What is a Commuter Account?

A Commuter Account is an employer-sponsored benefit that allows you to pay for qualified workplace mass transit (Transit Account) and parking expenses (Parking Account) using money that is not taxed.

It’s a great way to put extra money in your pocket each month and make your commute more convenient and affordable. You may contribute to both your transit and parking account on a pre-tax basis to pay for transit and parking expenses, which means you end up paying less in taxes and taking home more of your paycheck. The current monthly limit is $265 for your transit expenses and $265 for your parking expenses.

What is a Transit Account?

Transit Account is a pre-tax benefit account used to pay for public transit—including train, subway, light rail, bus, and ferry—as part of your daily commute to work.

What is a Commuter Parking Account?

A Commuter Parking Account is a pre-tax benefit account used to pay for parking as part of your daily commute to work, including parking at or near your place of work or at a location near where you take public transportation to get to work.

Do my unused Transit or Parking funds rollover from month to month or plan year to plan year?

Yes. However, there is currently a monthly benefit maximum of $265.

Can I submit a manual claim for Transit?

No. You must use your debit card to purchase your transit expenses.

Can I submit a manual claim for Parking?

Yes. Manual claims or debit card transactions are allowed for Parking expenses.

Can I change my election for Transit or Parking at any time?

Please see your Plan Administrator regarding their eligibility requirements of your Plan.

Is uberPOOL® and Lyft Line® Ridesharing available under my Transit Benefit?

Yes, however, there are limited locations and some restrictions. To qualify as an eligible benefit, the vehicle used for ridesharing (also referred as vanpooling) must seat at least six adults (not counting the driver).

UberPool is currently available in New York City, Boston, Chicago, Washington D.C., San Francisco, Philadelphia, Las Vegas, Denver, Atlanta, Miami, Los Angeles, San Diego, Seattle and New Jersey (state).

Lyft Line is currently available in New York City, Boston, Seattle, and Miami.

Are receipts required when submitting claims for parking reimbursement?

Receipts, if available, should be submitted along with a completed and signed reimbursement form. If a receipt is not available, just a completed and signed reimbursement form is acceptable.

 

Can the Commuter benefit be used for my family?

No. The Commuter benefit is available only for the employee to use for either public transportation or parking expenses associated with getting to and from the employee’s workplace.

What expenses are not included in the Commuter benefit?

Carpooling, Mileage, tools, and fuel. Also, business travel and expenses previously reimbursed by your employer.

Do I need to re-elect each month?

No, you elect your benefit amount for your employer’s annual plan year. Your monthly elections are available on your debit card each month.

 

Is there a maximum amount I can swipe my card for at one time?

The maximum you can swipe your card for is a total of $265 each month for transit purchases and a total of $265 each month for parking expenses. The current monthly limit is designated by the IRS. The limit will apply to all debit card swipes for transit and parking. 

What is a Commuter Benefits Account?
A commuter benefits account is an employer-sponsored benefit program that allows you to set aside pre-tax funds in separate accounts to pay for qualified mass transit and parking expenses associated with your commute to work.

What are the benefits of a commuter benefits account?

Tax Benefits
Contributions to a commuter benefits account are deducted from your paycheck on a pre-tax basis, reducing
your taxable income. You can save an average of 30%* on your eligible transit and parking expenses.

*For illustrative purposes only. Savings calculations are based on a federal tax rate of 15%,
state tax rate of 5%, and 7.65% FICA.

What expenses are considered eligible?

Qualified Mass Transit Expenses
Items that qualify as a mass transit expense include transit passes, tokens,
fare cards, vouchers, or similar items entitling you to ride a mass transit vehicle to or from work. The mass transit vehicle may be publicly or privately operated and includes bus, rail, or ferry.

Qualified Parking Expenses
With a commuter benefits account, you can be reimbursed for parking expenses incurred at or near your work location or a location from which you continue your commute to work by car pool, van-
pool or mass transit. Out-of-pocket parking fees for parking meters, garages and lots qualify. Parking at or near your home is not an eligible expense.

Qualified Van-Pooling Expenses
Van-pooling is not to be confused with carpooling. Van-pooling requires a commuter highway vehicle with a seating capacity of at least 7 adults, including the driver. At least 80 percent of the vehicle mileage must be for transporting employees between their homes and workplace with employees occupying at least one-half of the vehicle’s seats (not including the driver’s seat).

How can I contribute to my commuter benefits account?

Contribution Limits
There are monthly limits set by the IRS for Commuter Benefits. Your employer may decide to limit these amounts. Check with your employer to determine your maximum contribution limits. Currently, contributions for transit and van-pooling are limited to $265 per month. Parking contributions are limited to $265 per month. Any monthly expenses above these limits cannot be exempt from taxes and cannot be applied to future months.

Adjusting Contributions
You can make adjustments to your contribution, join, or terminate plan participation at any time.

How do I access my commuter benefits account funds?

Payment Options
You authorize your employer to deduct a pre-tax amount for parking and/or van pooling/transit throughout the year, up to the IRS limits. You pay for the qualified transportation with your benefits debit card or you can pay out of pocket and then file a claim for reimbursement.

Funds Deadlines
The money left in your account may be carried over into the next plan year, if you continue to participate in the plan.

 

Why employees should max out their HSA contributions

Most people don’t think about an HSA as a savings account. Instead, they think of it as an account used to set aside money, tax-free, to pay for healthcare expenses. While this is true, the reality is an HSA is much more
than a bank account. It’s a long-term savings vehicle.

HSAs offer the greatest tax benefits – more than any other retirement account, including a 401k. How is this possible? It’s simple. With an HSA, employees can tap into the power of triple-tax savings. This means contributions to the account are tax-free, earnings are tax-free, and withdrawals for eligible healthcare expenses are tax-free.

Here’s how HSAs stack up against traditional retirement plans:

As you can see, HSAs are the only account that offers these triple-tax savings. Plus, the funds in the account belong to the employee and roll over year to year, allowing employees to grow their accounts over time. Even better, they’re portable, so employees can take their HSA with them if they leave their employer.

How do HSAs help with retirement planning?

There is no doubt about it. Healthcare costs are on the rise and one of the biggest concerns when it comes to retirement planning. Studies show that a 65-year old couple leaving the workforce today can expect to need
$260,000 to cover medical expenses during retirement. And this does not even include long-term care, which most
of us will need at some point in our life.

So, the question is, are your employees taking the necessary steps today to ensure they are prepared for the future?

Directing savings to an HSA and maxing out their annual contributions helps ensure when health care expenses arise, they’re prepared. Not only will they have funds available, but those funds will be available on a tax-free basis. Employees who are fortunate enough to have good health and little need for healthcare-specific savings later in life can still access their HSA funds. They will just have to pay ordinary income tax on the distribution and wait until age 65 to avoid penalties.

The bottom line is there is no downside to maxing out HSA contributions. With healthcare costs continuing to grow, HSAs will become an even more important source of funds to pay for healthcare expenses. Make sure your
employees are doing everything in their power to get the most value from their accounts and the triple-tax savings only an HSA can provide.

 

Consumer-Driven Health Plans (CHDPs) have been steadily gaining in popularity for several years now. According to the Society for Human Resource Management (SHRM) 2018 Annual Benefits Report, 40% of the employers surveyed now offer a CDHP to their employees. SHRM defines a CDHP as a Health Reimbursement Arrangement (HRA) or a Health Savings
Account (HSA) paired with any underlying medical plan. In addition, 29% of employers surveyed offer a High Deductible Health Plan (HDHP) that is not linked to an HSA or HRA.

The central tenet of Consumer-Driven Healthcare (CDH) is that when employees have greater involvement in their healthcare finances, they will make better decisions. But is that actually the case? Are employees really ready to step up and take more responsibility for their healthcare? Do they have the foundation of financial knowledge and habits necessary to make CDH work for them?

Alegeus, a market leader in consumer-directed healthcare solutions, recently
commissioned an independent survey of more than 1,400 U.S. healthcare consumers to try and answer that very question. They didn’t just want to know if consumers understood basic healthcare terminology—they wanted a complete picture of their starting points, behaviors, and fluency in healthcare and finance.

Here is what they learned. 

Consumers lack basic financial skills

Alegeus believes that in order to stay on top of their healthcare finances, it’s
essential that consumers develop basic financial habits. Their survey found many consumers don’t have a strong handle on their finances and they aren’t confident in their ability to save for healthcare costs.

Of the respondents to their survey: 

These results are problematic for healthcare consumerism, which
requires consumers to be disciplined about their savings.

Unfortunately, the survey found that a high proportion of consumers are
undisciplined about savings in general. Of the respondents to the survey, 50% said they were not disciplined about saving for retirement and 51% reported they have no emergency savings at all.

It’s fair to say that if consumers aren’t saving in other important areas of their
lives, then they’re unlikely to save for their healthcare needs.

Healthcare fluency is still low

The survey results also highlighted a definite lack of understanding of basic
healthcare concepts.

For example, of the respondents:  

Even when consumers believe they understand healthcare, the reality is
often quite different. Alegeus found that, while 66% of respondents felt confident in their understanding of basic insurance terminology, only 50% correctly answered a simple true/false test about premiums and
deductibles.

What’s more, Alegeus has found that this lack of understanding to be magnified when it comes to health benefit accounts, such as Health Savings Accounts (HSAs). Of the general population, Alegeus reports that only 19% of people can pass a basic ten-question proficiency test on HSAs, compared to
29% for Flexible Spending Accounts (FSAs). Those numbers do go up amongst individuals currently enrolled in those accounts…but only to 35% and 37%.

That’s right. Around two-thirds of people
currently enrolled in an HSA or FSA simply do not understand their account.

According to Alegeus, it’s not just lack of understanding that’s getting consumers into trouble. Many people still struggle to predict how much they will need to spend out-of-pocket on their healthcare expenses:

• 55% can’t predict the amount of healthcare services they’ll consume this year
• 51% can’t forecast likely out-of-pocket costs for this plan year
• 58% don’t know or understand how much healthcare will cost in retirement

There is hope for the future

This is not to say that healthcare consumerism is doomed. The survey did highlight a few positive behaviors that can be built upon.

First of all, 82% of respondents were able to track their spending, with 75%
reporting that they are able to curb impulse spending when necessary. More than half had established clear financial goals. While these may seem like fairly basic financial behaviors, they do demonstrate an understanding that
financial planning is an essential part of modern life.

40% of respondents indicated that they want to take a more active role in their healthcare and highlighted key areas in which they would need support: 

Unsurprisingly, knowledge was highlighted as the single greatest barrier for
consumers who want to take a more active role in their healthcare finances.

Finally, Alegeus saw real cause for optimism in responses from consumers who have already joined the CDH movement. Respondents enrolled in HSAs displayed much higher than average levels of understanding and behavior. 

Where do we go from here?

As CDHPs continue to grow, Alegeus’s research results clearly demonstrate
that consumers feel the impact of their increased responsibility, and they struggle to manage it. Although consumers do have some basic financial systems and knowledge in place, many are not currently in a strong position to manage their healthcare finances.

Despite this, many consumers really do want to play a more central role in their
healthcare journey. When you take into consideration the recent growth of CDHPs, this suggests that consumers are starting to understand the value of healthcare consumerism but are looking to employers and plan providers for increased support.

Your employees are looking for the education, tools, and support they need to make informed decisions about their health, wellness, and finances. So long as this help is available, the future of healthcare consumerism looks bright.

 

The Department of Labor (DoL), Department of Treasury (DoT) and the Department of Health and Human Services (HHS) have jointly proposed new rules that would impact Health Reimbursement Arrangements (HRAs) effective January 1, 2020.

The proposed rules, which are open for public comment until December 28, 2018, would make a significant change to the HRA integration requirements. Current regulations require HRA participants to also be covered by a traditional group health plan with limited exceptions. The proposed
rules do not eliminate the integration requirement, but the rules would allow integration to also be available for employees covered by an individual health plan.  

If the proposed rules are finalized, this would allow employers of all
sizes to establish an HRA which reimburses individual health insurance premiums.

Some employers may shift from offering a traditional group health plan to offering an HRA which reimburses individual health insurance premiums, and the proposed rules make it clear that an employer cannot offer the same class of employees the choice between a traditional group health plan and an
HRA which reimburses individual health insurance plans. However, an employer could offer a traditional group health plan to one class of employees (e.g. full -time employees) and an HRA which reimburses individual health insurance premiums to another class of employees (e.g. part-time employees).

Employers would be free to establish the maximum reimbursement limits under the HRA, but variances for employees could only be based on an employee’s age and/or family size. Variances would be allowed for these two factors because they have a significant impact on the cost of an individual
health insurance plan.

A question that remains, and a question that is expected to be addressed with
future guidance, is how an employer who is subject to the Employer Mandate (generally, those with 50 or more employees) can establish this type of HRA and avoid the risk of penalties. The Employer Mandate requires a
health plan to be offered that is both affordable and has minimum value to avoid the risk of penalties. The proposed rules indicate that a future safe harbor rule will be issued and will tell employers how they can structure this type of HRA so that it can meet the affordability and minimum value requirements.

In addition to the above information, the proposed rules would also create a new limited, excepted benefit HRA. This HRA would be capped with
an annual reimbursement limit of $1,800 with the carryover of unused funds permitted. The HRA could reimburse expenses for things like out-of-pocket dental and vision care, or premiums for short-term medical plans and COBRA. This type of HRA could be offered by employers who also offer a traditional group health plan.

Many employers offer a cash payment to employees who waive health insurance coverage. These cash payments are always taxable to employees who waive health insurance coverage, but did you know employees who elect the health insurance coverage may be subject to paying taxes on the cash
payment that they didn’t receive?

Wait! What?

The Internal Revenue Service (IRS) has a term they use called “constructive
receipt.” In simple terms, constructive receipt means a person has control over money that is not yet in their possession. As an example, think about an employee who receives their final paycheck for the year on December 31, 2018, but the employee doesn’t cash the check until January 10, 2019. The IRS will consider the employee to have been in constructive receipt of this money in 2018, and subject to income taxes for 2018, even though the employee didn’t physically have the money until 2019.

Constructive receipt also needs to be taken into consideration when an employer provides a cash payment to employees who waive health insurance
coverage. Employees who are eligible for the health insurance plan have control over whether they receive a cash payment. That control exists because they have the option to waive coverage under the health insurance
plan in return for a cash payment. This is a form of constructive receipt.

This means an employee may actually elect health insurance coverage and have to pay taxes on the money they could’ve received had they waived coverage……unless the employer takes the appropriate steps and makes the cash payment available through a Cafeteria Plan.

First, let’s illustrate this the wrong way and assume an employer offers employees $1,000 in taxable compensation if they waive health insurance coverage. Employees who waive coverage will receive an additional $1,000 in compensation. This compensation should be treated like a cash bonus, subject to income and employment taxes. Employees who enroll in coverage will be considered to have constructively received $1,000, even though they didn’t receive any additional compensation. Employers will need to apply
the appropriate wage-withholding and employment taxes to money the employee never received due to constructive receipt.

Yikes!

But there is some good news. As long as an employer has a Cafeteria Plan in place which allows for the choice between health insurance and a cash payment, then constructive receipt will not apply to those employees who enroll in health insurance coverage. In other words, the employees who elect health insurance coverage can do so tax-free. The bottom line is to make sure the Cafeteria Plan document addresses this information so adverse tax consequences can be avoided.

 

Whether it be the ACA, COBRA, ERISA, HIPAA, Section 125, or another regulation, employers can find themselves out of compliance somehow, and they may not even be aware. Here is a list of some common areas of
non-compliance, not ranked in any particular order.

1. Determining applicable large employer
(ALE) status under the Employer Mandate: This requires employers to determine the average number of employees on business days in the prior year, and employers must count full-time equivalent employees.

2. Determining full-time (FT) employee status under the Employer Mandate: This requires employers to have a deep understanding of their
employee classifications, and they generally must track hours of service to know who is a full-time employee.

3. ACA Reporting: This requires an employer of any size with a self-insured medical plan to submit reporting to help the IRS enforce the Inpidual
Mandate. It also requires ALEs to submit reporting to help the IRS determine if penalties under the Employer Mandate will apply.

4. PCORI Fees: Employers who have a fully insured medical plan which is integrated with an HRA must pay PCORI fees on the HRA, and several
employers are unaware of this requirement.

5. Plan Documents: Many employers are unaware that plan documents that are issued by an insurance company or third-party administrator fail to
disclose several pieces of information required under ERISA, and employers should be supplementing their plan documents with an additional document commonly referred to as a Wrap Document.

6. Non-Discrimination Testing:
Cafeteria Plans, Health FSAs, Dependent Care FSAs, HRAs, and self-insured medical plans all require non-discrimination testing to be performed to ensure the plan does not discriminate in favor of highly compensated and/or key employees. Several employers are not performing the required testing.

7. Form 5500 Reporting: In general, employers with ERISA plans that have 100 or more participants must file details about the plans using
Form 5500. The DOL has indicated several employers are meeting the requirements for the retirement plans but are failing to submit reporting on the health plans.

8. Medicare Part D Notice and Reporting: Employers must provide a notice to Medicare-eligible employees with information about the drug coverage available on the group plan, and whether it’s at least as good as the standard Part D plan. Employers must also report information about the drug coverage to CMS. Many employers fail to meet one or both requirements.

9. COBRA Administration: Several employers have failed to update their COBRA notices with information about the Health Insurance Marketplace. In
addition, several employers are not providing the COBRA General (Initial) notice on time or at all.

10. HIPAA: Employers who offer a self-insured plan, including a Health FSA or HRA, have access to Protected Health Information (PHI). As a result, they are supposed to have written policies and procedures on how/when they will use or disclose PHI, they should be appointing a privacy and security officer and meet other requirements. Several employers are lacking some or all of the requirements under HIPAA.

The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.

 

What happens to beneficiaries who are enrolled in COBRA when a merger or acquisition occurs? 

The Internal Revenue Service (IRS) has some rather thorough and complex guidelines that address COBRA issues when business reorganizations occur, including mergers and acquisitions. In an effort to simplify an otherwise complex situation, we can generally break down the guidance as follows:

1. If the selling entity continues to maintain a group health plan after the sale has been completed, then the selling entity must continue to offer COBRA to qualified beneficiaries.
2. If the selling entity terminates its group health plan in connection with the sale, then the buying entity must make COBRA available to qualified beneficiaries, assuming the buying entity has its own group health plan in place. If the selling entity terminates its group health plan and the buying entity does not have a group health plan in place, neither party has the obligation to offer COBRA.
3. The buying and selling entities may also structure a contractual agreement which allocates the responsibility of making COBRA available to qualified beneficiaries. However, if the entity who is contractually assigned to provide COBRA fails to meet its responsibilities, then the entity that has the obligation to provide COBRA (according to bullets #1 and #2) assumes the liability for making COBRA available to qualified beneficiaries.

It should also be noted that the employment status of actively employed workers at the selling entity may be affected as a result of the merger or acquisition. For example, some employees at the selling entity may lose their job or experience a reduction in hours. To the extent a change in employment status results in a loss of coverage under the group health plan, then COBRA should be offered to those affected individuals. The same rules as outlined above would apply.

For more details, please refer to Reg § 54.4980B-9.

The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.

 

Two things happened in 1986. Run-D.M.C released their hit song, “It’s Tricky,” and COBRA became effective. Thirty-two years later, Run-D.M.C.’s music is still popular, and COBRA administration is still tricky—especially when it comes to Flexible Spending Account (FSAs). Add FSA carryover to the mix, and it gets even trickier.

COBRA only applies to FSAs which are said to be underspent.* This means that the amount available for reimbursement for the remainder of the plan year exceeds the COBRA premium for that same time period. Figuring out if the FSA is underspent involves a bit of math, so it’s best illustrated with an example.

How to determine the amount available for reimbursement for the remainder of the plan year:
v

• Jay has elected to put $2,500 into his FSA, which runs on a calendar year
  • He also has $500 in carryover funds from the previous year, for a total balance of $3,000 for the plan year
• Jay terminates employment on May 31.  At that time, he had been reimbursed for $1,100 in healthcare expenses.
• The maximum amount available for reimbursement for the remainder of the plan year is: $3,000 – $1,100 = $1,900 

How to determine the COBRA premium:

• The maximum monthly COBRA premium is 1/12 of the employee’s election, plus a 2% administrative fee.
• The carryover balance should not be factored into setting the COBRA premium
  • The employee would have already paid for the carryover amount with the previous year’s contribution
• The maximum monthly COBRA premium for Jay is ($2,500 ÷ 12) X 102% =  $212.50

How to determine if the FSA is underspent:

• Jay terminated employment on May 31, which leaves 7 months left in the plan year
• The total premium for the remainder of the plan year is: $212.50 X 7 = $1,487.50
• Since the amount available for reimbursement for the remainder of the plan year exceeds the premium for the same time period, the FSA is considered underspent, and COBRA would need to be offered
  • If the opposite were true, then COBRA would not have to be offered.

If COBRA applies to the FSA, then COBRA beneficiaries must be given the same carryover rights as current employees. Using the above example, Jay could elect COBRA for a maximum monthly premium of $212.50. Jay’s
employer can only change him a premium for the remainder of the plan year, which is 7 months.

If Jay has unused funds at the end of the plan year, then he must be allowed to carry over up to $500 for the maximum time period permitted under COBRA law. In this case, it would be an additional 11 months, since the termination of employment allows for 18 months of continuation coverage.

Jay’s employer is prohibited from charging him a premium for the additional 11 months of access to the carryover amount, as Jay would’ve already paid for this amount. Additionally, Jay’s employer does not need to give him the ability to make a new election to the FSA for the new plan year.

Employers can place restrictions on the carryover amounts. For example, they can structure their FSA so that carryover is only available to employees who make new elections in the following plan year. If Jay’s employer had this provision in place, then he would not be entitled to any carryover amount after the plan year was over. In other words, he’d only need to be offered COBRA for 7 months.

 

The Employee Retirement Income Security Act of 1974 (ERISA) requires most employers, who offer health and welfare benefits, to provide a written plan document to participants. The plan documents that are issued by insurance companies and other benefits providers are typically standardized and don’t include all of the customized, employer-specific language that the ERISA law requires.

To make things easier, Flexible Benefit Service Corporation (Flex) can prepare a written plan document with all of the required disclosures that “wraps around” all ERISA health and welfare benefits that an employer offers.
The Wrap Document can provide all of the required language for many different types of plans, such as:

1. Health Insurance
2. Dental Insurance
3. Disability Insurance
4. Vision Insurance
5. Life Insurance
6. Flexible Spending Accounts (FSAs)
7. Health Reimbursement Arrangements (HRAs)
8. Accident-Only Plans
9. Long-Term Care
10. Accidental Death & Dismemberment (AD&D)
11. Prescription Drug Plans
12. Retiree Medical Plans
13. Employee Assistance Programs (EAPs), if counseling is provided

Government and church plans are exempt from ERISA, but all other employers who offer health and welfare benefits are required to have a plan document in place that meets the disclosure requirements included in the ERISA law. Fortunately, employers can view Wrap Documents as the low-hanging fruit of compliance with ERISA.