Flexible benefit plans, also known as Cafeteria Plans or Section 125 plans, offer employers and employees payroll tax savings. These plans allow employees to set aside money pre-tax to pay for health insurance and various medical and dependent care expenses. Employers can elect to offer multiple types of accounts each providing a valuable benefit to employees. Below is a partial list of expenses that can be reimbursed through the various accounts.
Transportation Spending Account
Eligible mass transit or vanpool expenses associated with travel to and from work, including bus, train or subway.
Parking Spending Account
Eligible parking expenses either at your place of employment or at a location where you use mass transit.
A Health Savings Account (HSA) is an individually owned, tax-favored account that allows consumers to pay for qualified healthcare expenses.
An HSA must be coupled with a High Deductible Health Plan (HDHP) to receive the tax advantages allowed by the IRS. Premiums associated with an HDHP should be lower than a traditional plan, allowing employees to capture the savings to fund an HSA. Similar to a 401 (k) savings plan, individuals can make tax-deductible contributions into an HSA and the account can earn interest tax-free. HSA funds can then be used to pay for any qualified, out-of-pocket medical expenses. HSAs are also commonly used to pay for deductible and prescription drug expenses. Once the deductible is met, the health plan begins paying some or all covered expenses, depending on the plan selected.
In general, to be eligible for an HSA, you must meet the following criteria:
HSAs provide several tax-saving and cost-savings benefits. By combining an HSA with a qualified HDHP, you can reduce your insurance premiums. Because it is a triple-tax savings account, contributions are made tax free, grow tax free and can be withdrawn tax free to pay for a variety of qualified medical expenses, many of which are not covered by traditional health insurance plans (including dental visits, prescription drugs, eyeglasses, contact lenses, and chiropractor visits. Unlike other benefit accounts, unused funds are rolled over annually enabling them to be used for future expenses.
The U.S. Treasury Department establishes annual contribution limits and minimum deductible amounts for HSAs and HSA-qualified health plans, which are adjusted each year for inflation. To find out the current limits and amounts, visit the IRS website at www.irs.gov.
A Health Reimbursement Arrangement (HRA) is a stand-alone, employer-funded plan commonly combined with a High Deductible Health Plan (HDHP). An HRA allows employers to fund an account to pay employees' medical expenses that are not covered by insurance such as deductibles, copays or co- insurance.
Employers determine when HRA funds are available to employees, what expenses can be reimbursed, and how unused funds are disbursed upon employee termination. Reimbursements on qualified expenses are tax-deductible for the employer and tax-free for the employee. If elected by the employer, unused funds can also be carried forward.
There are various ways for an employer to design an HRA. BSB Consultants will assist employers with an HRA plan design that best fits their company. We will provide the adoption agreement as well as assist in the creation of communication materials to employees and provide ongoing administration for adjudicating claims and issuing reimbursements.
The most widely used HRA designs are:
Reimburses expenses from the first dollar up to the accumulated balance in the HRA account.
Plan pays for eligible expenses after the employee pays an initial amount established by the employer.
Employer and employee share the cost of covered expenses subject to the health insurance plan deductible.
Employer or employee pays the first portion of deductible expenses up to a limit defined by the plan.
Employer HRA reimburses the employee a percentage of their out-of-pocket deductible costs up to the employer defined HRA maximum amount.
The employer can set a specific dollar amount to reimburse certain co-pays.
COBRA administration can be a significant drain on your internal resources. Factor in the consequences of non-compliance and it's easy to understand why employers turn to BSB Consultants to manage this burdensome administrative task.
The COBRA administration specialists at BSB Consultants will generate and mail the required notifications following the initial notice, as well as track, document and update all COBRA-related events. We also provide and maintain the necessary documentation to respond to an Internal Revenue Service audit of your COBRA practices.
The law identifies four distinct groups who are COBRA eligible:
1. Employees and their families who lose coverage because of a covered employee's termination or reduction in hours.
2. Dependent children who lose coverage once they exceed the plan's age limit for eligibility.
3. Spouses and dependent children who lose coverage as a result of divorce, legal separation or death of a covered employee.
4. Spouses and dependent children who lose group coverage because the covered employee became entitled to Medicare.
Certain cases involving the bankruptcy of the employer, COBRA coverage may be available for retired employees, their spouses and dependent children.
Qualifying Event Notification