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Defined Contribution Health Plans- An Update. Bill Sweetnam Chris Keller David Levine October 19, 2006. Overview. Legislative Agenda Legislative initiatives What happens next year Recent Guidance HSA final comparable contribution regulations Recent IRS debit card guidance
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Defined Contribution Health Plans- An Update Bill Sweetnam Chris Keller David Levine October 19, 2006
Overview • Legislative Agenda • Legislative initiatives • What happens next year • Recent Guidance • HSA final comparable contribution regulations • Recent IRS debit card guidance • Recent IRS HRA guidance • Implementation Issues • Communication • Plan sponsor documents & ASO agreements • Trends
Legislative Initiatives • Bush Administration Budget Proposals • Continued push to expand consumer directed health plans • Health Opportunity Patient Empowerment Act – Ways and Means Committee • HRA and FSA transfer to HSA • Expand HSA contribution amounts • IRA rollover to HSA • Comparable contribution to non-HCEs • Finance Committee Hearing
What Happens Next Year? • If House stays Republican • Continued movement for more HSA legislation • Passage in Senate problematic – regardless what party is in charge • If Democrats take over House • Possible reduction of HSA benefits • Veto of any cutback by President • FSA rollover legislation price is too high – despite popularity in both parties • Predict Legislative Stalemate for Next 2 Years
Final Comparable Contribution Regs.Recent Guidance • Final comparability regulations under Treas. Reg. § 54.4980G (July 31, 2006) govern employer contributions to HSAs • Generally require that an employer make similar contributions to employees’ HSAs or pay 35% excise tax on all HSA contributions • Cafeteria plan exception allows the employer's HSA contributions to be subject to the cafeteria plan nondiscrimination rules under Code section 125 rather than these rules
IRS Debit Card GuidanceRecent Guidance • In Notice 2006-69 (July 11, 2006), the IRS adds three new methods for substantiating claimed medical expenses without the use of paper receipts • Inventory Information Approval System • Co-payment amounts that are not more than five times the dollar amount for a particular service • An explanation of benefits (“EOB”) from an insurance company
IRS HRA GuidanceRecent Guidance • In Rev. Rul. 2006-36 (August 14, 2006), the IRS provides guidance regarding distributions from an HRA to an individual who is not an employee, spouse or dependent • Domestic Partner coverage should not be affected as long as value of coverage is imputed to employee’s income at inception • Transition Relief Provided
Participant Communications Introduction of Defined Contribution Arrangements Communication of the Evolving HRA and HSA Rules Plan Features Debit/Credit Cards Investment Funds Defined Contribution Health PlansImplementation Issues
Plan Sponsor Documents Cafeteria Plan Document Welfare Plan Document Summary Plan Description Funding Vehicle Service Provider Agreements Administrative Services / Insurance Contract HSA Services Investment Management Defined Contribution Health PlansImplementation Issues
Recent Issues and Trends HSA Option Versus HSA As Sole Plan HSA ERISA Coverage State Taxation of HSA Benefits Internal Revenue Code Prohibited Transaction Rules HRA Retiree Medical HIPAA Privacy Defined Contribution Health PlansImplementation Issues