In a post-Affordable Care Act America, every employer should update their pretax benefit offering plan documents to address new IRS and DOL requirements.
Bradenton, FL (PRWEB) March 06, 2014
Core Documents, Inc., one of the nation’s leading providers of IRS and DOL compliant plan documents for establishing Section 125 Cafeteria Plans and Section 105 HRA benefit plans, has announced a new campaign designed to assist the large number of small and medium-sized businesses blissfully unaware and routinely ignoring IRS and Department of Labor compliance requirements for:
- IRS Section 125 Premium Only Plans,
- IRS Section 125 Premium Only Plans with HSA Savings Module,
- IRS Section 125 Health Flexible Spending Arrangements (FSA),
- IRS Section 129 Dependent Care Assistance FSA Plans,
- Section 105 HRA Plans used by Sole Proprietors,
- Health Reimbursement Arrangements or HRA Plans, and
- Section 132 Commuter and Parking Arrangements.
The Section 125 or Section 105 HRA compliance infractions are normally discovered by an astute insurance agent – rarely by the company owner, corporate attorney, CPA, or bookkeeper. However, many insurance agents, as well as accountants, just don't bother to keep up with the constantly changing requirements and compliance issues associated with these plans.
What are the consequences of a plan with compliance issues? Any, or all, of the following:
- all pre-tax deductions may be disallowed back to the beginning,
- IRS assessment of unpaid back taxes plus interest and penalties,
- and possible daily Department of Labor fines.
Many employers mistakenly believe their Accountant, CPA, Insurance Agent, Payroll Company, or Professional Employer Organization (PEO) probably take care of these issues. Don’t count on it. Don't be surprised to learn no one is addressing these compliance requirements. One way to solve this problem is for employers to maintain their own formal plan document, summary plan description, signed election forms, and copies of annual discrimination testing.
Here are a few of the more common compliance issues:
- Employers are required by the IRS to establish and maintain a formal plan document before pre-tax benefits can be offered,
- Employers or insurance agents that "borrow" and insert their company name in an outdated plan document designed for another company that doesn't address their plan design requirements, and has become increasingly out of compliance by new regulations,
- The "free" plan document offered by insurance company agents to sell supplemental policies (quackers), that no one ever updated or maintained, and probably can't even locate,
- Employers are required by the Department of Labor to distribute a Summary Plan Description or SPD to every employee initially and at predetermined intervals,
- Annual salary reduction election forms should be on file and available for possible IRS audit,
- Discrimination testing should be done at least once a year and proof of testing should be available for possible IRS audit,
- Medical expense reimbursement plans with more than 100 participants are required to file IRS Form 5500 annually,
- Failure to update and maintain plan documents for compliance with new laws regarding COBRA, HIPAA, FMLA, USERRA, protected health information, over-the-counter prescription drugs, new definitions for dependents, deductions for domestic partners, mid-year qualifying events to make election changes, and now the Affordable Care Act aka ObamaCare regulations,
- Failure to enforce twelve-month irrevocable deduction rules during the plan year,
- Refunding unused funds back to the employee from medical and dependent care assistance FSA plans at the end of the plan year,
- Not amending a Health FSA plan to the new required annual limits, and employer maximum contribution limits (due to ACA, ObamaCare), or adding the new Health FSA carryover provision option,
- Companies establishing simple reimbursement plans for dental, vision, or deductible and co-payment expenses without a Health Flexible Spending Account plan document,
- Reimbursing medical and insurance expenses to certain key employees only,
- Discriminating within a class of employees,
- Basing benefit limits for reimbursement on seniority or a percentage of pay,
- S Corporation owners and family members pre-taxing benefits,
- Owners participating illegally,
- Highly compensated and key employee deductions total more than 25% of group deductions,
- Professional groups, such as physicians, setting up elaborate insurance and medical expense reimbursement schemes without a formal plan while excluding hourly employees,
- Pre-taxing health savings account bank funds through the Section 125 Premium Only Plan without proper plan documentation addressing HSA administration,
- Not limiting Medical Expense Reimbursement FSA plans offered in combination with HSA plans,
- Offering pre-tax individual health insurance premium deductions through the Section 125 Plan or an HRA Plan,
- Allowing pre-tax ACA Exchange individual health insurance policy deductions through the Section 125 or HRA plan not allowed under recent IRS regulations,
- Employer funding Health FSA plans without an ACA compliant group health insurance plan,
- Offering a Comprehensive HRA plan with capped annual benefits for reimbursing medical expenses in violation of recent ACA, DOL, and IRS regulations,
- Employers still using a zaney HRA "buy individual health insurance and drop your group plan" system no longer allowed,
- Employers still using the Premium Reimbursement FSA system, no longer allowed,
- Employers using any number of proprietary HRA and Medical Expense Reimbursement Plan (MERP) systems designed as an ObamaCare work-around solution, no longer allowed,
- Offering any non-excepted benefits or individual health insurance through an HRA Plan.
These are just a few of the compliance issues employers should consider and why a competent plan document provider is necessary.
Core Documents, Inc. has been providing free consulting, affordable plan documents, and plan updates as needed for Section 125 Cafeteria Plans and Health Reimbursement Arrangements since 1997. See more information about these fringe benefit plans at Core Documents’ website: http://www.coredocuments.com, or call toll free 1-888-755-3373.