Health and Welfare Plans Archives - Page 70 of 129

Modification of “Use It or Lose It” Rule for Health Flexible Spending Arrangements

by McDermott Will & Emery | Nov 12, 2013 | Health and Welfare Plans

The Internal Revenue Service recently issued new guidance modifying the “use it or lose it” rule applicable to health flexible spending arrangements (FSAs) to allow carryover of certain unused health FSA amounts into the next plan year.

On October 31, 2013, the Internal Revenue Service (IRS) issued Notice 2013-71, which modifies the existing requirement that unused amounts in a health flexible spending arrangement (FSA) at the end of a plan year (or applicable grace period) must be forfeited. This new guidance permits an employer to amend its cafeteria plan, effective as early as the 2013 plan year, to allow up to $500 of unused amounts as of the end of the plan year to be carried forward for use in the following plan year. The tradeoff is that a health FSA cannot have both a grace period and a carryover feature; it is one or the other.

Carryover of Certain Unused Amounts Permitted

The “use it or lose it” rule applicable to health FSAs requires unused amounts remaining in a health FSA at the end of a plan year (or applicable grace period) to be forfeited. The new guidance now permits an employer to amend its plan to allow for up to $500 of unused amounts remaining in a health FSA at the end of a plan year to be carried forward to reimburse eligible expenses incurred in the next following plan year. While the employer can elect to allow less than $500 to be carried over into the next following plan year, the same carryover limit must apply to all plan participants. This $500 permitted carryover feature does not affect the $2,500 annual health FSA limit imposed by the Affordable Care Act. Thus, a participant with $500 remaining unused in his or her health FSA at the end of a plan year may be permitted to carryover the $500 into the next plan year, in addition to a maximum contribution of $2,500, for a potential total of $3,000 available reimbursement that next following plan year.

Under prior IRS guidance, health FSAs are permitted to include a two-month and 15-day grace period after the end of the plan year, during which a health FSA participant can incur eligible expenses and use the amounts contributed for the previous year to pay those expenses. The new guidance specifies that a plan that is amended to provide for the carryover of unused health FSA amounts into the following plan year cannot also have a grace period in place for that following plan year. Thus, an employer amending its plan to allow for carryover of unused health FSA amounts may also need to amend the plan to remove any existing grace period feature.

Deadline for Plan Amendments Allowing Carryover

Under the new guidance, an employer electing to allow for carryover of unused health FSA amounts must amend its plan to permit the carryover. This amendment must be adopted on or before the last day of the plan year from which amounts can be carried [...]

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New California Law Affects State Taxation of Employer Tax Gross-Ups for Domestic Partners

by Brian Tiemann, Jacob Mattinson and Todd Solomon | Nov 7, 2013 | Employment, Health and Welfare Plans, Retirement Plans

The California state legislature recently enacted a law that may affect the taxation of benefits an employer provides to same-sex domestic partners in the state. California AB 362 excludes from gross income for California state income tax purposes the amount of any tax gross-ups paid by an employer to an employee for benefits for that employee’s same-sex spouse or domestic partner. The law was approved by California’s governor on October 1, 2013, and is effective immediately through January 1, 2019.

Earlier this year the Supreme Court of the United States ruled in U.S. v. Windsor that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional (see “Supreme Court Rules on DOMA and California’s Proposition 8” for more). Section 3 of DOMA had provided that, for purposes of all federal laws, the word “marriage” means “only a legal union between one man and one woman as husband and wife,” and the word “spouse” refers “only to a person of the opposite-sex who is a husband or wife.” Subsequent Internal Revenue Service (IRS) and U.S. Department of Labor guidance clarified that, as a result of Windsor, favorable federal tax treatment of spousal benefit coverage would extend to all same-sex couples legally married in any jurisdiction with laws authorizing same-sex marriage, regardless of whether the couple currently resides in a state where same-sex marriage is recognized (see “IRS and DOL Guidance Clarifies Employee Benefits Impact of Supreme Court’s DOMA Ruling” for more information).

As a result of Windsor and the subsequent IRS guidance, the impact of California AB 362 appears fairly limited. Pre-Windsor, some employers provided a federal tax gross-up on the imputed value of coverage provided to an employee’s same-sex spouse or domestic partner. Post-Windsor, same-sex married couples in California no longer need a tax gross-up for either state or federal tax purposes because they no longer have to be taxed on the value of the coverage provided to their spouse. Because of this treatment, application of California AB 362 would be limited to a situation where an employer provides a federal tax gross-up to an employee who is in a California-registered domestic partnership. Such a gross-up, which would have been taxable under prior state law, is now no longer taxable in California. Employers in California will need to update their payroll and tax procedures accordingly. Employers both inside and outside of California that previously provided tax gross-ups may find it desirable to revisit their gross-up policies in light of the Windsor decision and the IRS guidance.

IRS Announces Employee Benefit Plan Limits for 2014

by Diane Morgenthaler and Jeffrey Holdvogt | Nov 6, 2013 | Health and Welfare Plans, Retirement Plans

The Internal Revenue Service (IRS) recently announced cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2014. Although many dollar limits currently in effect for 2013 will change, some limits will remain unchanged for 2014. This On the Subject provides a chart of these 2014 cost-of-living changes.

To read the full article, click here.

New Guidance Clarifies Health Reimbursement Arrangements Under ACA

by McDermott Will & Emery | Oct 31, 2013 | Health and Welfare Plans

Recently issued guidance clarifies the application of certain provisions under the Affordable Care Act (ACA) to health reimbursement arrangements, employer payment plans, health flexible spending arrangements and employee assistance programs.

To read the full article, click here.

IRS Guidance on Employment and Income Tax Refunds on Same-Sex Spouse Benefits

by Brian Tiemann, Ruth Wimer and Todd Solomon | Oct 22, 2013 | Employment, Health and Welfare Plans, Retirement Plans

Employers extending benefit coverage to employees’ same-sex spouses and partners should review their payroll procedures to ensure that such coverages are properly taxed for federal income and FICA tax purposes. Employers also should review the options in Notice 2013-61 and consider filing claims for refunds or adjustments of FICA overpayments.

To read the full article, click here.

View From McDermott: Dollars and Cents, the Cost of Benefit Coverage

by Brian Tiemann and Todd Solomon | Oct 10, 2013 | Employment, Health and Welfare Plans

Many employers have begun the process of evaluating their options and obligations with respect to extending benefit coverage under employer-sponsored benefit plans to same-sex spouses in light of the U.S. Supreme Court’s recent ruling on Section 3 of the Defense of Marriage Act. Section 3 of DOMA provided that for all purposes of federal law the word “marriage” meant “only a legal union between one man and one woman as husband and wife,” and the word “spouse” referred “only to a person of the opposite-sex who is a husband or wife.” In June 2013, the Supreme Court ruled in United States v. Windsor that Section 3 of DOMA was an unconstitutional “deprivation of the liberty of the person protected by the Fifth Amendment.” The effect of this ruling is that federal law now generally will defer to state law definitions of marriage, including same-sex marriage, which has been legalized in 13 states and the District of Columbia.

As part of evaluating options for extending benefit coverage to same-sex spouses, employers need to consider the financial implications of such benefits. These implications include costs the employer will incur in extending such benefits, as well as the financial impact on employees who opt to utilize such benefits. Many of these costs are dependent upon the spousal benefits the employer currently offers, although the relevant considerations and cost estimates outlined below may be helpful resources.

To read the full article, click here.

Join McDermott Partners at the 2013 ERISA Basics National Institute

by Diane Morgenthaler | Oct 9, 2013 | Health and Welfare Plans, Retirement Plans

Please join McDermott partners, Diane Morgenthaler and Jamie Weyeneth, on October 16-18 at the 2013 ERISA Basics National Institute in Chicago, IL. Designed for in-house and union counsel, benefits specialists, private practitioners, litigators, consultants and accountants, this conference provides an opportunity to hear from the ERISA experts. For more information, click here.

2013 ERISA Basics National Institute

Friday, October 18
10:05-10:55 a.m.
Section 401(k) Plans
Diane Morgenthaler, Partner, McDermott Will & Emery

11:05-11:55 a.m.
Cafeteria Plans
Jamie Weyeneth, Partner, McDermott Will & Emery

IRS and DOL Guidance Clarifies Employee Benefits Impact of Supreme Court’s DOMA Ruling

by Brian Tiemann and Todd Solomon | Oct 2, 2013 | Health and Welfare Plans, Retirement Plans

Recent guidance issued by the U.S. Department of the Treasury, the Internal Revenue Service (IRS) and the Employee Benefits Security Administration (EBSA) division of the U.S. Department of Labor (DOL) provides some initial clarifications on how U.S. v. Windsor will affect benefits for same-sex spouses. The guidance provides that same-sex couples legally married in a jurisdiction with laws authorizing same-sex marriage will be treated as married for federal tax purposes, regardless of whether the couple resides in a state where same-sex marriage is recognized.

To read the full article, click here.

Additional Affordable Care Act Guidance Clarifies Exchange Notices and 90-Day Waiting Period

by Maggie McTigue | Sep 26, 2013 | Health and Welfare Plans

Recent guidance clarifies the exchange notice requirement and the 90-day waiting period limitation under the Affordable Care Act.

IRS Issues Proposed Regulations on Information Reporting under the Affordable Care Act

by McDermott Will & Emery | Sep 17, 2013 | Health and Welfare Plans

by Amy M. Gordon, Susan M. Nash and Jacob Mattinson

Recently issued guidance clarifies annual information reporting requirements for insurers and employers under the Affordable Care Act (ACA). The required reporting enables the Internal Revenue Service to determine compliance with the employer and individual mandates and individual eligibility for premium tax credits under the ACA.

To read the full article please click here.

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