The IRS recently released Revenue Procedure 2023-34 (https://www.irs.gov/pub/irs-drop/rp-23-34.pdf), which contains adjustments for various tax-related amounts that are indexed for inflation. As indicated in this guidance:
- The cap on health FSA salary reduction contributions for plan years beginning in 2024 has increased. The maximum amount participants may contribute to a health FSA through salary reduction during the 2024 plan year will be $3,200. If a cafeteria plan permits the carryover of unused health FSA amounts, the maximum carryover amount is $640.
- The monthly limits on transit/commuter highway vehicle benefits and parking benefits for 2024 have increased to $315 per month of each type of benefit.
In light of these increases, employers should review the plan documents governing their health FSAs and/or transportation plans to determine whether these increases are automatically incorporated into the plans. It may be necessary to amend the plans to adopt the increased limits (if the plans do not automatically incorporate them and the employer intends to implement the increases in 2024) or reject the increased limits (if the plans automatically incorporate them but the employer does not wish to implement the increases in 2024).
If you have any questions or need assistance amending your plan, please contact us.
Patient-Centered Outcomes Research Institute (“PCORI”) Fees
Many plan sponsors of self-insured health plans are required to pay PCORI fees by Monday, July 31, 2023. What the plan sponsor pays for PCORI depends upon the plan year. Some will pay the $2.79 per covered life and some will pay the adjusted higher amount per covered life($3.00).
Important: Identify what plans are subject to the requirement and whether the plan is self-insured or fully insured.
What self-insured plans?
- Major medical coverage
- Certain health reimbursement arrangements (HRAs)
- Individual coverage health reimbursement arrangements (ICHRAs)
See the chart on the IRS website regarding the application of PCORI fees to common types of health coverage or arrangements: https://www.irs.gov/newsroom/application-of-the-patient-centered-outcomes-research-trust-fund-fee-to-common-types-of-health-coverage-or-arrangements
Form 720 for Self-Insured Plan: The plan sponsor must file Form 720 and pay the required PCORI fee directly to the Internal Revenue Service (IRS). Third-party administrator (TPAs) cannot pay the fee on behalf of a plan. The Form 720 is available here: https://www.irs.gov/pub/irs-pdf/f720.pdf. Instructions for the form are available here: https://www.irs.gov/instructions/i720.
Form 720 for Fully Insured Plan: The issuer of a “specified health insurance policy” must file Form 720 and pay the required PCORI fee directly to the IRS. Consequently, the insurance carrier files the Form 720 and pays the PCORI fee.
Amount of PCORI Fee. The current annual fee adjustments are as follows:
- For plan years that ended on or after October 1, 2022, and before October 1, 2023, (this includes calendar year plans), the fee is $3 per covered life under the plan.
- For plan years that ended on or after October 1, 2021, and before October 1, 2022, the fee is $2.79 per covered life under the plan.
In general, a self-insured plan must use one of three ways to determine the number of covered lives for purposes of PCORI fees: (1) the actual count method, (2) the snapshot method, or (3) the Form 5500 method.
It is important to note, for many plans, COBRA qualified beneficiaries, retirees, and former employees must all be included as covered lives. However, for HRAs and ICHRAs, covered lives means the number of participants with an account.
If you need assistance in working through the PCORI Fee process, please contact us.
Form 5500 Deadline Fast Approaching
In general, for plans subject to ERISA, Form 5500 filings are due by the last day of the seventh months following the last day of the plan year. For a calendar year plan, the Form 5500 for the 2022 plan year is due on July 31, 2023, unless an extension is requested. Note: Certain small plans are exempt from the filing requirement.
If you need assistance with Form 5500 preparation and/or filing an extension, please contact us.
The ECFC Annual Symposium provides networking and professional development for employers, plan sponsors, third-party administrators, and other service providers in the consumer-directed benefits industry. The Symposium is an annual opportunity for practical advice, technical education, and Congressional and regulatory updates from industry leaders.
The agenda for the ECFC 36th Annual Symposium is packed with all the current employee benefit topics, including key agency guidance from representatives of the Internal Revenue Service and Department of the Treasury discussing the latest information regarding tax-advantaged accounts, cafeteria plans, FSAs, HSAs, HRAs, and the ACA.
Darcy Hitesman is excited to be a presenter at the Symposium again this year. Her topics of discussion include lifestyle programs during the morning session on Wednesday, August 2nd, as well as a co-discussion with Sheilla Jones from OneBridge Benefits, regarding health reimbursement arrangement (HRA) plan designs, tax and compliance considerations, during the afternoon session on Wednesday, August 2nd.
IMPORTANT REMINDER TO MULTIPLE EMPLOYER WELFARE ARRANGEMENTS (MEWAs): The Form M-1 must be filed no later than March 1 following any calendar year for which a filing is required. A one-time extension of time to file will automatically be granted if the administrator of the MEWA requests an extension. More filing information is available on the US DOL (EBSA) website: https://www.askebsa.dol.gov/mewa/.
If you sponsor a limited scope health FSA or limited scope HRA that covers post-deductible expenses, the claims substantiation rules require independent third party substantiation. The substantiation incudes demonstrating that the individual whose expense is submitted for reimbursement has satisfied the deductible. This could be satisfied through submission of an Explanation of Benefits (EOB) showing satisfaction of the applicable deductible. A mere statement by the participant that he/she has satisfied the deductible is not sufficient.
If you have any questions or would like additional information, please contact us.
For an applicable large employer (ALE) completing Form 1095-C, a former employee that has coverage (e.g., COBRA, state continuation, retiree coverage, etc.) is coded as 1H for line 14 and 2A on line 16 for the months in the year in which the termination of employment occurs, and 1G for line 14 for months in the year(s) following the year in which the termination of employment occurs. If the coverage is self-insured, Part III needs to be completed as well.
If you have any questions or need assistance with ACA compliance, please contact us.