Many group health plans will need to be amended to reflect the required changes to benefits and waiting periods that take effect in 2014. Employers also should consider whether eligibility language will need to be updated to reduce the number of hours the employee must work to be eligible, to address look-back periods, and/or to base eligibility on actual hours worked instead of the “regularly scheduled to work” standard that is common now.
Section 125 plans have until December 31, 2014, to amend the plan for any or all of these changes:
- The required reduction in the maximum employee contribution to a health care FSA of $2,500
- A one-time opportunity to make a mid-year change during the 2013-2014 plan year because of the individual mandate and/or opening of the health Marketplace [available to non-calendar year plans only]
- Adoption of the newly permitted health care FSA rollover (and elimination of any available grace period)
HRAs must be amended to allow an employee, or a former employee, to permanently opt out of and waive future reimbursements from the HRA and to provide that upon termination of employment either the remaining amounts in the HRA will be forfeited or the employee will be permitted to permanently opt out of and waive future reimbursements from the HRA. The IRS has added this requirement because a person is ineligible for a premium tax credit if covered by minimum essential coverage. HRAs are considered minimum essential coverage, and the IRS does not want individuals to lose a premium tax credit simply because they have a small balance in their HRA.
Health plan amendments are an important part of preparation for PPACA. For information on all aspects of PPACA readiness, including determining “large employer” status, 2014 benefit requirements, and 2015 requirements for large employers, download Preparing for PPACA – A Readiness Checklist.