FSA: Underutilized to Increased Participation

Flexible Spending Accounts have been around, but often underutilized by employees.  One main reason employees have shied away from this employee benefit had been the long-standing use-it-or-lose-it rule.  On October 31, 2013, the U.S Treasury Department and the IRS issued guidance allowing the option for participants to roll over up-to $500 of unused funds at the end of the plan year or a grace period.  Neither of which reduces the $2,500 maximum a worker can contribute to an FSA each year. 


The option to carryover appears to be favorable according to a March 2015 ECFC membership survey.  The ECFC membership survey points to 73% of members finding increased participation for switching to the carryover option.  This increase means more employees taking advantage of the FSA benefit to contribute pre-tax dollars to pay for out-of-pocket health care expenses.  The expenses include deductibles, co-payments, and other qualified medical expenses not covered by an individual’s health insurance plan.   

As we look ahead, the FSA could continue to see increased participation with out-of-pocket healthcare expenses climbing by 8 percent this year over last, from $416 billion in 2014 to $608 billion in 2015, according to a new report from Kalorama Information.  For over 30 years Kalorama Information has been publishing market research in medical markets, and also reported that co-payments are expected to grow at 9.5 percent annually, and that prescription medication is the single highest out-of-pocket expense.


After 30 years of many employees fearing the FSA, it looks like between the increase in out-of-pocket spending and the changes in Flexible Spending Accounts, employers should be offering and employees should be taking advantage.

Anne Case
BASE® - Director of Marketing & Communications  

Many Employers Utilize BASE® ERISA Wrap

Since becoming a major topic earlier this year, many employers have worked with BASE® to become compliant with the Employee Retirement Income Security Act (ERISA). The BASE® ERISA Wrap is designed to help employers fulfill ERISA requirements for Summary Plan Descriptions (SPD) and Plan Documents. 

Here are a few points just to recap on what ERISA is and why it is important to make sure you are in compliance.

What do employers need to do?

ERISA requires employers who are plan administrators of benefit plans such as medical, dental, vision, life insurance, etc. to comply with two important requirements. 

1) Distribute and maintain Summary Plan Descriptions (SPDs) to plan participants which accurately reflect the contents of the plan and which include specific information as required under federal law.

2) Group health plans must be administered in accordance with a written plan documents which must be made available to plan participants and beneficiaries upon request.

Many employers mistakenly assume that insurance contracts, certificates of insurance and benefits summaries fulfill the ERISA requirements, but they do not. They lack the required or recommended provisions that protect the plan and the employer. 

What happens if employers don’t comply?

Lack of an SPD could also trigger a plan audit by the U.S. Department of Labor.  According to the Department of Labor’s Strategic Plan for Fiscal Year 2014-2018, a random-sample of plans shows seven out of ten plans fail to comply with some aspect of ERISA’s provisions. The price of noncompliance in the event of a DOL audit is expensive at the rate of $110 per employee per day fines for failure to have or provide an SPD or Plan Document.

How can employers easily comply? 

Call BASE® and find out how you can become enrolled in the BASE® ERISA Wrap. BASE® will provide all the necessary documents to make sure you stay in compliance with ERISA and the Affordable Care Act.

Tom Stiles
BASE® - Digital Marketing Assistant

New Bill Aims to Allow Use of Pretax Dollars

Can my clients pay for health insurance premiums for their employees?  A question that we continue to hear all to often, and the answer is ever-changing.  On September 13, 2013, guidance was issued disallowing employers from using stand-alone HRAs to reimburse employees for healthcare-related expenses.  From that day forward business owners with this type of arrangement in place did not satisfy the ACA’s market reforms and were put at risk of $100 per day per employee penalty. 


While the Section 105 HRA for one employee was exempt from the ACA, and is still an option for self-employed business owners and farmers, other small business owners do not have the luxury of utilizing this cost-sharing option for health insurance premiums and health costs. 


On February 3, 2015 this guidance was questioned and was later announced on February 18, 2015 that the enforcement of this guidance resulting in penalty would be delayed until July 1, 2015.


As of July 1, 2015, small business owners with fewer than 50 employees are not allowed to use pre-tax dollars to give employees a defined contribution for health care expenses, in other words stand-alone HRAs to reimburse employees are prohibited.  Failing to comply with this market reform puts these small business owners at risk for a $100 per-day per-employee penalty.


However, a bipartisan bill has been introduced that could change all that by ensuring that small businesses with fewer than 50 employees would be allowed to continue using pre-tax dollars to give employees a defined contribution for health care expenses.  This would provide an affordable healthcare option for small business owners, which allows employees to use HRA funds to purchase health coverage on the individual market, as well as for qualified out-of-pocket medical expenses if the employee has qualified health coverage.  In addition, the bill would protect employers from being financially penalized for assisting employees with pre-tax dollars.   S-Corporations are in the clear for now.  They can continue to reimburse premiums for their more than 2% owners without fear of the excise tax until IRS says otherwise.


According to Chuck Grassley, R-IA, “It doesn’t make sense to tell small employers they can’t help their employees get health insurance.  Why disrupt something that worked?  Our bill puts this provision back to what it was so farmers and small businesses can use this option as they see fit.”


Be sure to write your local Congressman in support of House (H.R. 2911) and Senate (S. 1697) bill known as the Small Business Healthcare Relief Act.

Anne Case
BASE® - Director of Marketing & Communications