New Small Employer HRA May Cover Individual Health Insurance Premiums

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BPC is pleased to alert our clients and partners about the passage of 21st Century Cures Act which President Obama signed into law on December 13, 2016.  Of particular interest to employer benefits is a provision which will allow small employers to establish a Health Reimbursement Arrangement (HRA) in order to reimburse medical expenses, including for individual health insurance premiums, for employees and their families.  This important legislative action provides small employers a powerful new strategy to provide health coverage to employees. 

BPC is excited to be able to provide document, compliance and administrative services to our clients who are interested in these plans starting as early as January 1, 2017.  If you or an organization you work with has interest in establishing such a plan, please click here to obtain a quote.


These plans, which may be referred to as a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or Individual Premium HRA, allow small employers to help employees with overall healthcare costs.  HRA funds may be used by an employee to pay individual medical premiums or out-of-pocket medical costs.  Employers may fund HRAs with up to $4,950 for single coverage or $10,000 for family coverage (indexed for future inflation).

Eligible Employers:

An employer will typically be eligible to offer this arrangement if:

a.)    It is not subject to the employer mandate under the Affordable Care Act (those with less than 50 full time employees); AND

b.)    Does not offer a group health plan to any employees. 

Plan Requirements:

Eligible Expenses: Eligible expenses can include individual medical premiums or out-of-pocket medical costs as defined in Code § 213(d).  This will include copay, coinsurance or deductible expenses under the health plan, as well as other medical, dental and vision expenses.  HRA funds can be used to pay for such expenses on behalf of the covered employees or eligible dependents (as defined in the terms of the plan).  BPC can facilitate HRA payments via check, direct deposit, and/or debit card. 

Annual Cap: Reimbursements cannot exceed $4,950 for single or $10,000 for family coverage (indexed for future inflation).  Employers are free to use plan caps below those amounts if desired.  Plan documents may be structured such that the limit automatically rises with inflationary adjustments in future years.  Amounts may be pro-rated for employees with partial year coverage. 

Coverage Uniformity: In general, coverage must be provided to all employees on an equal basis.  Coverage may vary in accordance with variations in the price of an insurance policy in the relevant market, based on the age of an employee (and covered individuals) and the number of family members covered.  Additionally, employers may exclude part-time or seasonal employees, employees with less than 90 days service, employees younger than age 25, union employees and/or non-resident aliens without earned income within the U.S.

Funding: Like all HRAs, these plans must be funded solely by the employer.  Salary reduction contributions are not permitted.

Interaction with major medical insurance: There are several key things to keep in mind with regard to how these HRAs interact with major medical insurance. 

1.       Coverage Requirement: HRA reimbursements will only be tax-free in months when the individual has Minimum Essential Coverage (MEC).  A covered individual (employee or dependent) who fails to obtain MEC for a given month may receive reimbursements for services in that month, but they will not be tax-free.  IRS regulations could provide further clarity, but it appears that employers may rely on employee certification that such coverage is in force.  Qualifying MEC could include an individual policy, Medicare or Medicaid coverage, or coverage through another employer (such as through an employee’s spouse). 

2.       Exchange Subsidy Impact: Employees provided with an HRA under the terms of the bill may be subject to lower premium tax credits when purchasing Exchange coverage.  If the coverage provided by the HRA constitutes affordable coverage, then the employee will not be eligible for a subsidy.

Required Notice: The law requires distribution of a specific notice to all eligible employees.  Failure to provide the notice may result in penalties of up to $50 per employee, up to $2,500 per year. 

1.       Timing: In general, distribution must occur 90 days prior to the plan year start, but transition relief allows employers to distribute the notice in early 2017 for this year. 

2.       Content: Notices must include (1) the amount of the employee’s permitted benefit, (2) instructions to the employee to disclose that amount when applying for any premium tax credits on the Exchange, and (3) a warning to employees about the requirement to maintain Minimum Essential Coverage (MEC). 

W-2 Reporting: Employers must report the benefit available under the HRA on employee’s Form W-2 for calendar year 2017 (forms distributed in 2018). 

COBRA Exemption: HRAs meeting the requirements of this act will not be treated as a group health plan for purposes of COBRA continuation coverage.  Therefore employers may offer the coverage to active employees, without any obligation to offer or provide continuation coverage once an employee terminates.  

More Information:

BPC will follow industry commentary and regulatory guidance carefully with these plans.  We consider this a positive development for small employers looking for new options to provide affordable healthcare to their employees. If you or an organization you work with has interest in establishing such a plan, please click here to obtain a quote.  


Posted on December 13, 2016 .

Cadillac Tax Delay Advocacy A Success

Cadillac Tax Delay Advocacy A Success

Employers can find relief in a two-year delay to the start of the unpopular excise tax on group health premiums known as the “Cadillac Tax”. BPC’s largest policy concerns in 2015 were related to the looming impact of the tax. BPC’s CEO, Habeeb Habeeb, along with other industry leaders, spent time in Washington D.C. meeting with members of Congress on both sides of the aisle, explaining the need for repeal or reform of this potentially harmful tax.  The 40% excise tax on the value of health coverage exceeding certain thresholds was set to go into effect in 2018.  Estimates ranged widely across different studies and surveys, but overwhelmingly found that the tax would impact a broad range of employers in the U.S.

On December 18, the House of Representatives and the Senate passed, and the President signed into law, a large spending and tax bill that delays the start of the Cadillac Tax from 2018 to 2020.

At worst, this move buys extra time for employers to prepare for its impact in 2020. But it could do more than that.  The postponement could also signal repeal or significant reform.  The tax is unpopular across most industries in the U.S., with businesses and unions concerned about its effects on employers and employees. A recent Senate amendment to repeal the tax passed 90-10, signaling just how strongly Congress opposes the tax.  By pushing the effective date to 2020, Congress will have ample time to pass repeal or reform legislation and put it in front of our next President.  While President Obama would be likely to veto a full repeal, his successor could feel differently.  

Nearly all of the current Presidential candidates have signaled a desire to repeal the Cadillac tax, and none of them are bound, like the current President, to past promises to veto major changes to the Affordable Care Act.  If Congress maintains its position, and those candidates maintain their positions, it could mean the tax never takes effect, which will preserve freedom for employers to offer a broad range of health coverage options to their employees, without fear of reprisal for generosity.  

BPC will continue to advocate for the repeal of the Cadillac Tax and keep you posted on further progress.


Posted on January 7, 2016 .

IRS/DOL Scrutiny of 5500s and Transit Plans on the Rise

IRS Scruitiny of 5500 and Transit Plans

With ACA reporting looming on the horizon, many employers are focused on what’s new, but BPC wants to take a moment to review some older regulations that may be thrown into new light in 2016.

If you aren’t already utilizing BPC’s 5500 service, now’s the time to let us help ease the burden by filing your 5500 for you.  


5500s for Health & Welfare Plans:

Background: Under ERISA and DOL regulations, many health & welfare plans are required to file a Form 5500 on an annual basis.  Small plans, defined as those with fewer than 100 participants on the first day of the plan year, are generally exempt.  Large plans providing benefits such as healthcare, dental, vision, life or disability benefits will generally be required to file a 5500 each year.  Some small plans may also be subject to the filing if operating with a trust. 

Many large employers stopped filing health and welfare 5500s in 2002 (for 2001 plans) when the IRS indefinitely suspended 5500 filing requirements for cafeteria plans.  That change, however, did not apply to health and welfare plans in general, even if the benefits are funded through a cafeteria plan. 

Penalties for failure to file can be staggering.  The DOL states that they may assess penalties of up to “$300 per day, up to $30,000 per year, until a complete annual report is filed (See Q/A 8 here).  On top of these penalties, the IRS may add its own penalties into the mix. 

Luckily, the DOL offers a Delinquent Filer Voluntary Compliance Program (DFVCP), under which employers may file even severely past due plans with penalties of just $4,000.  Likewise, the IRS will waive all penalties for employers using this program.  However, once an employer receives a DOL Notice of Intent to Assess a Penalty, they will be disqualified from the DFVCP. 

What’s changing? While it is difficult to speculate on audit intentions of the IRS and DOL, BPC does consider it to be worth noting that Affordable Care Act requirements are creating very clear reporting of health coverage to the IRS. The IRS recently pushed the filing timeline back for several form which you can learn more about by clicking here.  Whether you’re reporting PCORI Fees on IRS Form 720, or meeting your Code § 6056 reporting obligation with IRS Forms 1094-C and 1095-C, we have reached a point where groups will clearly be self-reporting the presence and scope of their healthcare offerings directly to the IRS.  Since Form 5500s are also filed to the IRS, it will be very simple for the IRS to cross-check these forms and determine a Form 5500 is absent. Whether you’re reporting PCORI Fees on IRS Form 720, or meeting your Code § 6056 reporting obligation with IRS Forms 1094-C and 1095-C, we have reached a point where groups will clearly be self-reporting the presence and scope of their healthcare offerings directly to the IRS.  Since Form 5500s are also filed to the IRS, it will be very simple for the IRS to cross-check these forms and determine a Form 5500 is absent. 

How BPC can help:  BPC can assist employers wishing to cleanup past 5500 non-compliance by preparing forms and providing penalty calculation and payment guidance on the DOL’s DFVCP.  BPC can provide these filing services for multi-year and/or multi-plan catchups with discounts of up to 20% over usual filing costs. 

For more information, email us or request specific pricing here.


Background: Since 1985, Code § 132(f) has authorized employers to provide qualified transportation and parking fringe benefits to employees on a pre-tax basis.  Generally, such plans are offered as salary-reduction benefits, with employees deferring a portion of their salary on a pre-tax basis for use on these benefits.  Similar in this regard to Flexible Spending Accounts, such plans allow both the employer and employee to save significant tax dollars. 

What’s Changing? In IRS Revenue Ruling 2014-32, the agency indicated that beginning in 2016, cash reimbursement of transportation expenses will no longer be permitted in areas where fare media, including terminal-restricted debit cards, are readily available.  The test for determining whether transit fare is “readily available” depends on a variety of facts and circumstances, but employers in most major metro areas will find that offering cash reimbursement for transportation expenses is no longer a viable option in the eyes of the IRS. 

We are also pleased to point to some good news coming out of Congress.  Late in 2014 they passed legislations that brought the monthly maximum available for this benefit up to align with the parking maximum, which for 2016 is set at $255 per month. 

How BPC can help: BPC can provide transportation plans driven through terminal-restricted debit card starting in 2016.  Using the same debit card they may already use for Health FSA, HRA, or HSA benefits, your employees can purchase transit passes directly from any terminals that sell only transit fare.  Under this setup, there is no requirement for employees to substantiate expenses since the cards will only work for actual transit fare. 

Parking benefits may still be administered using cash reimbursement.  BPC can provide administration of both the mass transit (through terminal-restricted debit cards) and parking (through cash reimbursement) portions of your Transportation Plan. 

To find out whether BPC offers terminal-restricted debit cards for mass transit in your area (we bet we do!) request a proposal or email us.

Posted on January 7, 2016 .

Employers Beware of Reimbursing Individual Health Insurance Premiums

Employers Should Beware of Reimbursing Individual Health Insurance Premiums

BPC fielded questions from clients and employers throughout 2015 about the prospect of dropping group health coverage and instead reimbursing employees for the cost of individual health insurance premiums.  These arrangements have taken various forms over the years – pre-tax reimbursement through a cafeteria plan, simple post-tax reimbursement, or non-taxable employer payments through an HRA. 

While such arrangements may appear attractive to some employers, guidance from the IRS and DOL have made it very clear such options are not viable in today’s landscape (except in some circumstances for retirees).  A mountain of guidance – in the form of IRS Notices (see IRS Notice 2013-54, IRS Notice 2015-17, and even recently, IRS Notice 2015-87) and agency FAQs (see IRS FAQs here, and DOL FAQs here) made it clear they view any of these arrangements as group health plans, termed “employer payment plans,” as subject to the market reforms requiring preventive service coverage and eliminating annual and lifetime limits.  Such plans, according to the IRS and DOL, fail these reforms and therefore would be subject to excise tax penalties of up to $100 per day, per employee.

While some transition relief was offered to small employers through the first half of 2015, that is now long-expired.  Recently, this position achieved new status as it made its way into regulatory guidance.  Volume 80 of the Federal Register, published November 18, includes a strong reiteration of the departments’ position, including this excerpt from page 72203: It has come to the Departments’ attention that there are a wide variety of account-based products being an attempt to circumvent the guidance set forth by the Departments on the application of the annual dollar limit prohibition and the preventive services requirements to account-based plans.  The Departments intend to continue to address these specific instances of noncompliance.”

Legislation to reverse this stance has been introduced and garnered some support in Congress.  Should such legislation pass, BPC will promptly reach out to our client and partner community.  Until that time, we certainly advise caution with respect reimbursing individual health insurance premiums.  



Posted on January 7, 2016 .

Retirement and Benefit Plan Contribution Limits for 2016

2016 Retirement and Benefit Plan Limits

The IRS determined that the increase in cost-of-living index was insufficient to trigger an adjustment in many annual limits for 2016.

Health Flexible Spending Account contribution limits remain unchanged at $2,550.

Health Savings Account salary reduction contribution limits will remain at $3350 for self-only coverage and $6750 for family coverage.

Dependent Care contribution limits, which as regulated by statute rather than cost-of-living, remains at $2,500 if married and filing a separate tax return or $5,000 per year if married and filing a joint tax return or if filing as single or head of household.

Qualified Transportation and Parking Benefits will both have monthly reimbursement limits of $255.  Legislation passed on December 18, 2015 restored, and made permanent, parity between the two benefits.  Future inflationary adjustments will apply equally to both Qualified Transportation and Parking Benefits. 

The IRS announced the dollar limits for contributions and benefits in retirement and certain deferred compensation plans for 2016.  The key limits remain unchanged from 2015.  The limits did not change because the IRS determined the increase in the cost-of-living index was insufficient to trigger an adjustment.  See the chart below for selected limits.

Click on image to enlarge.

ACA Reporting: The Impact on Cobra and Account-Based Plans

BPC has carefully monitored the regulations surrounding ACA reporting as they have developed over the past several years. This fall, the IRS finalized forms and instructions related to ACA reporting, and we want to take a moment to detail how your account-based health plans (HRAs, FSAs, and HSAs), and COBRA coverage, could impact your reporting obligations.

The good news: most account-based plans won't have any impact on your ACA reporting, with the exception of a small number of HRAs.

However, COBRA coverage is likely to have a larger impact on many employers, since individuals on COBRA may need to be reported in some circumstances.

To learn specifics about ACA reporting requirements and how they may impact account-based plans and COBRA please visit our ACA Reporting Resource page for full details.

Posted on December 11, 2015 .

How to Be Ready for PCORI Fee Reporting By July 31, 2015

PCORI Fee Reporting

As the July 31, 2015 deadline nears, you may be hearing a lot about PCORI Fees. To assist employers and plan sponsors, BPC is offering two services to help you understand PCORI Fees and file compliant reports.

The first service, a no-cost PCORI FEE Self-Service Guide, gives background information on PCORI Fees, helps you understand fees you may be subject to paying, and provides step-by-step instructions for calculating and filing reports.

The second option is BPC's PCORI Fee Reporting & Compliance Services provided by our knowledgeable Benefit Specialists for just $95.00 until July 15, 2015*.

Select one of the options below to learn more.

** Orders placed after July 15, 2015 will still be processed as quickly as possible, but delivery by July 31 is not guaranteed and additional fees may apply.

Posted on June 24, 2015 .

IRS Announces 2016 Limits for Health Savings Accounts (HSAs)

HSA Limits 2016

The IRS has released the 2016 inflation-adjusted amounts for health savings accounts (HSAs): for calendar year 2016, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,350 and for an individual with family coverage is $6,750, with a “high deductible health plan” annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses do not exceed $6,550 for self-only coverage or $13,100 for family coverage.

Read the full text of IRS Revenue Procedure 2015-30.

Posted on May 5, 2015 .

BPC Named to List of Best Places to Work in Illinois 2015

BPC Named to List of Best Places to Work in Illinois for the Second Time

We are excited to share with you that BPC has been named a 2015 Best Places to Work in Illinois company. This is the second time BPC has been recognized by the independent program designed to identify the best places of employment in Illinois that benefit the state's economy and workforce.

For 36 years our team has been in the business of taking care of people. We are just happy people who love our employees and our clients, striving daily to make the world a better place. We are so thankful to our clients, plan participants, partners and colleagues for allowing us to do what we love every day. 

As a special thank you to our staff for their hard work in helping BPC be a Best Places to Work in Illinois Company we will be structuring department schedules so employees can enjoy every other Friday as paid time off during the summer. But rest assured we will be available and ready to serve you on Fridays and every day!  Other rewards and special events will be scheduled to celebrate this achievement. Watch this video to see how we revealed the big news to them!

Our mission is to take care of every employee, client, partner and participant with kindness and joy that not only makes them want to do business with us, but in a way that puts a smile on their face and joy in their hearts.
— Habeeb Habeeb, President & CEO of BPC

BPC’s passion for creating positive, service-based cultures doesn't stop with us. We want to share our guiding principles to help others thrive. As a result we are partnering with the H-Squared Leadership Institute to conduct seminars and certified continuing education classes to help individuals, businesses and communities become their very best. CEO Habeeb Habeeb has delivered these high-energy, all heart talks and seminars throughout the United States reaching audiences in business, universities and high school work-study classrooms.

Thank you again for allowing us to serve. We hope to make 2015 your best year yet!


Posted on April 23, 2015 .