Higher Limits for HSA Contributions and Deductibles in 2015

Whether you have an established high-deductible health plan (HDHP) at your organization – or such a move is under consideration, it is important to note that the Internal Revenue Service has announced higher limits on contributions to health savings accounts (HSAs) and for out-of-pocket spending under linked high-deductible health plans (HDHPs) starting in 2015.

Contribution & Out-of-Pocket Limits for HSAs and for HDHPs
20142015
HSA contribution limit (employer AND employee)Individual: $3,300  
Family: $6,550
Individual: $3,350
Family: $6,650
HSA catch-up contributions (age 55 or older) Catch-up contributions can be made any time during the year in which the HSA participant turns 55.$1,000$1,000 (no change)
HDHP minimum deductiblesIndividual: $1,250
Family: $2,500
Individual: $1,300
Family: $2,600
HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, excluding premiums)Individual: $6,350
Family: $12,700
Individual: $6,450
 Family: $12,900

Reference Guide: Employer Mandate Revisions

 

Previous

Mandates

Newest

Mandates

What time frame is used to determine the size of an employer? To determine the size of an employer, refer to a consecutive 12 month period To determine the size of an employer, refer to a consecutive 6 month period
When will an employer be subject to the compliance of the employer mandate? All mid and large size employers must comply to the employer mandate by January 1, 2015. An employer will be subject to the employer mandate, given the final revisions, at the time their plan year begins in 2015 for large employers and 2016 for mid-size employers.
What methods are allowed to determine affordable healthcare coverage? Safe harbors permit employers to use W-2 forms, hourly wages, and the poverty line to determine affordability Previous methods remain, however, as clarification, full W-2 wages must be used, which include any employee salary reductions contributed to 401(k) or cafeteria plans.
How do employers determine full-time employee eligibilty? A full-time, eligible employee is anyone who works at least 30 hours per week in the previous year. Previous methods remain, however, clarification revisions were made. Volunteer workers, seasonal workers, and students in work-study programs are NOT considered full-time. Adjunct faculty must be credited 21/4 hours per week for each hour of teaching and 1 hour per week for each additional hour of out-of-classroom work to determine status. No other revisions were made addressing short term employees or those in high-turnover positions.
In the case of a rehire, how does coverage apply? If you rehire an employee to work full-time, they must be offered coverage within 90 days of hire. If the rehire is to work variable hours and their return is within 26 weeks of their departure, the employer must offer coverage within 90 days and continue to cover the employee until the end of the standard plan year. However, they will also immediately start on a new employee measurement period, which if not satisfied by the time open enrollment ends for the next plan year, the employer does NOT need to extend coverage for that year. All previous requirement remain, EXCEPT, if the rehire is to work variable hours and their return is within 13 weeks of their departure, the employer must offer coverage within 90 days and continue to cover the employee until the end of the standard plan year.

 

pdf_downloadReference Guide_Employer Mandate Revisions

 

 

Pay it or Play it: Preparation Not Procrastination

All employers with 50 or more full-time employees will need to make a decision in January 2015 whether they are going to “pay or play.” Preparing now can be crucial to ensuring you make the right decision for your organization and avoid unwelcome surprises come 2015. As you make your decision, take a careful look at these three key areas:

 

1.) Affordability:

Health coverage is affordable from an employer when an employee’s premiums do not exceed 9.5% of the employee’s a.) W-2 Form, wages from that employer, b.) monthly wages equal to the hourly rate of pay X 130 hours or the employee’s monthly salary, or c.) the federal poverty line for a single individual.

These premiums are those paid on a minimum value, lowest cost coverage plan. To qualify as minimum value, a plan must pay at least 60% of the total allowed costs stated under the plan. Employers can use 3 methods to determine minimum value:

1.) IRS generated minimum value calculator,
2.) Safe Harbor Checklist,
3.) Actuarial certification.

2.) Full-time status:

Many tax penalties will occur because of the lack of quality systems that clearly differentiate eligible from ineligible employees. A full-time, eligible employee is anyone who works at least 30 hours per week in the previous year. Therefore, employee hours in 2014 will affect how much liability your company will face once the employer mandate takes effect next year. Benefits Lawyer, Peter Marathas, says that “employers should be working with payroll and HRIS vendor now to create systems that will flag hours employees work and maintain them in a form that will be suitable for use to prove to the government” (ebn, 2014).

3.) Non-discrimination:

Double checking eligibility can benefit both you and your employees. Employers can use a standard measurement period (SMP) between 3-12 months for ongoing employees in order to define full-time status based on hours worked during that period. On going employees are those which have been employed for at least one complete SMP and have worked an average of 3o hours per week during the stability period. The stability period, subsequent to the SMP and usually the same length, must be at least 6 months long and no shorter than the SMP. Employers can vary the SMP as long as the changes are consistent for all employees under the same category of employment. For example, if an employee is determined a full-time employee during an SMP of 6 months, then he/she must be treated as full-time for the duration of the next 6 months (stability period) even if they work less than the required 30 hours per week.

**Hint: Remember, even if you are part of controlled group with another company, both of the companies are combined to determine if they collectively qualify as a large employer. If so, both of you would be subject to the pay-or-play penalties. However, any tax penalty amount will be individually issued and assessed.

Still having trouble deciding whether paying or playing is right for your company? The following questions can help you start thinking about certain ramifications of both the paying and playing decision.

Pay_or_Play_decision_making

 

Quick Reference for IRS-Issued Notice Concerning FSAs

What has changed?
On October 31, 2013, the Internal Revenue Service (IRS) issued Notice 2013-71 providing that a cafeteria plan may allow up to $500 of a participant’s balance at the end of the plan year to be carried over into the next plan year and used for eligible medical expenses incurred during that next plan year.

Is the change mandatory?
The change announced in Notice 2013-71 is optional. Cafeteria plans are not required to permit this carryover.

What are the implications if my organization does decide to permit the $500 carry over?
This change does not affect the maximum amount that may be contributed by a participant to an FSA for a plan year and does not reduce the participant’s maximum FSA contribution for the next plan year. Therefore, a participant who carries over $500 from Year 1 to Year 2 and contributes $2,500 to his or her FSA for Year 2 could receive reimbursements for up to $3,000 of eligible medical expense during Year 2 from his or her FSA.

What does my organization need to do in order to make this change?
A plan may not offer a participant the option to carry over an unused amount and allow a grace period. In order for a participant to be able to carry over unused amounts, any grace periods must be removed from the existing plan and the plan must then be amended to permit a carryover.

Grace Periods:
Plan sponsors who currently offer a grace period will need to decide whether the grace period or the carryover option is a more desirable plan design. If the carry over option is more desirable, then the grace period provision must be removed prior to permitting carryovers.

Amendments to Existing Plans:
Plans are not required to adopt either the carryover option or a grace period option. However, if your organization wants to permit carryovers, the grace period must be removed (if present) from the existing plan and then the amendment allowing a participant to carry over up to $500 of unused amounts must be adopted on or before the last day of the plan year from which unused amounts are to be carried over. So, your plan needs to be formally amended by December 31, 2014, if the carryover option is being adopted for 2014 for a calendar year plan – or any time before the last day of the plan year that begins in 2014 to permit carryover of amounts from a plan year beginning in 2013.