Frequently Asked Questions
When does a 5500 need to be filed for a health & welfare benefit plan?
Answer: All (large) insured benefit plans must file a form 5500 annually. A large plan is a plan that covers 100 or more participants at the beginning of the plan year. Example a company 110 employees enrolled in the insured company paid group life and disability plan. Because the life and disability plan covers greater than 100 participants the company should be filing a 5500.
Will Sullivan Benefits prepare our health and welfare benefit plan 5500?
Can an employer headquartered in the state of Massachusetts get a multi-year rate guarantee for health insurance?
What is the limit on health FSA for 2013?
Answer: Beginning in 2013, a health care FSA offered through a cafeteria plan will have to limit the amount of salary reduction contributions that employees can make. Effective for plan years beginning after Dec. 31, 2012, employee contributions to a health care FSA are capped at $2,500 per year. The IRS has clarified that the $2,500 FSA limit does NOT apply for plan years that begin before 2013. Also, the $2,500 limit will increase in future years to reflect cost-of-living increases.
What are COBRA notice requirements?
Notice Procedures Summary Plan Description
The COBRA rights provided under the plan, like other important plan information, must be described in the plan’s summary plan description (SPD). The SPD is a written document that gives important information about the plan, including what benefits are available under the plan, the rights of participants and beneficiaries under the plan, and how the plan works. ERISA requires group health plans to give each participant an SPD within 90 days after he or she first becomes a participant in a plan (or within 120 days after the plan is first subject to the reporting and disclosure provisions of ERISA). In addition, if there are material changes to the plan, the plan must give participants a summary of material modifications (SMM) not later than 210 days after the end of the plan year in which the changes become effective. If the change is a material reduction in covered services or benefits, the SMM must be furnished not later than 60 days after the reduction is adopted. A participant or beneficiary covered under the plan may request a copy of the SPD and any SMMs (as well as any other plan documents), which must be provided within 30 days of a written request.
COBRA General Notice
Group health plans must give each employee and each spouse of an employee who becomes covered under the plan a general notice describing COBRA rights. The general notice must be provided within the first 90 days of coverage. Group health plans can satisfy this requirement by including the general notice in the plan’s SPD and giving the SPD to the employee and to the spouse within this time limit.
COBRA Qualifying Event Notice
Before a group health plan must offer continuation coverage, a qualifying event must occur. The group health plan is not required to act until it receives an appropriate notice of such a qualifying event. The employer is required to notify the plan if the qualifying event is:
- Termination or reduction in hours of employment of the covered employee;
- Death of the covered employee; or
- Covered employee’s becoming entitled to Medicare resulting in a loss of coverage.
**The employer has 30 days after the event occurs to provide notice to the plan.
The covered employee or one of the qualified beneficiaries is responsible for notifying the plan if the qualifying event is:
- Legal separation; or
- A child’s loss of dependent status under the plan.
COBRA Election Notice
After receiving a notice of a qualifying event, the plan must provide the qualified beneficiaries with an election notice, which describes their rights to continuation coverage and how to make an election. The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event.
COBRA Notice of Unavailability of Continuation Coverage
Group health plans may sometimes deny a request for continuation coverage or for an extension of continuation coverage, when the plan determines the requester is not entitled to receive it. When a group health plan makes the decision to deny a request for continuation coverage from an individual, the plan must give the individual a notice of unavailability of continuation coverage. The notice must be provided within 14 days after the request is received, and the notice must explain the reason for denying the request.
COBRA Notice of Early Termination of Continuation Coverage
Continuation coverage must generally be made available for a maximum period (18, 29, or 36 months). The group health plan may terminate continuation coverage early, however, for any of a number of specific reasons. When a group health plan decides to terminate continuation coverage early for any of these reasons, the plan must give the qualified beneficiary a notice of early termination. The notice must be given as soon as practicable after the decision is made, and it must describe the date coverage will terminate, the reason for termination, and any rights the qualified beneficiary may have under the plan or applicable law to elect alternative group or individual coverage, such as a right to convert to an individual policy.
How long can a person stay on COBRA?
COBRA requires that continuation coverage be made available for a limited period of time of 18 or 36 months. The length of time for which continuation coverage must be made available (the “maximum period” of continuation coverage) depends on the type of qualifying event that gave rise to the COBRA rights. A plan, however, may provide longer periods of coverage beyond the maximum period required by law.
When the qualifying event is the end of employment or reduction of the employee’s hours, and the employee became entitled to Medicare less than 18 months before the qualifying event, COBRA coverage for the employee’s spouse and dependents can last until 36 months after the date the employee becomes entitled to Medicare. For example, if a covered employee becomes entitled to Medicare 8 months before the date his/her employment ends (termination of employment is the COBRA qualifying event), COBRA coverage for his/her spouse and children would last 28 months (36 months minus 8 months).
When the qualifying event is the covered employee’s termination of employment (for reasons other than gross misconduct) or reduction in hours of work, qualified beneficiaries must be provided a maximum of18 months of continuation coverage.
For all other qualifying events, qualified beneficiaries must be provided 36 months of continuation coverage. When the qualifying event is the covered employee’s termination of employment (for reasons other than gross misconduct) or reduction in hours of work, qualified beneficiaries must be provided a maximum of18 months of continuation coverage.
For all other qualifying events, qualified beneficiaries must be provided 36 months of continuation coverage.
What is a Health Savings Account (HSA)?
Answer: A Health Savings Account (HSA) is a tax-exempt account owned by an individual that is established for the purpose of paying for qualified medical expenses of an individual and/or his or her spouse and tax dependents, including deductibles and other out-of pocket medical expenses. An HSA offers increased tax benefits to employees allowing both an employee and an employer to contribute funds. An HSA also allows employees to save for future healthcare expenses (similar to how a 401K allows an employee to save for retirement) by allowing employees to carry over unused HSA funds until needed.
HSAs are used in conjunction with a High-Deductible Health Plan (HDHP) which is insurance that does not cover “first dollar” medical expenses (except for preventive care). This means that a participant pays all expenses out out-of-pocket or from their HSA account up to a set dollar amount (the “deductible”) before insurance coverage for medical expenses can begin.
In other words, all covered benefits apply to the plan deductible, including prescription drugs (note, some drugs and medications may be considered preventive care). HSAs must meet IRS design and eligibility requirements.
Who can participate in an HSA?
- Is covered by a High Deductible Health Plan (HDHP)
- Is not covered by other health insurance
- Is not enrolled in Medicare
- Cannot be claimed as a dependent on someone else’s tax return
- Tax dependent children cannot establish their own HSAs
- Spouses can establish their own HSAs, if eligible
- No income limits on who may contribute to an HSA
- No requirement of having earned income to contribute to an HSA
Domestic Partners and individuals enrolled in another health care plan or in Medicare are ineligible to participate in an HSA. Examples of medical benefits that make someone ineligible for an HSA include Medicare, Tricare, and Healthcare Flexible Spending Accounts. Individuals that open an HSA and don’t meet IRS requirements will have their contributions subject to taxes and penalties by the IRS.