses outlined in Section 213(d) of the IRC.

 

When EBAS provides the services to help administer these types of plans, it is usually recommended to reimburse the employee who will then have to pay the provider.  There are several reasons why doing this is best but the most valuable reason is because these plans are consumer driven plans, and when the employee is engaged with the costs of their health care expenses, they will understand and appreciate the value of the benefit offered by the employer.

 

Integrated HRAs: An HRA that is 'Integrated' (linked to an employer group health plan) will be designed to meet healthcare reforms under the Affordable Care Act.

 

QSEHRA: As of January 1, 2017, an employer that does not have a group health plan in place can establish an HRA to reimburse employees for their insurance premiums that are not sponsored by any employer plan.  This is called QSEHRA (Qualified Small Employer Heath Reimbursement Arrangement).  EBAS can assist with this plan set up, documents and procedures for a small employer to self administer.

 

There are many different ways to designs your benefits plan with an HRA.  EBAS will analyze the current plan and recommend plan designs which best suit the group.  An employer may decide to allow choices for the employee’s.  The flexibility which an employer can create a customized benefit plan is key to the success of a benefits plan design which create longevity and continuity within the employer benefits plan as a whole.

 

Whatever plan design we assist you with will work to educate and engage the employee as a consumer and a participant in a program which offers more flexibility and choices.  We have always created plan design options that will lower employee premium and health care cost exposure along with creating an efficient plan that lowers your benefit costs.

• Tax-Free Investments

 

 

 

• Portability

 

 

 

• Flexibility

 

 

 

• Multiple Investment Options

 

 

 

 

-All contributions and earnings in an HSA are considered tax-free by the IRS and will not be taxed unless withdrawn for non-medical reasons.

 

 

-There is no use-it-or-lose-it rule associated with HSAs. HSAs are owned by the account holder and roll over year after year. Even if your clients change jobs, the money in the account is theirs to keep.

 

 

-Account holders can change the amount they want to invest and the way the funds are invested. And they can always access the money in their account if the need arises.

 

 

-Account holders can pick from one of four investment models or create their very own custom investment portfolios.

 

 

COBRA

COBRA / State Continuation Administration Services:

The following services are included in the COBRA administrative fee:

Initial Notification

 

 

 

Qualifying Event Notifications

 

 

 

Confirmation Letters to participant

 

 

Monthly premiums

For HRA or FSA COBRA participants:

Claims Adjudication

 

 

Claims Payment Options:

(Each payment option includes the participant receiving a printed Explanation of Benefits (EOB) which also includes year to date account totals).

 

 

Claims Submission Options:

 

 

Account Balance and Information Access:

 

 

Enrollment

 

 

Client Support

 

• EBAS will include this in the enrollment packet to each eligible employee and a copy will be included for qualified dependents

 

 

• EBAS will send the notifications to the employee and qualified beneficiaries whenever there is a qualifying event.

 

 

• EBAS will send the confirmation to the employee and qualified beneficiaries

 

 

 

 

• EBAS will collect and process the monthly payments

 

 

 

 

• The services will be the same as for active employees

 

 

• The services will be the same as for active employees

 

 

• The services will be the same as for active employees

 

 

• The services will be the same as for active employees

 

 

• Toll Free phone support Monday – Friday 8 am to 4:30 pm CST

Defined Contribution Plans

These plans work well for employers that want to create a benefits program that gives a fixed cost for the employer, but allowing flexibility for the employee.  There are two variations of Defined Contribution Plans:

The first is a Flex Credit Plan that works within the Café Plan.  This program is where the employer will give the employee a ‘Flex Credit’ approach to buying their benefits.  The Flex Credit is a set dollar amount that the employer contributes to the plan.  Then the employer will create a ‘menu’ of benefits for the employee to choose from with the Flex Credits.  If the cost of the benefits chosen by the employee exceeds the amount of the Flex Credits, the employee will simply pay for the excess with pre-tax dollars.  The menu could include the following:

 

 • Ancillary employer sponsored products such as cancer insurance, accident plans and Flexible Spending Accounts offered within the Café Plan.

 

Please note:  The Defined Contribution Plan is generally not a health plan which means that it may not be a qualified health plan for PPACA purposes.  Therefore, if a large employer does not offer a qualified health plan, they may be subject to penalties under PPACA laws.

 

Employee Benefits Administration Services • 218 N. Broadway St., Ellsworth, WI 54011

715.273.0128 • 866.341.EBAS • (fax) 715.273.0147

© EBAS 2017