FAQs

What is a “TPA” and what do they do?

A Third Party Administrator (TPA) provides plan administration services. TPAs design Plan Documents, certify eligibility of plan participants, prepare reports and process claims. CDS is a TPA for employers that provide cafeteria plans and retirement plans to their employees.

What is a Limited FSA?

A Limited FSA is a flex spending account that only reimburses for eligible dental and vision expenses. A Limited FSA is available to employees who are enrolled in a high deductible health plan (HDHP) or an HSA.

What is an HSA?

A Health Savings Account (HSA) is an investment account from which you can draw money tax-free for medical care. HSAs are owned by the individual and grow through investments, similar to an IRA. HSAs have favorable tax treatment for contributions, distributions and earnings. They are available to individuals covered by a high deductible health plan (HDHP) and can be established to pay for family medical expenses. If an HSA is offered through a cafeteria plan in the workplace, employees save on Federal and State Income Tax, FICA and Medicare taxes (approximately 30%) and employers save on FICA and Medicare taxes (7.65%). Unspent balances remain in the account and rollover the following year.

What medical expenses can be submitted for reimbursement through my flex account?

Medical expenses that are not covered by health insurance that are incurred by the plan holder, their spouse or dependents and are approved Section 125 expenses can be reimbursed.

Over-the-Counter (OTC) Medicines, PPE, and  Menstrual Products Are Qualified Medical Expenses

The Coronavirus Aid Relief and Security (CARES Act) allows consumers to purchase over the counter (OTC) drugs and medicines with funds from their Health Savings Account (HSA), Flexible Spending Accounts (FSA), or Health Reimbursement Arrangement (HRA). Consumers may also receive reimbursement for OTC purchases through those accounts. In addition, menstrual products are now considered a qualified medical expense, meaning consumers can pay for or be reimbursed for these products through an HSA, FSA, or HRA.

Here are examples of Over-The-Counter (OTC) Medicines that can be reimbursed through a flexible spending account :

• Band Aids/Bandages
• Carpal Tunnel wrist supports
• Cold / hot packs for injuries
• Contact lens cleaning solution
• Diabetic Supplies
• First Aid Kits and Supplies
• Incontinence Supplies

**Cosmetic items are not reimbursable, except for amounts paid for surgery necessary to improve a deformity arising from a congenital abnormality, personal injury from an accident or trauma, or a disfiguring disease. If this is the case, a physician’s certification of the medical need will need to be attached to the claim for reimbursement.

In IRS Announcement 2021-7 provides that PPE such as hand sanitizer, sanitizing wipes and face masks, for the primary purpose of preventing the spread of COVID-19, are now eligible medical care items under Section 213(d) of the Internal Revenue Code. This change allows for a retroactive change as early as January 1, 2020.

Telehealth

The CARES Act states that “telehealth and other remote care services” below the deductible will be permitted in an HSA-compatible high deductible health plan (HDHP).  The bill does not specify what “telehealth and other remote care services” entails, but we will provide updates as we learn more.

How do I file a reimbursement claim if I didn’t use a Benefits Debit Card?

Please complete the necessary reimbursement request claim form (Medical, Limited Medical, Dependent Care, as provided in the Forms section) and submit online, or by mail, fax or email your reimbursement form along with either an itemized statement or an Explanation of Benefits (EOB). The itemized statement or Explanation of Benefits must show the date of service, description of service, amount charged for services received, the actual amount of all insurance payments made on the charges by insurance, provider name, and patient name.

Just a note: per IRS regulations, we cannot accept credit card receipts or reimburse from amounts listed on itemized statements as “Previous Balance Due”, “Balance Forward”, “Previous Patient Balance” or “Paid on Account (POA)”. Please be sure the documentation includes the provider, date of service, to whom the service was provided, amount charged for medical services, and all insurance payments.

What expenses may I use my Benefits Debit Card for?

Depending on the type of account you have elected during the annual election period, you may be able to use your card for eligible FSA, Limited FSA or Dependent Care expenses.

Most pharmacies are members of the IIAS system, therefore you may not be required to submit receipts for prescription purchases. However, other medical expenses paid with the Benefits Debit Card may require an itemized statement or Explanation of Benefits as supporting  documentation to substantiate the claim. You will receive letters (by mail or email) requesting the information. If you do not respond to the requests for supporting documentation, your card will be suspended.

Unsubstantiated card transactions, finance charges, expenses incurred outside of the plan year, and some non-reimbursable expenses based on IRS guidelines will be considered ineligible although the card may work for payment at the time. You will be required to pay it back to your account or turn in additional claims to offset these expenses.

How do I send in my receipts? Is there a form I should use?

It is generally helpful to include a reimbursement claim form with your receipts showing your name and employer. However, you must note on this form that it is for a Benefits Debit Card transaction or we may inadvertently process it as a regular claim. Most forms have a box to check to mark it as a debit card claim or simply writing it anywhere on the form would be acceptable.

If you submit just a receipt, please be sure that the plan participant’s name is clearly shown and if possible, note the name of the participant’s employer as well.

How will your Benefits Debit Cards work at an IIAS retailer?

With the IIAS system, Benefits Debit Cards are set to allow purchases of only healthcare items from certain retailers and pharmacies to be automatically approved without requiring additional supporting documentation to substantiate the expense. You may be asked by the retailer at the time of purchase to provide another form of payment to buy the remaining items that have been identified as non-healthcare items by the retailer. If any retailer such as a wholesale club, discount store or on-line merchant does not have an IIAS system, your transaction likely will be denied. You will then need to submit your request for reimbursement on a flex reimbursement request claim form and be reimbursed manually.

The IRS does not require locations such as doctor’s offices, labs, hospitals and pharmacies to have an IIAS to be in place and you can continue to use your Benefits Debit Card at these locations but will be required to provide supporting documentation of your expense(s).

What is a Run-Out Period?

The run-out period is the last day to submit claims for reimbursement of eligible medical expenses incurred in the prior plan year.

What happens to funds after the Run-Out period has passed?

According to federal law, any remaining balance in the Flex account at the end of the plan year and not submitted for reimbursement by the run-out date is forfeited. However, if your plan allows a carryover option, you may be eligible to “roll over” up to $500 of unused funds into the next plan year.

How can I increase my annual contribution?

Normally you will need a “change in status” in order to adjust your annual election. You must have a qualifying event per IRS guidelines.

What is a Premium Only Plan (POP)?

Premium Only Plans (POPs) allow employees to pay their share of premiums for heath, dental, vision and group term life insurance on a pre-tax basis through salary reduction. POPs allow employees to save on Federal and State Income Tax, FICA and Medicare taxes (approximately 30%). Employers save on FICA and Medicare taxes (7.65%).

What is a Form 5500 and do we have to file one?

Employee benefit plans subject to the reporting requirements of ERISA are required to file a Form 5500 for the plan. Your Cafeteria Plan is not an ERISA plan, but components under your Cafeteria Plan for example, a Health FSA, is an ERISA Plan. ERISA regulations require an annual form 5500 unless an exemption applies such as unfunded and/or fully insured plans with fewer than 100 participants at the start of the plan year. Church and governmental plans are not subject to ERISA.

What is a “TPA” and what do they do?

A Third Party Administrator (TPA) provides plan administration services. TPAs design Plan Documents, certify eligibility of plan participants, prepare reports and process claims. CDS is a TPA for employers that provide cafeteria plans and retirement plans to their employees.

What is ERISA’s bonding requirement for our company’s 401(k) Plan?

ERISA requires that every plan fiduciary and every person who “handles funds or other property” of a plan be bonded. This bond is commonly referred to as a fidelity bond. The bond must be for at least 10% of the amount of the funds handled in the preceding plan year but generally must be for no less than $1,000 or no more than $500,000.

What is a Form 5500 and do we have to file one?

Retirement Plans are subject to the reporting requirements of ERISA are required to file a Form 5500 for the plan. A plan which does not cover any employees (only a sole shareholder, partner in a partnership and/or spouse) is not an ERISA plan for DOL purposes, but is for IRS purposes.

What are the FSA $500 carryover rules?

Employees may be able to carry over up to $500 in unused contributions remaining in their Flexible Spending Account at year-end and use expenses in the following year to eliminate the balance. The plan would need to be amended prior to year-end to add this provision.

Carryover Methods

Employers may design their general-purpose FSA so that unused amounts are carried over to the following year into a limited-purpose FSA to allow individuals to participate in a Health Savings Account in the following year.

Can Health FSAs be used on a pre-tax basis to help employees pay for individual health insurance premiums? 

On Friday, September 13, 2013 Treasury published Notice 2013-54 (Notice) which preserves all health flexible spending accounts (health FSAs) that are considered excepted benefits but eliminates an employer’s ability to use a stand-alone health FSA or other tax-favored arrangements, including Premium Reimbursement Arrangements or health reimbursement arrangements (HRAs), to help employees pay for individual health policies on a tax-free basis.

What is a health reimbursement arrangement (HRA)?

A health reimbursement arrangement (HRA) is a type of health care account which is funded entirely by an employer that allows for reimbursement of eligible medical expenses.

What can HRAs reimburse?

HRAs can only be used for healthcare expenditures. These may include deductibles, coinsurance, copayments, prescription drugs, vision care and dental care. The HRA can be designed to limit the expenses that the plan reimburses.

Is the HRA contribution reported as income to the employee?

The employer contributions are not considered to be part of income and therefore are not subject to income, FICA or worker’s compensation tax.

Does the money in an HRA roll over from year to year?

An HRA can be designed to rollover from one year to the next.

What is an Integrated HRA?

An Integrated HRA is linked with the Affordable Care Act (ACA)-compliant employer sponsored group health insurance plan. The Integrated HRA is offered only to company employees who elect group health insurance as a supplement to help with their out of pocket healthcare costs.

What is a stand-alone HRA?

A stand-alone HRA is not linked to a group health insurance plan. In most cases, a stand-alone HRA is only offered to retirees.

Does an HRA make an employee ineligible for HSA contributions?

A standard HRA will make you ineligible for an HSA because it would provide coverage for all medical expenses below the HSA deductible. An employer can design the HRA so that the HRA does not make the employees ineligible to have contributions to an HSA.

What is COBRA?

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. This is the federal law that requires employers with 20 or more participants to offer continuation coverage of their group health plans to covered employees, former employees, spouses, and dependents when group health coverage is lost due to specific events, like an employee’s termination or reduction in hours.

What are the notice requirements?

There are strict regulations concerning COBRA notices and the time frames and manner in which they have to be provided to eligible employees and qualifying beneficiaries.

• The General/Initial Notice needs to be provided within the first 90 days of coverage under the group health plan.
• The Election Notice needs to be provided within 14 days of being notified of a qualifying event.
• The Unavailability of Continuation of Coverage Notice needs to be provided within 14 days after receipt of a request for continuation.
• The Termination of Coverage Notice needs to be provided as soon as practicable after a decision has been made to terminate the coverage due to certain specified events.

Who pays for COBRA coverage?

Usually the beneficiary pays for COBRA coverage. The cost cannot be more than 102% of the premium cost for similarly situated employees that haven’t lost their coverage. Usually the beneficiary will pay for both the employee and any employer portion of the premium after they have lost their coverage.

What is the penalty if there are possible errors?

There is a possible penalty of $110 per day per affected person.

Who qualifies for continuation of coverage?

According to the DOL, there are 3 elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

Plan Coverage – Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction on an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.

Qualified Beneficiaries – A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee’s spouse, or an employee’s dependent child. In certain cases, a retired employee, the retired employee’s spouse, and the retired employee’s dependent children may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

Qualifying Events – Qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

The qualifying events for employees are:

• Voluntary or involuntary termination of employment for reasons other than gross misconduct
• Reduction in the number of hours of employment

The qualifying events for spouses are:

• Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
• Reduction in the hours worked by the covered employee
• Covered employee’s becoming entitled to Medicare
• Divorce or legal separation of the covered employee
• Death of the covered employee

The qualifying events for dependent children are the same as for the spouse with one addition:

• Loss of dependent child status under the plan rules

What does CDS do?

CDS can help employers stay compliant with COBRA regulations. We will make sure qualified beneficiaries will get the required notices within the correct timeframes, we will keep all related parties informed of continuation/termination of coverage elections, collect and remit premiums, keep a record of all notices, election & coverage periods and premium collections.

Does the QSEHRA amount need to be reported on the W-2?

Yes, the amount of reimbursements the eligible employee is entitled to receive from the QSEHRA for the calendar year must be reported in Box 12 of Form W-2 using code FF.

What type of health insurance must I have to get reimbursed through the QSEHRA?

You must provide proof of MEC (minimum essential coverage) for the month in which the reimbursement is provided.

What is MEC?

MEC is minimum essential coverage which satisfies the Affordable Care Act’s individual responsibility requirement. Some examples of MEC are:

• Group health insurance coverage for employees
• Self-insured group health plan for employees
• COBRA
• Retiree Coverage
• Medicare
• Veterans Health Care
• Tricare

Can we set up a QSEHRA at any time?

Yes, the employer can implement a QSEHRA at any time during the year, but the statutory dollar limits must be prorated to reflect the actual number of months that an eligible employees is provided the QSEHRA

What must the “Written Notice” include?

• A statement of the amount of each permitted benefit for which the employee is eligible.
• The date on which the QSEHRA is first provided to the eligible employee.
• A statement that the eligible employee must inform any Marketplace to which the employee applies for a premium tax credit, the amount of the permitted QSEHRA benefit.
• A statement that if the eligible employee does not have MEC for any month, the employee will not be eligible for tax-free reimbursements in that month.