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Brown & Brown — Conference Presentation (May 2023)
46 slides from Brown & Brown's conference presentation, May 2023
Slide 1: This Webinar Will Start Momentarily
This Webinar Will Start Momentarily. Thank you for joining us.
Slide 2: Account-Based Health Plans
Account-Based Health Plans Presented By: Presented by the Regulatory and Cindy Niesen and Daniel Brady Legislative Strategy Group
Slide 3: Disclaimer
DISCLAIMER Brown & Brown, Inc. and all its affiliates, do not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this document is intended to provide a general overview o
Slide 4: Presentation Agenda
Presentation 1 Account-Based Plans – Overview Agenda 2 Health Savings Account (HSA) Health Flexible Spending Account 3 (Health FSA) 4 Health Reimbursement Arrangement (HRA) 5 How Account-Based Plans Impact Each Other BROWN & BROWN | 4
Slide 5: Account-Based Plans Overview
Account-Based Plans Overview
Slide 6: What Are Account-Based Plans?
What Are Account-Based Plans? Healthcare FSA/HRA Employer-provided group health plans that allow for the payment or reimbursement of expenses for medical care on a tax-favored basis. HSA Tax-favored trust or custodial account used to pay for qualified medical expenses • Often subject to eligibility
Slide 7: Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs)
Slide 8: Health Savings Account (HSA)
Health Savings Account (HSA) What is an HSA? What is it for? Are there any special requirements? Tax-exempt trust or custodial May be used for eligible account owned by the medical expenses of the Must be covered by a high individual individual, spouse & deductible health plan (HDHP) as dependents d
Slide 9: High Deductible Health Plan (HDHP)
High Deductible Health Plan (HDHP) Federal Standards*: • Minimum Annual Deductible (indexed for inflation - 2023): » Individual contract o $1,500 non-embedded o $3,000 embedded • Other than individual contract: $3,000 (2023) 2024 indexed HDHP standards just announced o Satisfied by one or more cover
Slide 10: Who Is Eligible to Establish an HSA?
Who Is Eligible to Establish an HSA? Any individual covered under a High Deductible • Not covered under another health plan that is a non- Health Plan (HDHP): HDHP plan that provides first-dollar coverage (other than preventive care) before satisfying the applicable • Not enrolled in Medicare IRS mi
Slide 11: HSA Contributions
HSA Contributions EMPLOYEE HSA CONTRIBUTIONS • May be made through pre-tax payroll deductions through the employer’s Section 125 cafeteria plan* » HSA must be listed as an available benefit (pre-tax HSA contributions) in the cafeteria plan documents • If employee contributions are made through a caf
Slide 12: HSA Contributions
HSA Contributions EMPLOYEE HSA CONTRIBUTIONS Maximum Annual HSA Contribution Limit • Employer contributions to an employee’s HSA are included in the maximum amount an employee is eligible to contribute to their HSA on a calendar year basis Employer Contributions May Be Excluded from Income Tax and F
Slide 13: Employer HSA Contributions Outside of Cafeteria Plan
Employer HSA Contributions Outside of Cafeteria Plan EMPLOYEE HSA CONTRIBUTIONS • Comparable contribution rules require employer • May differentiate based on the following contributions to be the same for comparable classifications only: participating employees (based on HDHP coverage » Current acti
Slide 14: Annual Contribution Limits
Annual Contribution Limits • Catch-up contributions for individuals aged 55 and older by end of the tax year = $1,000 • Excess contributions are included in the individual’s gross income and subject to 6% excise tax if not distributed • 2023 annual HSA contribution (along with any earnings) from the
Slide 15: Multiple HSAs in the Family
Multiple HSAs in the Family HSAs are individually owned accounts » Catch-up contributions are allocated separately to each spouse and one spouse cannot take • Cannot be shared or jointly owned by spouses (but advantage of the other spouse’s catch-up account holder may name a beneficiary in the event
Slide 16: Special Contribution Rule
Special Contribution Rule “LAST MONTH RULE” • The last month rule assumes that the account holder had the same HDHP coverage for the entire year, based on coverage effective on December 1st An individual may contribute • If the employee is enrolled in the family tier as of December 1st of the the en
Slide 17: HSA Corrections
HSA Corrections M I S TA K E S H A P P E N What happens when ineligible contributions are For those that lose eligibility: made to an HSA? • Curative distribution can be used if excess • It appears the IRS differentiates between those that contribution and net income attributable to an excess were n
Slide 18: HSA Corrections Continued
HSA Corrections Continued M I S TA K E S H A P P E N What about contributions in excess of the statutory maximum or contributions made due to an administrative error? • Curative distribution can be used if excess contribution and net income attributable to an excess contribution are distributed befo
Slide 19: HSA Distribution Rules
HSA Distribution Rules TA X Q U A L I F I E D • If taken for qualified medical expenses » If non-qualified expenses, income tax and 20% penalty apply • May only be used for expenses incurred on or after the date the HSA was established • May use funds for expenses incurred in prior year if the HSA w
Slide 20: Qualified Medical Expenses
Qualified Medical Expenses EXAMPLES • Most medical care that is subject to your • Select insurance premiums deductible: » COBRA » Copays » Qualified long-term care insurance » Coinsurance » Health insurance premiums paid while » Doctor visits receiving unemployment benefits » Inpatient or outpatient
Slide 21: Non-Qualified Medical Expenses
Non-Qualified Medical Expenses EXAMPLES • Insurance premiums (other than the exceptions listed on previous slide) • Surgery purely for cosmetic reasons • Expenses covered by another insurance plan • General health items such as tissues, toiletries and hand sanitizer BROWN & BROWN | 21
Slide 22: Midyear HSA Election Changes
Midyear HSA Election Changes • Section 125 irrevocable election rules do not apply to HSA’s funded pre-tax through a Section 125 plan since HSA eligibility is determined prospectively on a month-to-month basis • Cafeteria plan may permit employees to make prospective salary reduction elections (or c
Slide 23: Health Flexible Spending Account (FSA)
Health Flexible Spending Account (FSA)
Slide 24: Health Flexible Spending Account (FSA)
Health Flexible Spending Account (FSA) What is a health FSA? What is it for? • Tax-advantaged self-insured Reimburses eligible medical medical reimbursement plan expenses not covered by • Group health plan and health plan employee welfare benefit plan BROWN & BROWN | 24
Slide 25: Who Is Eligible to Participate
Who Is Eligible to Participate • Any common-law employee, subject to employer plan design exclusions » Eligibility typically limited to employees eligible for the employer’s medical plan • Greater than 2% shareholders of S Corp and family members, LLC members, partners in a partnership and sole prop
Slide 26: Health FSA Funding
Health FSA Funding • Can be funded with pre-tax payroll deductions through a Section 125 cafeteria plan and/or employer contributions • Employee contributions subject to indexed annual limits: » $3,050 in 2023 » Carryover limit from plan year beginning 2023 to 2024 is Remember: Although employer $61
Slide 27: Use-or-Lose Rule
Use-or-Lose Rule Contributions not used to reimburse medical expenses incurred during coverage period (i.e., plan year) will be forfeited unless exception applies. Carryover • Health FSAs may carryover $610 (indexed annually) at end of plan year to be used for qualified medical expenses incurred in
Slide 28: Uniform Coverage Rule
Uniform Coverage Rule H E A LT H F S A S O F F E R E D T H R O U G H A C A F E T E R I A P L A N Must be uniform coverage throughout coverage • If employee contributions cease, coverage ceases period (usually 12 months) (subject to COBRA rules) • Maximum reimbursement amount must always be » Claims
Slide 29: Expense Reimbursement
Expense Reimbursement O N LY Q U A L I F I E D E X P E N S E S F O R M E D I C A L C A R E D E F I N E D UNDER CODE §213(D) • Cannot reimburse medical care expenses already • Reimbursement request must be less than the reimbursed from other health plan coverage or that maximum limit provided by plan
Slide 30: Health FSA Nondiscrimination
Health FSA Nondiscrimination Code §105(h) – Self-Insured Medical Plan, Including Health FSA Offered Under Cafeteria Plan • Prohibits discrimination in favor of highly compensated individuals (HCIs) • Tests whether reimbursements under health FSA are taxable » Eligibility Test – Cannot discriminate i
Slide 31: Health FSA Election Changes – Sec. 125
Health FSA Election Changes – Sec. 125 Health FSAs Offered Through Cafeteria Plans Are Subject to the Section 125 Irrevocable Election Rule • Permitted election change rules allow midyear election changes to health FSA salary reductions during the coverage period only in limited circumstances: » Bir
Slide 32: Applicable Laws and Regulations
Applicable Laws and Regulations ERISA – Employee Welfare Benefit Plan COBRA – Group Health Plans • Applies to private-sector and nonprofit entities • Subject to COBRA unless small employer (fewer than (governmental and certain church plans exempt) 20 employees) or church plan • Health FSAs are subje
Slide 33: Applicable Laws and Regulations
Applicable Laws and Regulations HIPAA ACA • Exception to HIPAA portability and nondiscrimination • Excepted benefit FSA not subject to ACA market requirements for health FSAs that qualify as excepted reforms (e.g., preventive services mandate) benefit » Most health FSAs designed as excepted benefits
Slide 34: Health Reimbursement Arrangement (HRA)
Health Reimbursement Arrangement (HRA)
Slide 35: Health Reimbursement Arrangement (HRA)
Health Reimbursement Arrangement (HRA) What is an HRA? What is it for? Employer-financed self- Reimburses eligible insured reimbursement medical expenses not arrangement covered by health plan BROWN & BROWN | 35
Slide 36: Who Is Eligible to Participate
Who Is Eligible to Participate • Any common-law employee, subject to employer plan design exclusions » Eligibility typically limited to employees eligible for the employer’s medical plan • Greater than 2% shareholders of S Corp and family members, LLC members, partners in a partnership and sole prop
Slide 37: HRA Funding
HRA Funding • Financed solely with employer contributions • No employee contributions means HRAs are not financed through pre-tax salary reductions or under a Section 125 cafeteria plan • Account may be seeded upfront at beginning of year with entire There is no employer HRA amount available for rei
Slide 38: HRA Integration Rules
HRA Integration Rules HRAs Integrated with Group Health Plan (most HRAs can be integrated with non-HRA coverage that common) does not provide minimum value if reimbursement is Integrated HRAs satisfy ACA market reforms (e.g., limited to copayments, coinsurance, deductibles and prohibition on annual/
Slide 39: Expense Reimbursement
Expense Reimbursement O N LY Q U A L I F I E D E X P E N S E S F O R M E D I C A L C A R E D E F I N E D U N D E R C O D E § 2 1 3 ( D ) • Employer may place limitations on reimbursable expenses (both as to the kinds of reimbursable expenses and as to whose expenses are reimbursable to the employee)
Slide 40: HRA Nondiscrimination
HRA Nondiscrimination Section 125 • Not applicable – HRAs cannot be offered under a cafeteria plan because no contributions by an employee Section 105(h) • Applicable to most HRAs as self-insured medical reimbursement plans » Prohibit discrimination in favor of HCIs as to eligibility and benefits BR
Slide 41: Applicable Laws and Regulations
Applicable Laws and Regulations ERISA » Qualified beneficiaries who lose HRA coverage • Most HRAs are employee welfare benefit plans due to qualifying event must be given the subject to ERISA (unless governmental or church opportunity to continue HRA coverage for plan) prescribed time period » COBRA
Slide 42: How HSAs, FSAs and HRAs Impact Each Other
How HSAs, FSAs and HRAs Impact Each Other
Slide 43: HSA Eligibility
HSA Eligibility G E N E R A L - P U R P O S E H E A LT H F S A O R H R A C O V E R A G E W I L L P R E V E N T H S A E L I G I B I L I T Y • Individuals whose medical care expenses can be paid or reimbursed under a general-purpose health FSA or HRA (e.g., employee’s medical care is reimbursable unde
Slide 44: Ordering Rules
Ordering Rules Health FSA and HRA • Health FSAs typically payers of last resort • Claims generally submitted to HRA first, then health FSA reimburses any amounts not covered by the HRA » Employers can draft HRA and health FSA plan documents so that an HRA pays only after the health FSA amounts are e
Slide 45: HRCI and SHRM Credits
HRCI and SHRM Credits This Program, , ID No. 627218, has been approved for 1.00 HR (General) recertification credit hours toward aPHR™, aPHRi™, PHR®, PHRca®, SPHR®, GPHR®, PHRi™ and SPHRi™ recertification through HR Certification Institute® (HRCI®). Brown & Brown is recognized by SHRM to offer Profe
Slide 46: Find your solution at BBrown.com
Find your solution at BBrown.com DISCLAIMER: Brown & Brown, Inc. and all its affiliates, do not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this document is intend