Category Archives: Health Savings Accounts

Which supplemental medical products disqualify HSA eligibility?

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By:          Zack Pace, SVP, Benefits Consulting

If your company sponsors voluntary supplemental medical products, such as hospital indemnity, critical illness, cancer, or accident, have you received conflicting or confusing opinions, from time to time, regarding if these products disqualify an individual from contributing to a Health Savings Account (HSA)? Per IRS Publication 969, to be eligible to contribute to a HSA, an individual must be enrolled in a High Deductible Health Plan, cannot be enrolled in another health plan, cannot be enrolled in Medicare, and cannot be claimed as a dependent on someone else’s tax return.

Publication 969 then provides a listing of the “additional insurance” an HSA- eligible individual may purchase that is not considered additional health coverage. However, the publication’s language is not descriptive:

  • Liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to ownership or use of property.
  • A specific disease or illness.
  • A fixed amount per day (or other period) of hospitalization.

You can also have coverage (whether provided through insurance or otherwise) for the following items.

  • Accidents.
  • Disability.
  • Dental care.
  • Vision care.
  • Long-term care.

To bring clarity to this topic, I asked my CBIZ colleague William M. Smith, Esquire, from our national tax office a series of questions. The result was our Q&A for Employee Benefit News Which voluntary products disqualify HSA eligibility? You may need to register with Employee Benefit News to view it.

Upon reading Bill’s concluding admonishment in the final Q&A, I remarked that his prose reminded me of Miguel De Cervantes. Bill then reminded me that Cervantes was also a tax professional – prior to writing Don Quixote, Miguel served as a tax collector. . .

You can reach me on zpace@cbiz.com or via Twitter. My collection of LinkedIn essays is located here, and my Employee Benefit News articles are available here.

By: Zack Pace, SVP, Benefits Consulting

In the wake of the Supreme Court’s King v. Burwell Affordable Care Act (ACA) subsidy opinion, CBIZ asked me to write an essay summarizing the decision’s impact for employers. However, I pointed out that my colleague Karen McLeese had already accomplished that task in ten words. Her 111th Health Reform Bulletin summarized the King v. Burwell opinion as follows:

In summary, it is business as usual for the Affordable Care Act.

Thus, I suggested that my essay instead focus on the ACA chores employers should complete this summer. This graphic summarizes my suggestions:

ACA Chores with Contact Info  r1

The resulting essay is available here: Let’s finish up our ACA chores this summer.

Further reading:

  1. 10 ACA employer shared-responsibility reporting tips
  2. Cadillac tax hurricane preparation: After-tax HSA contributions

Zack Pace is a Senior Vice President, Benefits Consulting at CBIZ, Inc. He can be reached at ZPace@cbiz.com. Follow him on LinkedIn and Twitter at @zpace_benefits

 

The Cadillac Tax Hurricane Reaches the Caribbean Sea

ACA Cadillac Tax

By: Zack Pace, SVP, Benefits Consulting

The ACA Cadillac Tax is a patient, powerful hurricane moving across the Atlantic. If it makes landfall, the impact will be dramatic. Late last spring, we observed the storm Building off the African Coast and provided a long-range forecast.

Just last week, this storm reached the Caribbean Sea, Hurricane Hunter Aircraft made initial observations, and Treasury issued its first official forecast via IRS Notice 2015-16. Of note:

  1. Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) are in grave danger
  2. Employer and pre-tax employee contributions to Health Savings Accounts are in peril
  3. Excepted Dental & Vision plans will likely be spared

While some remain hopeful that this hurricane will veer off into the North Atlantic before 2018, the bipartisan support that seems to be building for retaining this tax in one form or another is worth considering. For example, the Hatch-Burr-Upton Plan, as reported by Business Insurance, essentially transfers the tax from the insurer to the individual.

Hurricane preparation strategies for employers to consider:

  1. If offering FSAs, begin letting employees know that FSAs might go away
  2. If offering HRAs, begin preparations to retire the HRA
  3. If contributing to HSAs, evaluate shifting those contributions towards employee premium contribution reductions
  4. If allowing employees to contribute to HSAs pre-tax via your Section 125 plan, consider if you would facilitate after-tax contributions
  5. If sponsoring Dental & Vision plans, double-check that the plans meet the definition of Excepted. See our bulletin: IRS Pronouncements.
  6. Determine the possible overall increase to your payroll taxes

While we should begin preparation this year, we can hold off on buying duck tape and plywood for another year or so.

Thank you for reading this post. We’ll continue to monitor and evaluate the impact of the Cadillac Tax in the months ahead. If you have questions about the impact to your organization and your employees, we’re here to help. Please consider subscribing for updates via the upper right hand section.

You can reach me on zpace@cbiz.com. Please follow me on LinkedIn & Twitter.