Pacific Benefits iFlex, Inc.

Monthly Limits for Qualified Transportation Plan Announced

2011-10-31T08:56:00.000-07:00

According to IRS Rev. Proc. 2011-52, beginning in 2012, the combined monthly limit for Qualified Transportation in a commuter highway vehicle and any transit pass is $125. While the monthly limit for qualified parking is $240, which is a $10 increase from the 2011 limit.

In 2009 due to the economic stimulus package, the maximum cap for commuter highway vehicle and any transit pass was temporarily increased to $230.

Qualified Transportation Plan (QTP) is an employer provided voluntary benefit program that allows employees to reduce their monthly commuting expenses. Salary contributions used for eligible expenses are excludable from gross income subject to federal taxes. QTP benefits consist of:
- Commuter transportation in a commuter highway vehicle
- Transit passes
- Qualified parking
Qualified bicycle commuting expenses

Click image above to enlarge.

Estimated Out-Of-Pocket Costs for 2012

2011-10-04T13:13:00.000-07:00

Having trouble deciding what your annual election should be? While everyone’s needs are different and your annual election should be estimated based on your specific needs, according to a recent survey from AON-Hewitt, a national consulting firm, the average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, are expected to be $2,275 in 2012, compared to $2,007 in 2011, and $1,691 in 2010.

IRS Increases Mileage Rate to 23.5 Cents Per Mile

2011-06-23T13:59:00.000-07:00

The Internal Revenue Service announced today an increase in the optional standard mileage rates for the final six months of 2011 effective July 1, 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for medical expenses.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

New Legislation to Strengthen and Expand HSAs and FSAs

2011-06-03T14:30:00.000-07:00

Last week, Sen. Orrin Hatch (R-Utah) introduced the Family and Retirement Health Investment Act of 2011 that would modify and streamline rules for both HSAs and FSAs. Companion legislation was introduced in the House by Rep. Erik Paulsen (R-Minnesota) to improve health care through expanded HSAs.

Support is needed, as Hatch's bill specifically includes the following provisions:

Catch-up Contributions
Allows the spouse of an HSA account holder to double their catch-up contribution to account for their eligible spouse.

Contributions for Medicare Part A Eligible
Allows seniors enrolled in Medicare Part A only to continue contributing to their HSAs.

FSA Rollover
Permits up to $500 of unused FSA funds to carry forward to the following year.

Transition to HSAs
To ease transition to HSAs, clarifies current law to provide employers greater opportunity to roll-over funds from employees' FSAs or HRAs to HSAs.

Removes OTC Restrictions
Repeals restrictions on use of HSA/FSA/HRA dollars for the purchase of over-the-counter medications without a prescription.

Purchase of Health Insurance from HSA
Allows purchase of COBRA coverage, long-term care insurance, and HSA-qualified policies from an HSA.

Medicaid Health Opportunity Accounts
Provides states with the flexibility to create Health Opportunity Accounts for their Medicaid population.

Lifts Limits on Deductibles for Employer-Sponsored Plans in the Small Group Market
Repeals the recently enacted deductible limits of $2,000 for single coverage and $4,000 for family coverage for plans sold to small employers.

Expanded Definition of Qualified Medical Expenses
Modifies the definition of "qualified medical expenses" to promote wellness, and encourage exercise and better diet, by allowing HSA and FSA dollars to be used for gym memberships and meal replacement products.

Click here to read S. 1098 (Hatch).
Click here to read H.R. 2010 (Paulsen).

Act Now!

We urge you to act immediately! Please contact your legislators in Washington, and ask them to actively endorse these bills. We also encourage you to send a letter to your representatives and urge them to sign on immediately.

To locate contact information for your members of the House of Representatives, click here.
To locate contact information for your Senators, click here.

Also, you can visit savemyflexplan.org for more information.

News from Pacific Benefits iFlex, Inc.

2011-04-04T09:48:00.000-07:00

It is with a heavy heart that we announce the departure of our Asst VP of Administration, Pam Criswell. Pam has decided to pursue a career in the entertainment staging field and we wish her all the best in her future endeavors.

On a happy note, we are delighted to announce that Wil Helm has been promoted to Senior Team Lead. Many of you have had the opportunity to work with Wil as he has been with us for 5 years. Wil is extremely knowledgeable with the process of cafeteria plan administration. He has taken over many of Pam's prior duties and will continue to be a valuable resource for both you and your employees. Wil can be reached via email at wil@pacificbenefits.com or at
(916) 363-2101 extension 251.

As we enter our 21st year in business, we continue to be the leader in the Flexible Benefit Administration and Consulting field. There are fresh challenges with the advent of Health Care Reform and its impact on Benefit Plans, and we will bring you and your employees the very best in Flex administration and consulting services and keep you informed of any and all changes that affect your Flex plans (FSAs, HSA, HRAs).

Legislation Introduced to Repeal Flexible Spending Account Limits

2011-02-22T08:29:00.000-08:00

This week, Senator Kay Bailey Hutchison (R-TX) and Congressman Erik Paulsen (R-MN) introduced, in the Senate and House, respectively, the Patients’ Freedom to Choose Act to remove future contribution limits on FSAs as well as include over-the-counter medicines as an allowable medical expense.

On January 1, 2011, a provision in the health care law took effect prohibiting individuals from using funds from either HSAs or FSAs to purchase over-the-counter medication unless they have a prescription from their doctor. In addition, starting in 2013, PPACA institutes a $2,500 federal cap for all FSA contributions. Over 80 percent of all large employers that offer an FSA to their employees include a limit that is over this $2,500 threshold.

Sen. Hutchison’s and Rep. Paulsen’s legislation repeals the arbitrary cap on FSA contributions by striking the $2,500 restriction. It also repeals the provision that requires patients using HSAs or FSAs to have a prescription from their doctor before they purchase over-the-counter medication.

HHS acts to control "unreasonable" health insurance rate increases

2010-12-28T12:04:00.000-08:00

New proposed Affordable Care Act regulations announced today by the U.S. Department of Health and Human Services (HHS) will bring new transparency and scrutiny to proposed health insurance rate increases. These proposed rules allow HHS to work with states to require insurers to publicly disclose and justify unreasonable rate increases.

Today’s proposed regulations will build on these efforts by requiring insurers in all states to publicly justify any unreasonable rate increases beginning in 2011. In 2011, proposed rate increases of 10 percent or higher will be publicly disclosed and thoroughly reviewed to determine if the rate increase is unreasonable. After 2011, state-specific thresholds would be set using data and trends that better reflect cost trends particular to each state.
Insurance company’s justifications for unreasonable increases will be posted on HealthCare.gov and the insurance plan’s website.

“The proposed rate review policy will empower consumers, promote competition, encourage insurers to do more to control health care costs and discourage insurers from charging premiums which are unjustified,” said Jay Angoff, director of HHS’ Office of Consumer Information and Insurance Oversight.

Under the proposed regulation, states with effective rate review systems would conduct the reviews. If a state lacks the resources or authority to do thorough actuarial reviews, HHS would conduct them. Meanwhile, HHS will continue to make resources available to states to strengthen their rate review processes.

In 2014, the Affordable Care Act empowers states to exclude health plans that show a pattern of excessive or unjustified premium increases from the new health insurance exchanges.

An Early Joint Gift from the IRS, DOL and HHS: No 105(h) Nondiscrimination Compliance or Penalties until Regulations Are Issued

2010-12-23T10:50:00.000-08:00

The Internal Revenue Service and Departments of Labor and Health and Human Services issued a bulletin today delaying compliance with the new Patient Protection and Affordable Care Act provisions that applied rules similar to the nondiscrimination requirements of Section 105(h)(2) to insured group health plans. PPACA requires that all fully insured group health insurance plans that do not have grandfathered status may not discriminate in favor of highly compensated individuals in regards to either eligibility to participate in the plan or the level of benefits provided. However, the rules guiding how this requirement would be applied to fully insured plans have not been released, leading many small businesses and their agents and brokers to struggle with how the nondiscrimination tests (which were designed for very large companies) would apply to small-group health plans.

The new bulletin states that the relevant federal agencies and departments have determined that compliance with these requirements should not be required until after regulations or other federal guidance has been issued and, accordingly, any noncompliance sanctions or penalties are delayed too.

MasterCard Issue Update: Resolved

2010-12-03T09:48:00.000-08:00

As of 4AM this morning, the MasterCard processing issue has been resolved at the point of purchase. There is no limit on card swipes (other than the standard $2,000 limit or existing purse value) and cardholders can use their cards as they did prior to the conversion. The backlog of swipes has been processed. Some of these transactions are not yet visible on myRSC, and there may still be a very small number of unanticipated declines until the conversion process is completed.

Transaction emails are being sent, but some may be sporadic. Swipes that declined during the conversion process will be categorized as "general declines" until the remaining issues are resolved. We are addressing the remaining issues quickly, and it is estimated that the information will be current and viewable by end of business PST, today.

As of now,

All transactions are being processed according to the correct client balances.
All SIGIS/IIAS parameters, Employer MCCs and Overrides for purchases are in place.
Discount stores such as Target, Wal-Mart and Walgreens are functional.
Swipe declines that occurred during the resolution process will be shown as “general” until the remaining processes are completed.
Cards uploaded for creation on and since Tuesday will be processed on Monday, Dec. 6, in time for Jan. 1 plan years.
During the remainder of the conversion process, as transactions become visible on myRSC, transaction emails will be sent.

We will notify you as the remaining issues are resolved. A very detailed explanation of the conversion issue and resolution, as well as what the new platform will mean to you, will be released next week. If you have any further questions, please contact customer service.

MySource Card Issue Update: Limit Raised to $500

2010-12-02T13:32:00.000-08:00

The resolution of the card conversion issue is ongoing. However, the limit of $125 per day has been raised to $500 until the card processing issue is resolved. If you've experienced a decline based on the amount, you should now be able to attempt the swipe again up to the $500 limit. We will keep you apprised of all new information as soon as it becomes available. When the issue has been completely resolved, we will issue an official statement detailing the events.

Important Information about the MySource Card Conversion Issue

2010-12-02T10:20:00.000-08:00

Our software company, DataPath, has informed us that many of the card transactions are currently declining. DataPath is running a card conversion process in order to speed up the card reimbursement cycle. Their estimated time to do this was 3 hours. Due to difficulties coordinating the process with MasterCard it has taken significantly longer than originally anticipated.

Until this conversion process has been completed, all MySource FSA and HSA cards will not be fully functional. The cards are functioning on a very limited basis. Unfortunately, we have not been given an expected completion time for the conversion. We apologize for the inconvenience this has caused and assure you that we are working with DataPath around the clock to resolve this issue.

In the meantime, for FSA accounts we do have claim forms available on our website http://www.pacificbenefits.com and any expenses paid out of pocket can be reimbursed with a live check. Simply submit the completed form along with the receipt to Katherine at ksinhawk@pacificbenefits.com or by fax to Katherine's attention at 916-363-4213. We will process these claims and issue the check within 24 hours. For HSA accounts, please use the direct deposit feature on the website and the money will be in the participants checking account within 72 hours.

These are temporary fixes and the cards are expected to be fully functional shortly.

We appreciate your understanding as we work toward resolving this issue, and we will keep you updated as we receive additional information from DataPath.

Important Information about the MasterCard Conversion Issue

2010-12-02T08:10:00.000-08:00

From our MySource card vendor:

The following is a status update of the card conversion process and to address questions and concerns that you may have.

The first question to be addressed is why was it necessary to convert to a new platform when the debit card service was already working? The Fiserv platform that we were on prior to the conversion did not allow us to grow and keep up with our growing industry. The new platform allows us to expand our services and provide better service to our clients, your employer clients, and the individual participants.

Long before the conversion process began, much research, development and preparation was conducted by DataPath to ensure there would be minimal impact when we finally made the switch. However, despite our best preparation, we had no way of anticipating the readiness of the other parties involved. The conversion process was not a single party effort, involving just DataPath alone. This also involved coordination and changes made by MasterCard and Fiserv.

At 4:00am CST this past Monday, after the initial phases of the conversion processes, it was discovered that we were not receiving authorization information from MasterCard. MasterCard informed us that they had an issue preventing the proper routing of transactions to us, that it would take 3 days to reverse the changes they had already made, and during which time no cards would be functional. This was not an option for DataPath. After coordination with MasterCard and Fiserv, it was decided that we would move forward to reduce the amount of downtime for our clients and their participants.

Additionally, MasterCard did not provide us with the option to perform the conversion over the weekend, when the impact on our clients and the card participants would have been reduced. Additional changes also had to be implemented by both parties to accommodate the new changes that MasterCard put in place.

Yesterday, at approximately 3:00 pm CST, MasterCard completed their changes, allowing both Fiserv and DataPath to move forward. This also allowed card holders to begin making purchases again. However, until the conversion process has been completed, the cardholders will be limited to temporary “stand-in” purchase restrictions, controlled by Fiserv.

These temporary restrictions include the following:

$125 daily limit on all purchases
A restricted list of medical related MCCs for purchase based on the General MCC list previously available in the dpiCMS system.
No IIAS/SIGIS or 90% Merchant parameter controls. However, IIAS merchants may still authorize only eligible expenses at the point of purchase. These transactions will still download and substantiate according to your system autosub parameters.

Transaction status emails indicating that transactions are resolved, requesting substantiation documentation or money due should still be processed as normal.

The conversion process will continue to be an on-going process as we work towards improving the process and procedures that must be implemented. Steps left to complete include:

Reinstatement of debit card rules such as IIAS, 90% Merchant and Employer Specific MCC parameters.
Recording and Displaying of Purse Values on myRSC.com. This situation does NOT prevent the use of the card, in that these values are being uploaded to Fiserv.
Recording and Display of Authorizations and Declines on myRSC.com.
Miscellaneous report data.
Reinstate Card Authorization Emails

We acknowledge the impact this is having for you and your clients and we want to assure you that we have worked around the clock to minimize the impact. All resources are working toward the completion of the conversion process, which will ultimately ensure the service you deserve.

Should you have any additional questions or concerns, please contact Pacific Benefits iFlex, Inc.

Savings on Top Brands through our Partnership with FSAStore

2010-09-21T10:31:00.000-07:00

Pacific Benefits iFlex, Inc., is pleased to announce our partnership with FSAStore, the One Stop Destination for FSA's.

FSAStore makes it easy for you to shop, search for services, and learn more about your Flexible Spending Account.

- Shop: We have thousands of FSA Eligible OTC Products online.
- Search: You can search over 500,000 eligible medical doctors, and find FSA Eligible Services in your area.
- Learn: We have an education resource center that answers hundreds of commonly asked FSA questions, including healthcare changes that may affect your account.
- Participants can shop for their FSA Eligible OTC Products in the FSAStore and have items shipped direct.
- With the upcoming 2011 changes to FSA eligible items, the FSAStore has implemented an automatic eligibility checker so that Account Holders can continue to shop for products without having to question if they are eligible.

The 2011 FSA Changes are around the corner and with FSA Account Holders concerned about the eligibility of OTC products, FSAStore can assure that if the product is available on the FSAStore website it is eligible.

Log onto http://www.pacificbenefits.com/fsastore/ and use coupon code PB10 at checkout to receive an additional 10% discount on your first order.

Model Amendment for adding Children to Age 26

2010-09-17T15:36:00.000-07:00

We have just posted on PacificBenefits.com the "Model Amendment for adding Children to Age 26" in the Forms section (http://www.pacificbenefits.com/forms.htm). Please download the form (found under the Employer Forms section), complete the underlined portion and distribute it to your employees as part of open enrollment for plan years starting on and after 10-01-10.

If you have any questions, please feel free to contact us at (916) 363-2101.

Changes to FSAs and OTC Medicines and Drugs

2010-09-09T14:14:00.000-07:00

Last week, the IRS issued guidance regarding changes on the reimbursement for OTC medicines through FSAs, HRAs, HSAs, and Archer MSAs.

Section 213(d)(3) defines a prescribed drug as a drug or biological that requires a prescription of a physician for its use by an individual. In contrast, under 106(f), 223(d)(2)(A) and 220(d)(2)(A), an individual may be reimbursed for over-the counter medicines or drugs, so long as the individual obtains a prescription for the medicines or drugs. For purposes of 106(f), 223(d)(2)(A) and 220(d)(2)(A) only, a "prescription" means a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.

The IRS will not challenge the use of health FSA and HRA debit cards for expenses incurred through January 15, 2011 if the use of the debit cards complies with previously accepted IRS Regulations. However, on and after January 16, 2011, over-the-counter medicine or drug purchases at all providers and merchants (whether or not they have an inventory information approval system (IIAS)) must be substantiated before reimbursement may be made.

Substantiation is accomplished by submitting the prescription (or a copy of the prescription or other documentation that a prescription has been issued) for the over-the-counter medicine or drug, and other information from an independent third party that satisfies the requirements under Prop.Treas. Reg. 1.125-6(b)(3)(i). Thus, for example, a customer receipt issued by a pharmacy which identifies the name of the purchaser (or the name of the person for whom the prescription applies), the date and amount of the purchase and an Rx number satisfies the substantiation requirements for over-the-counter medicines or drugs, as does a receipt without an Rx number accompanied by a copy of the related prescription. Debit cards may continue to be used for medical expenses other than over-the-counter medicines or drugs.

Click here to read the guidance.

Click here for a press release.

Click here for Q&As.

Simple Cafeteria Plans - Good News for Smaller Companies

2010-06-22T12:26:00.000-07:00

One of the real gems in the sometimes confusing and restrictive Health Reform Act is the introduction of “Simple Cafeteria Plans”. Highly Compensated Employees (HCEs) in smaller companies (less than 100 employees) have long been hampered by some very restrictive limits on Cafeteria Plan benefits. Simple Cafeteria Plans remove these restrictions.

Nondiscrimination requirements:

Cafeteria plans and certain qualified benefits (including group term life insurance, self insured medical reimbursement plans, and dependent care assistance programs) are subject to nondiscrimination requirements to prevent discrimination in favor of highly compensated individuals generally as to eligibility for benefits and actual contributions and benefits provided. There are also rules to prevent the provision of disproportionate benefits to key employees through a cafeteria plan. Although the basic purpose of each of the nondiscrimination rules is the same, the specific rules for satisfying the relevant nondiscrimination requirements, including the definition of highly compensated individual, vary for cafeteria plans generally and for each qualified benefit. An employer maintaining a cafeteria plan in which any highly compensated individual takes part must make sure that both the cafeteria plan and each qualified benefit satisfies the relevant nondiscrimination requirements. Otherwise, a failure to satisfy the nondiscrimination rules generally results in a loss of the tax exclusion by the highly compensated individuals.

Effective January 1, 2011, an eligible small employer is provided under the new health reform law with a safe harbor from the nondiscrimination requirements for cafeteria plans as well as from the nondiscrimination requirements for specified qualified benefits offered under a cafeteria plan, including group term life insurance, benefits under a self insured medical expense reimbursement plan, and benefits under a dependent care assistance program. Under the safe harbor, a cafeteria plan and the specified qualified benefits are treated as meeting the specified nondiscrimination rules if the cafeteria plan satisfies minimum eligibility and participation requirements and minimum contribution requirements.

Requirements to qualify are as follows:

• An employer is eligible if, during either of the preceding two years, the business employed 100 or fewer employees on average (based on business days). For a new business, eligibility is based on the number of employees the business is reasonably expected to employ. Businesses can grow to 200 employees once qualified.
• The usual aggregation rules apply that add together all employees of commonly owned businesses.
• Some employees may be excluded in determining the count of eligible employees; i.e. have not attained age 21, less than one year of service, covered under a collective bargaining agreement, and non-resident aliens.

Minimum Contribution Requirements:

The employer contribution requirement can be met with a non-elective employer contribution or a minimum matching contribution.
• The minimum non-elective contribution is an amount equal to a uniform percentage (not less than 2%) of each eligible employee’s compensation for the year, determined without regard to whether the employee makes any salary reduction contribution under the Cafeteria Plan.
• The minimum matching contribution is the lesser of 100% of the amount of the salary reduction contribution elected to be made by the employee for the plan year or six percent of the employee’s compensation for the plan year. Compensation for purposes of this minimum contribution requirement is compensation with the meaning of section 414(s).

More on Health Care Reform and Your Cafeteria Plan

2010-05-05T10:25:00.000-07:00

IRS Issues Guidance on Health Care Coverage for Young Adults Under Age 27

Just last week, the IRS issued guidance on the tax treatment of health care coverage for children under age 27 that provides additional information on the changes made by the Patient Protection and Affordable Care Act (PPACA). The agency's Notice 2010-38 states that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage on their plans for their children who are young adults. These changes immediately allow employers with cafeteria plans to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This applies even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

Please note that you do not need to make this available until next year. If you decide to cover these dependents this year-pick a date that is the start of the month and document it with an employee notice. Pacific Benefit Consultants, Inc., will be posting a sample Summary of Material Modifications for our clients to use on our website later this year. Please watch for the announcement and instructions.

Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit beginning March 30, 2010, if the children are already covered under the employer's plan or are added to the employer's plan at any time after March 30, 2010. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.

Clarification on over-the-counter drugs (OTC) and medicines for 2011

As the dust starts to settle under health care reform and more detailed interpretations are forthcoming there are some unexpected results. Contrary to what was originally thought over-the-counter drugs and medicines will not be covered without a prescription beginning January 1, 2011, regardless of the plan year.

It was originally thought that plans that straddled January 1, 2011 would be able to cover over-the-counter drugs and medicines for the full plan year. What this now means is that your plan can only cover over-the-counter drugs and medicines without a prescription until December 31, 2010.

There are still planning opportunities with over-the-counter drugs and medicines but some advance planning will need to be done. Please direct your employees to the Employee Bulletin on our website at www.pacificbenefits.com.

We will continue to keep you informed as health care reform continues to unfold.

Changes You Must Make to Your Benefit Plans Now!

2010-05-03T12:14:00.000-07:00

Health Care Reform and Your Benefit Plans: Things You Must Do Now!

Although charts that list changes to be made over the next 8 years abound, this bulletin will concentrate on the employer changes to benefit plans that need to be made very soon for plan years starting in October 2010 through January 1, 2011.

Time is of the Essence - Several provisions of health care reform need to be addressed by all employers and group health plan sponsors for implementation effective with the first plan year beginning on or after September 23, 2010. This means that, generally, group health plans will have to comply with some of the requirements of health care reform as early as October 1, 2010. However, most employers, as group health plan sponsors, maintain calendar year plans to which some changes enacted by health care reform become effective as early as January 1, 2011. Because benefit plan design must be finalized, enrollment materials must be prepared and distributed and open enrollment concluded well in advance of the first day of the plan year, it is vital that the following provisions are addressed in the upcoming months. Guidance is expected to be issued before the effective dates of these provisions.

Advance Notice of Benefit Changes - Group health plan participants must be notified 60 days in advance of any material changes in plan terms - by November 1, 2010, for the plan year beginning January 1, 2011. Material changes include changes to covered services, as well as deductibles and co-payments.

Since most material changes are made at the beginning of a plan year, this will impact the content and timing of annual enrollment materials. While it is likely that most employers and group health plan sponsors will want to coordinate the required notice with their annual enrollment periods, the statute does not establish standards or requirements for the annual enrollment process. Inasmuch as the new advance notice requirement is in addition to existing ERISA disclosure requirements, employers and group health plans sponsors may also want to ensure that the required notice meets ERISA requirements for a summary of material modifications in order to avoid duplication of efforts later. The penalty for a willful failure to comply with this provision can be as high as $1,000 per day per failure, and will be imposed in the case of insured plans, on insurers, or, in the case of self-insured plans, the plan sponsor or administrator.

This is a particular worrisome provision and thus we mention it first. Normally, insurance companies have been slow in getting out renewal notices with rate changes and plan design changes, e.g., material changes. However, without some relief, all planning has to be done and communicated to your employees by November 1, 2010, for calendar year benefit plans. For cafeteria plans it is a short list and we know what needs to be done. For other benefit plans, sponsored by insurance companies some changes are not known this early in the year - claims experience as an example - it could be a very busy fall indeed! Below is a partial list of some of he changes that need to be made to Benefit Plans before January 1, 2010.

This following list does not apply to plans that qualify as Grandfathered Plans[1]:

· Non-discrimination Rules for Fully Insured Plans - Insured plans can no longer contribute unequal amounts or have different benefits for different employee groups without passing discrimination testing. Same testing as self-insured plans.

· Preventative Care Screening - Must be provided within guidelines without cost-sharing.

· Emergency Services - Must be provided with prior authorization or out-of-network cost sharing.

· Plans that Require PCP/Gatekeeper - Must allow individual to designate any available PCP; must permit pediatrician as PCP; must provide direct access to OB/GYN.

· Clinical Trials - Cannot deny coverage.

· Plans must provide for Internal/External Reviews

The following list applies equally to both Grandfathered and Non-Grandfathered Plans:

· Pre-Existing Conditions - Not permitted for children under 19.

· Maximum Lifetime Benefit - Not allowed.

· Annual Limits - Allowed on "essential benefits" only if specifically permitted by regulation.

· Dependent Coverage to Age 26 - Even for married non-dependent children, college no longer a factor.

· Rescission of Coverage - Must have prior notice; plan needs to have provision for allowing rescission for fraud or misrepresentation.

· IRS Reporting - Employer must report value of each employee's health coverage on W-2 beginning for plan year Jan. 1, 2011 (depends on issuance of regulations).

Changes to Flexible Benefit Plans:

Over-the counter drugs and medicines

The only large change to Flexible Benefit Plans (FSAs, HSAs, HRAs and MERPs) is the exclusion of over-the-counter drugs and medicines. This, in effect, takes us back to 2002 before the IRS ruled that these expenses were eligible. The good news here is that they are still eligible with a prescription. There may be some planning devices that will help to offset the out right loss of some of these items. The effect on plans should be negligible. A survey was taken in 2002 before the advent of over-the-counter drugs and medicines being an approved expense to see what employees were leaving in Flexible Spending Accounts under the use it or lose it rule. The survey found that less than 10% of flex participants left any money at all in these accounts and the amount left was less than $30.

Some other possible changes will be some of the requirements for insured and self-insured plans. Age 26 for dependent children, for example, might be required for the medical flex account. Again, these changes that are material (OTC drugs and medicines) must be communicated to calendar year plans by November 1st.

In summary, these are just the immediate changes in compliance for benefit plans. Our benefit world has been turned upside down. The old Chinese blessing, "May you live in interesting times" seems to apply here. Our recommendation has always been in planning your benefits to live one year at a time. Certainly, there can, and I think will be, some changes in some of this as our legislators change over the years and the IRS and HHS get around to writing interpretive regulations. As always, we will strive to keep you posted as things develop.

[1] Plans in effect as of 3-23-2010 -it is still not clear whether or not any (or what kind of) plan modifications will effect Grandfathered status

Mileage for Reimbursement 16.5 cents per mileage for Medical -- IRS Release 2010

2009-12-04T08:31:00.000-08:00

The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

- 50 cents per mile for business miles driven
- 16.5 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Are Employees and Employers Happy with HSAs?

2009-11-09T10:39:00.000-08:00

It certainly seems so. A recent survey by Buck Consultants revealed that most employers and account holders using health savings accounts (HSAs) and HSA qualified high deductible health plans were satisfied with all aspects of these plans. The survey found that account holders are satisfied with their coverage, spend less, and are more engaged in their health benefits. The survey revealed the following:

84% of account holders said their HSA qualified plans are affordable.
72% of account holders pay the same or less than with a traditional type of health plan.
After moving to an HSA, More than half of account holders monitor their health care costs more closely. Forty-eight percent read their medical bills more closely, 46% have a better understanding of where their money goes, and about 40% evaluate costs more closely before electing medical services.
81% of account holders say their ability to control health care costs was an important reason for them to choose an HSA.
86% of the employers offering HSAs for more than three years say costs were the same or less than the previous year.
96% of employers say that HSAs allow the company to continue offering group-sponsored health insurance.

RESOLVED: MySource Card Declines - Walgreens

2009-10-02T14:33:00.000-07:00

As suspected, Walgreens has confirmed that they made an unannounced change that resulted in card declines for several healthcare card vendors, including DataPath. While not all Walgreens stores were impacted, a significant number of them were.

Walgreens has provided us with the new information and we have updated our systems accordingly, so participants can now resume purchases at Walgreens stores as normal.

MySource Card Declines - Walgreens

2009-10-02T09:47:00.000-07:00

At 10:30 am today, a manual review of MySource card declines was performed and a pattern was identified with transactions from Walgreens being declined. The situation has been identified as Walgreens having an issue with their acquiring bank's MasterCard ICA number.

We have since been in contact with Walgreens and they are currently investigating the situation to resolve it. Additional information will be provided once the issue has been addressed.

Health Care Reform: What does it mean for Employers?

2009-09-16T07:56:00.000-07:00

Much has been said about the effect of health care reform on employees, insurance companies, medical providers and others: but what about employers?

In reviewing the President Obama's speech and the ensuing discussion, our take is that he made some subtle but significant changes from his previous position. He certainly gave a more detailed account of the impact of his proposed plan than in the past, but was it reassuring to employers?

He told the nation that what he's proposing won't force businesses to change their existing insurance coverage. That much is true. Unfortunately, he also pointed out that nothing in his plan will guarantee that employers will have the same form of coverage as in the past. In earlier speeches he had said that people who were happy with their current insurance plan could simply keep it without having to change. That's correct as far as it went, but neither can his plan guarantee that people can keep their current coverage even if the plan is the same. Employer coverage extends to families as well as employees, so all are affected. Employers are free to change their coverage in response to health care reform in ways that employees might not like and some employers may even elect to drop coverage. In the past Obama has said, "If you like your health care plan, you'll be able to keep your health care plan, period." Now, the subtle change in wording is that nothing in his plan will "require any change."

How will employers be affected by the "public option plan?" In discussing this "hot potato option" it seems to me that Obama came down solidly with one foot on each side of the fence. Who can blame him as this piece of legislation seems to be dividing Congress and the country most of all? His words were: "The public option is only a means to an end and we should remain open to other ideas that accomplish our ultimate goal". It seems to me that this is consistent with what he has said in the past. Many were disappointed as they were expecting an out right endorsement of a public option plan.

The fear of many employer groups and insurance companies is that a public option could ultimately grow into a universal coverage, government run plan. The opponents of the public option fear that the younger and healthier employees will gravitate toward the public option as it will be cheaper (at their age) than their group insurance because of government efficiencies that cannot be achieved by public insurance companies; i.e. not for profit. It is argued that the result of the younger and healthier employees going to the public option is that the employer plans are eventually left with essentially the older and sicker people. It is further argued that this will raise the cost of employer plans while lowering the cost of the public option through this process of "adverse selection".

Opponents point out that carried to its ultimate conclusion this could be the death knell of private employer insurance as the government run public option now becomes nationalized health care. Proponents of the public option are quick to point out that this will not be the case. Instead, they say that the public option will increase competition in the health insurance marketplace and make the insurance companies more efficient in their operations. They add that with all the criticism of government run operations (Medicare) being less efficient than private plans why then should employers fear this option?

What about pre-existing conditions? Obama's plan will eliminate insurance company underwriting for pre-existing conditions and allow full coverage regardless of health conditions. In our opinion, this will only work in tandem with another part of his plan-mandated coverage. He said, "Individuals will be required to carry basic health insurance-just as most states now require you to carry auto insurance." This is a change from his earlier campaign position-but necessary for this to work. By requiring all citizens to be covered by health insurance will bring younger, healthier people into the pool and their premiums should help pay for those who are already sick. In its simplest form, insurance is essentially grouping people together to share risk and assessing all people in the pool with a contribution (premium) to pay claims for those who are ill. With a larger pool of people sharing the risk, claims become more predictable and premiums are lowered. This answers the issues that we see with people not being able to get insurance and/or having it taken away when they need it the most. In our opinion, this is something that is most needed in health care reform.

Another area of concern to employers is how health care reform will be paid for-with or without a public option. One of the missing links from the President's speech was a more detailed look at this topic. It was mentioned, but in no great detail. Another concern of employers is how much this will reduce our costs for insurance in the future? To date, there has been little discussion of how all of this reform will affect future premium rates. Will they still continue to increase each year? Much of the discussion going on now is about how we pay for the overhaul, but silence on the affect this will have on future costs of health care to the employer and employees. The only comment we have of any significance was made in July by the Director of the CBO (Congressional Budget Office): "We do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount"

Obama has maintained for some time that there is agreement on 80% of the agenda of his plan and the remaining 20% can be worked out in committee. However, as we all know "the devil is in the details" and the hardest work is still yet to come. How all of this will eventually affect employers' Benefit Plans is still uncertain.We do know that the Senate Finance Committee bill will limit Flexible Spending Accounts to a yearly maximum of $2,000 for unreimbursed health care expenses and eliminate coverage for over-the-counter drugs and medicines. One of the bills (at last count there are five) will roll back HSAs to where they started as to reducing the deduction limits and also requiring claims to be adjudicated. If you are concerned about limiting these benefits (as we hope you are) we have a link for you on our newly redesigned website to SaveMyFlexPlan.org. By this link, you can send an email directly to President Obama, Vice President Biden and your respective Congressmen. The website has some suggested paragraphs you can add with just a few clicks or you can add your own comments.

In summary, while there is much that can be agreed upon there is still no one bill that we can read, digest, agree with, object to or comment on. Will all of this be settled by year-end, which is Obama's time table? I fear not, but we will be watching closely and will continue to keep you informed.