USA: Alliant’s Employee Benefit Compliance Fast Facts & FAQ – October 28, 2016

November 17, 2016:

The following information on compliance in the United States was provided to us by Asinta Partner, Alliant:

Compliance is Scary!
To help account management teams during busy season, the Compliance Team has drafted some helpful compliance slides. These slides cover a lot of the popular compliance topics happening right now. You can find the slides on the homepage of the portal and they are also attached to this e-mail.

Cost-Sharing Limits and HDHPs
As noted in a previous alert, the ACA provides that cost-sharing for Essential Health Benefits (EHBs) under a non-grandfathered group health plan cannot exceed certain annual limits. The regulations set the maximum annual limit on cost-sharing for 2017 at $7,150 for self-only coverage and $14,300 for other than self-only coverage.

As you know, for plan years starting in 2016 and beyond, there is an embedded out-of-pocket limit for each individual with family coverage. This means that the self-only cost-sharing limits apply to all individuals regardless of whether the individual is covered by a self-only plan or by an other-than-self-only plan. For example, if the out-of-pocket limit on a family plan is $13,100, no individual in the family can incur out-of-pocket costs for EHBs of more than $7,150 (the limit for self-only coverage).

Most clients with HDHP plans will need to tweak their plan designs to include this embedded out-of-pocket limit. The two major plan design components to keep in mind are outlined below:

(1) If an HDHP has a family deductible that is higher than the ACA’s self-only OOP limit ($7,150), the plan would need to cover the expenses of any family member whose own individual expenses exceeded $7,150.

(2) If an HDHP has a family OOP that is higher than the ACA’s self-only OOP limit ($7,150), the plan would need to apply an embedded individual ACA OOP ($7,150).

PCORI and Reinsurance Fee Calculations: How to Adjust the Snapshot or Snapshot Factor Methods of Counting Covered lives for Partial Years
When a health plan changes funding (from fully insured to self-insured or self-insured to fully insured) in the middle of a plan year determining the average number of covered lives for both PCORI and Reinsurance fees becomes more complicated. Although the Actual Count method for determining the average number of covered lives will automatically get an accurate average, the Snapshot or Snapshot Factor Method may not have covered lives for an entire quarter and could, due to the selection of Snapshot dates, result in a greater or lesser number of covered lives than the actual average. To avoid this result, CMS clarified that if a plan that uses the Snapshot or Snapshot Factor Method had enrollees on any day during a quarter it must choose a set of Snapshot dates with enrollees. However, the count for a date in a quarter in which the plan was either not in existence or not self-funded for the entire quarter can be reduced by a factor reflecting the amount of time during the quarter that the plan did not have enrollees. For example, a plan that terminates on August 31st (62 days into the third quarter) would not be permitted to use September 1st as the date for the third quarter under the Snapshot or Snapshot Factor Methods. However, it can reduce its count of covered lives for the third quarter by 30/92, the proportion of the quarter during which the plan had no enrollment. This reduction factor only applies to a new plan, a terminating plan, or a plan that changes funding options that wants to use the Snapshot or Snapshot Factor Methods to determine its’ average number of covered lives.

FAQ of the Week
Q. My client held their 2017 open enrollment before the new FSA limit was announced. Can employees change their FSA elections if open enrollment has already closed?
A. Yes, as long as the change is made before the new plan year starts. Code 125 allows election changes prior to the beginning of the coverage period (generally, the plan year). Thus, employers can allow elections for a new plan year to be changed for any reason (or no reason at all) before the plan year has begun. If the plan does not designate a hard dollar limit for FSA salary reductions (e.g., just references the “lawful limit” or similar terminology), an election change may not be necessary.

Once again, special thanks to Alliant for providing us with this content. If you have any questions regarding compliance in the United States, please get in to contact with Alliant via their contact page here.