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March 2007

An HSA participant can contribute up to the maximum statutory limit as allowed by the Internal Revenue Service. In 2007 the limits are: $5,650 for those with family coverage and $2,850 for those carrying single coverage. Those who are age 55 or older may also make a catch up contribution amount. This amount is $800 for 2007. Under the previous regulations, HSA account holders were limited to the lesser of the HDHP deductible or the statutory contribution limit, and there was no catch-up contribution.

Individuals may now make full year contributions, even though they open an account mid year and continue to remain an eligible individual for 12 months. Prior to 2007 regulations, the contribution amount was prorated based on number of eligible months and there was not a 12-month participation requirement.

In addition, there is a one-time tax-free rollover of Health FSA and HRA amounts to an HSA account. This means that a participant in a HRA or FSA plan may rollover to an HSA an amount that is equal to the lesser of their FSA balance on September 21,2006 or the FSA balance at the time of that rollover. Employees who were not plan participants in an FSA on September 21, 2006 or had a zero balance will not be eligible for this rollover provision.

Lastly, the negative impact of a Health FSA grace period, as it relates to eligibility under the HSA, was resolved. What this means is that a FSA participant is not disqualified from establishing or contributing to an HSA solely because he is a participant in a Health FSA with a grace period, as long as the individual has a zero balance on the last day of the plan year or rolls over the balance to his HSA as of the last day of the plan year.

Question: Do I need a document if I am deducting employee premiums pre-tax?

Yes – Employers must have a written Section 125 plan document and Summary Plan Description (SPD), sometimes referred to as a Premium Only Plan (POP). A reminder, SPDs for your POP, Flex and HRA Plans must be provided to employees:

• Within 90 days after enrollment
• Every five years (or ten years if no changes have been made that require a summary of material modifications)

Question: Is a health plan required to periodically notify enrollees about the availability, and how to obtain a copy, of its Notice of Privacy Practices?

Yes - Health plans already may have satisfied the reminder requirement in a number of ways. For instance, a health plan may have adopted the practice of sending its Notice of Privacy Practices to its enrollees annually. Or if a health plan may have amended its Notice of Privacy Practices recently and have sent the revised Notice to its subscribers as required by the Privacy Rule.

This information is especially important as the third anniversary of the compliance date of the HIPAA Privacy Rule nears. Health plans, other than small health plans, were first required to distribute their Notice of Privacy Practices to enrollees by April 14, 2003. Thus, those health plans that have not already reminded their enrollees in some manner had to do so no later than April 14, 2006. For small health plans, which had until April 14, 2004 to first distribute notices, the compliance date for those plans will be April 14, 2007.

BPC can put all the benefit pieces together to design and administer a new or existing plan. Let BPC assist you with maximizing your savings, as well as your employees’ savings.

This is a supplemental e-newsletter from BPC designed to inform you of current developments in Section 125 accounts, Flexible Spending Accounts, Health Reimbursement Arrangements, etc.

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