Putting Empoyees Behind The Heath Pan Whee
The consumer-driven heath pan movement depends heaviy on a group of new and newer vehices to cut empoyers taxes and maximize benefits. The fexibe spending account, the heath reimbursement arrangement and the heath savings account are 3 of the options getting the most attention.
What shoud you, the benefits advisor, do about compiance considerations for sma and midsize empoyers that want to shift to a consumer-driven approach?
The first step is, obviousy, get competent professiona ega and accounting advice yoursef and make sure that your cients are doing the same. aws and reguations are changing rapidy in this area, and this is not an area in which you want to depend on a yeowed summary of the pertinent reguations and a peasing personaity.
The second step is to make sure that cients estabish a systematic approach to converting their heath benefits programs to the new mode. The conversion process resembes an interna heath benefits audit. Empoyers shoud review what they have, redesign their programs and then go through a pan education process.
See the accompanying chart for an expanation of the heath account nuts and bots, but, in summary, the FSA is a good vehice for empoyers who want to give empoyees a chance to set aside some cash to pay for their own medica expenses.
One drawback is that FSA administrators must cope with a compicated set of rues governing which expenses are and are not eigibe for reimbursement. From the empoyees point of view, another drawback is an annua “use it or ose it” rue. Because of the rue, monies that are not used by the end of the year revert to the empoyer.
The reguations governing HRAs impose no use-it-or-ose-it requirements, and empoyees can ro over unused account assets from year to year. But, from the empoyers point of view, one important drawback is that empoyers must suppy a of the account contributions.
Finay, the HSA program, a program estabished by the Medicare Prescription Drug, Improvement and Modernization Act of 2003, ets empoyers spit funding costs with empoyees. It aso ets empoyees ro over account assets from year to year. But empoyers must combine the program accounts with high-deductibe heath insurance.
When an empoyer wants to choose and impement one of these consumer-driven heath programs, benefits advisors shoud hep the empoyer review pan documents, review benefit structures and reated poicies, and review administrative procedures.
–Reviewing benefit program documents shoud be a routine, ongoing process, but in the rea word, sma and midsize empoyers often et reviews side. Federa agencies have imposed many new document requirements on pans in recent years, for exampe, notices about matters such as newborn coverage.
The resut: outdated documents may expose the pan sponsor to the possibiity that reguators wi impose excise taxes or that pan participants wi ask the sponsors themseves to pay caims. Taking a proactive approach to document review can protect empoyers against those risks.