Premium-Only Plan Flexible Savings Account Health Reimbursement Arrangement Health Savings Account. Enrollment and Participation Guide

Transcription

1 Premium-Only Plan Flexible Savings Account Health Reimbursement Arrangement Health Savings Account Enrollment and Participation Guide Rev 03/2011

2 WHO WE ARE AND WHAT WE DO Thank you for considering the Small Business Association of Michigan (SBAM) for your Section 125 Plan, Flexible Spending Account, Health Savings Account and / or Health Reimbursement Arrangement administration. The Small Business Association of Michigan understands the important role that employee benefits, especially health insurance, play in our member s ability to recruit and retain top quality employees. We also understand that all employers in Michigan and nationwide are feeling the effects of the sharp increases health insurance premiums. We know what it is like to have to make payroll, maintain a positive cash flow and build a business. We understand that rising costs erode profits and limit your flexibility as an employer. Why do we understand? Because these factors have the same impact on our business. That is why we make it our business to focus the buying power, political power and shared resources of thousands of small businesses to help you achieve more than you could on your own. Produce more. Sell more. Earn more. And pay less. You can do this through our potent resource of products, services and knowledge designed to save you time, save you money and help you succeed. Count on SBAM to give you what you need to tackle human resources issues, legal questions, operational challenges, government relations issues and more.

3 KUSHNER & COMPANY For more than 25 years, Kushner & Company have made the design, implementation, communication and administration of successful benefit plans easy for their clients. In the ever-changing world of employee benefits, Kushner & Company is an acknowledged leader in the industry. Over one thousand organizations, three United States Presidents and numerous Congressional Committees have sought their expertise. By receiving no compensation from insurance companies, the brokers or those who sell products, they offer you totally objective, unbiased design, compliance and administration. Kushner & Company s primary concern is to provide exceptional services that simplify your plan responsibilities, including: Customized Plan Design Debit Card Options Web-Based Information Access Direct Deposit Toll Free Customer Service Compliance Testing & Reporting Enrollment & Education Communications Personalized Reports & Statements Regulatory Updates Online Claim Entry Full Reporting Package Personalized Employee Statements Secure Web-Based Information Access via Account Balance Plan Claim Data Payment Data User ID and PIN Changes Deposit Data Necessary Forms Online Claim Entry Toll-Free Customer Service (800) KUSHNER / (800) a.m. until 8 p.m. User ID and PIN Changes Questions & Answers

4 Plan Options and Prices Premium-Only / Section 125 Plan Administration A Premium-Only Plan (POP) allows employees to pay for a portion of health insurance premiums with pre-tax dollars. Eligible premiums include health, dental, vision and up to $50,000 of group term life insurance. If your company is increasing the amount employees pay for insurance plans, or perhaps introducing premium-sharing for the first time, it makes financial sense to deduct these contributions on a pre-tax basis. Your employees benefit because their premium contributions are deducted pre-tax, decreasing taxable income and increasing takehome pay. Your company benefits because FICA tax liability is lowered. Self-employed individuals or sole proprietors cannot participate in a Section 125 Premium Conversion Plan. However, the sole proprietorship may have a Premium Conversion Plan for its employees including spouse/employees (provided they are a bona fide employee and not invested in the business). 2% or greater shareholders of Subchapter S corporations cannot participate in a Section 125 Premium Conversion Plan. Unlike sole proprietorships, however, spouses, children, grandchildren and parents of the 2% or greater shareholder cannot participate in the Premium Conversion Plan, even if they are a bona fide employee of the business. Partners in a partnership cannot participate in a Section 125 Premium Conversion Plan. However, the partnership may provide a Premium Conversion plan for its employees including spouse/employees (provided they are a bona fide employee, and not a partner). Non-employee (outside) directors, limited partners, and members in LLCs are generally treated as self-employed individuals. As such, these individuals generally cannot participate in the Section 125 Premium Conversion Plan. You can expect the first year of your plan to require more involvement on your part than any other year. Basically in year one, together we will build a secure foundation, which will allow your Premium Conversion Plan to operate much more easily in the subsequent years.

5 Plan Document and Summary Plan Description The Plan Document will need to be signed by a representative of your organization as well as be approved by your Board of Directors (if applicable). The Summary Plan Description will need to be copied and distributed to all benefit eligible employees. Kushner & Company constantly monitors the legislative and regulatory scene to determine what amendments to the plan may become required by law. When this occurs, they will notify you of what must be incorporated into your Plan Document and Summary Plan Description to keep them in compliance. Employee Enrollment Prior to the beginning of each Plan Year, an open enrollment period must be held. At that time, each eligible employee must complete an Enrollment Form, detailing each of the Premium Conversion Plan options. An Enrollment Form should be completed even if an employee elects not to participate in the Plan. You should keep each original Enrollment Form on file for seven years. Non-Discrimination and Concentration Testing The IRS requires that certain Non-Discrimination Tests be performed on your Premium Conversion Plan each Plan Year. In addition to the need to maintain non-discriminatory eligibility policies, the IRS requires passage of the Section 125 Concentration Test. The Section 125 Concentration Test is performed to ensure that no more than 25% of the nontaxable or pre-tax benefits under the Plan are provided to key employees. A key employee is currently defined as an officer of the organization with annual compensation of greater than $130,000; or a more-than-5% owner of the organization; or a more-than-1% owner with annual compensation of greater than $150,000. This test is required to be performed at the end of the Plan Year, however, we also recommend performing it periodically throughout the year in case that adjustments may need to be made to any of the key employee elections.

6 Enrollment Newsletter As part of your Plan s initial implementation, you are provided with an enrollment newsletter for your employees. This will help your employees understand the tax savings of the Premium Conversion Plan and what their participation in it involves. in Michigan. Payroll Guide Your Premium Conversion Plan will provide tax savings for both you and your employees. The employee salary reduction contributions to the Plan are not subject to FICA, Medicare, federal, or state taxes (if outside of Michigan, consult your project manager). However, you will need to contact your tax advisor to determine if state or local income taxes apply. In addition, the employer does not pay FICA, Medicare or federal unemployment taxes [FUTA] on employee contributions (nor state unemployment taxes [SUTA] in some states, although you do pay SUTA. IRS Form 550 The IRS has suspended the requirement of Premium Conversion plans to file an IRS Form 5500 or any of the associated Schedules. However, if your health and welfare plan has greater than 100 participants you are still required by ERISA to file a Form 5500 and all applicable Schedules. Customer Service When you chose SBAM and Kushner & Company to provide the tools necessary to your Plan, you chose to receive extensive expertise whenever you need it. Your Project Team will always be available to answer any questions you may have regarding the administration of your plan(s). Debit Card With this optional debit card, an employee can access his or her Health Care FSA, HSA or HRA directly to pay for eligible expenses. Plus, this option helps to increase both participation and contributions, reducing the amount of taxes your company and your employees pay. Claims Processing Kushner & Company processes claims weekly or daily (your choice) and employee reimbursements can be given in the form of a check or direct deposit into their bank account.

7 Self-Administered Premium-Only Plan $99 to create / change documentation When you enroll in the self-administered Premium-Only Plan, you are given all the necessary documents to administer the program yourself including a fully compliant Plan Document and Summary Plan Description, employee enrollment forms, payroll guide, and non-discrimination / concentration testing spreadsheet. You will also have access to the Kushner & Company Project Team who will handle any questions you have along the way. Fully Administered Premium-Only Plan $27.50 per month When you enroll in the fully administered option, Kushner & Company, does all the work for you. The Plan Document and SPD is completed for your company and tailored to your specifications. You will be contacted by a representative from the Project Team who will set up all aspects of the plan on your behalf. This option minimizes paperwork for you to complete and greatly simplifies the implementation and administration. This option also includes annual non-discrimination testing for your company.

8 Section 125 Plan Administration with Flexible Spending Account (FSA) A Flexible Spending Account is a low cost way for your enhance your employee benefits package by providing your employees reduced federal income taxes, social security taxes, and state income taxes. It also allows your employees to better budget for known out-of-pocket expenses over a twelve month period. Flexible Spending Accounts Health Care Account: Employees may set aside a portion of their salary through pre-tax payroll deduction to pay for medical, dental or vision care expenses for the employee, their spouse and dependents that are not covered by any other insurance plan. These dollars go into a health care spending account and as expenses are incurred, employees can file a claim against their account and withdraw money to pay the expenses. Examples of such expenses include deductibles and copayments, the cost of prescription drugs, vision care (including eyeglasses and contact lenses, dental care and orthodontia not covered by your group health or dental plans. Flexible Spending Accounts Dependent Care Account: Employees (and their spouse, if married) who have children and have to pay someone to watch the children so they can work, look for work, or attend school full-time, the employee can elect to set aside a portion of their salary through pre-tax payroll deduction to pay for those expenses. These dollars go into a dependent care spending account and as expenses for daycare or babysitting are incurred, employees can file a claim against their account and withdraw money to pay the expenses. COST $5.25 per month per participant ($52.50 per month minimum) Free debit card If you elect this enhanced option, you will receive all of the Premium Only Plan administration, as well as Flexible Spending Account processing for your employees health and dependent care. This includes an administration guide to aid you in the day-to-day operations of the FSA plan, employee communication materials, enrollment forms and claims kit, daily processing of employee claims, and once a week you ll receive a Deposit Report, Check Report and a Year-To-Date Benefit Summary. Employees receive a free debit card to pay for eligible expenses and gives them direct access to their account (when using an approved bank). Your employees will have password protected access to the BeneWorld Web site where they can view all FSA activity within their own account.

9 Health Reimbursement Arrangement (HRA) Administration Health Reimbursement Arrangements (HRAs) are an effective and efficient way to provide employer-funded health benefits to employees of any type of business. HRAs allow individual employees to customize their benefits without adding administrative cost on your part. There is no requirement that the employer maintain any health insurance plan and employees may optionally elect lower-cost individual insurance. The most attractive feature of HRAs is that they allow for payment of all qualified health-related expenses on a pre-tax basis. All businesses, including one-person and part-time businesses, may operate an HRA plan. Self employed, partnerships, and shareholders with more than 2% ownership in an S-Corp cannot have an HRA but their employees can participate. Amounts provided by employers to employees are tax free and may be used to pay for group or individual health insurance or for any noninsured medical expense. These benefits are not wages and therefore are not subject to income taxes or wage taxes, FICA or worker s compensation. You may derive the benefits formula in any manner that is not considered discriminatory to the owner and highly compensated employees. Unused benefits may roll over from one year to the next and be banked for future expenses. Unlike an HSA, there is no requirement to set up separate accounts for employees. The primary benefit is that each employee may customize and optimize his or her own health benefits at no additional cost or effort required on your part. There are two types of fully administered HRAs: Standard HRAs are relatively simple and can be processed automatically. Non-Standard HRAs are more complex and have to be processed more manually. This additional effort requires slightly higher administration fees. The tables to the right illustrate examples of standard and non-standard plans. Kushner & Company will work with you to set up whichever HRA you choose and provide all the necessary documentation including Custom Plan Document and Summary Plan Description (SPD), employer-specific enrollment forms, employee communication materials including an employee newsletter explains the benefits and tax savings of the plan and online benefits access, direct deposit and available debit cards. Standard Health Reimbursement Arrangement: $5.25 per month per participant ($52.50 per month minimum) Free debit card Non-Standard Health Reimbursement Arrangement: $10 per month per participant ($100 per month minimum) SBAM also offers a self-administered HRA option for $99. You will receive all the necessary documents to administer an HRA yourself including the HRA Master Plan Document, HRA Summary Plan Description, and HRA Plan Document Cover Letter.

10 Health Savings Account Administration $2.75 per month per participant; FREE debit card ($27.50 per month minimum) A Health Savings Account (HSA) is a tax-exempt trust or custodial account established exclusively for payment of current and future qualified medical expenses. To have an HSA, you must first have a qualified high-deductible health plan. Qualified Medical Expenses Qualified medical expenses for an HSA include health insurance plan deductibles, co-payments and co-insurance amounts, prescription and over-the-counter drugs, dental services, vision care, long-term care, psychiatric and certain psychological treatments and certain health premiums including COBRA (but not premiums while an active employee). HSA Contributions Once you have established the HSA, your company, the employee or both may contribute to the HSA in a given year. For an HSA established by a self-employed individual, the individual may contribute to the HSA. In addition, family members may contribute to an HSA on behalf of another family member. Contributions to an HSA must be made in cash. Contributions to an HSA may be made through a Section 125 Plan via the pre-tax payroll method or after-tax by making deposits. In any given year, contributions may be made until April 15 the following year. HSAs may be invested much like a 401(k) or an IRA in an interest-bearing account, a mutual fund or stocks and bonds. Because you don t know when the HSA will be called upon for medical expenses, it is generally recommended that the majority of funds be readily accessible through a bank account. No Limits or Risk of Losing Funds with an HSA There is no use-it-or-lose-it provision with an HSA. Any balance of funds at the end of the year may be carried over into future years with no limits. The HSA Stays with the Employee Because the account is owned by the employee or individual and maintained in a trust, the account holder may use the account after he or she leaves the employer who offered the qualified high-deductible health plan. Debit Card Employees receive a free debit card to pay for eligible expenses and gives them direct access to their account (when using an approved bank).

11 Enrollment Checklist Complete and sign the SBAM Membership Application. A $90 check for first year membership investment made payable to SBAM (Small Business Association of Michigan). If the company chooses to pay monthly, or the agent is using a voucher to cover the cost of the first year dues, please indicate so on the membership application. Complete the Enrollment Form identify which plan option the company is choosing and method of payment. Complete and sign the Agreement. Payment for Section 125 Plan, FSA, HSA or HRA administration: If the company chooses the $99 Per Access Fee option for their self-administered Premium-Only Plan or Health Reimbursement Arrangement, please include a check made payable to SBAS (Small Business Administrative Services). If the group chooses any other monthly payment option, they will be billed on a monthly basis. The monthly charges will be included on the group s monthly BCBSM premium invoice, or if they have BCN or any other non-blue provider, they ll receive a monthly invoice directly from SBAM. Submit the above documents to the following address: SBAM Attn: Small Business Administrative Services (SBAS) PO Box Lansing, MI

12 Timelines: Complete implementation of the plan(s) usually takes two to four weeks. After SBAM receives the initial enrollment form and agreement, Kushner & Company will contact the group and/or insurance agent via with the Client Information Sheet and the HRA Adoption Agreement (if applicable). A conference call is scheduled to gather the necessary information together with Kushner & Company. Once Kushner & Company has received the completed Client Information Sheet and the HRA Adoption Agreement (if applicable), they will begin to generate the materials for the plan(s). Depending on the time of year, and complexity of the plan(s), the client will receive all of materials within one to two weeks. Your client receives the following materials from Kushner & Company in a series of s separated by the types of information: Enrollment and Plan Administration Materials These s contain all materials necessary for the client s open enrollment period and plan administration throughout the plan year. There will typically be a separate for employer materials and employee materials. They may include items such as: Employee Enrollment Form Request for Reimbursement Form Newsletter and/or PowerPoint Flexible Spending Account Worksheets Direct Deposit Authorization Forms (employer and employee) Online Inquiry and Claim Entry Instructions FSA Eligible Expense List Debit Card Information Notice of Termination FSA Deduction Reporting Instructions Discrimination Testing Information and Census Spec Sheet Employer Administration Guide

13 Plan Documents This from Kushner & Company will include all Plan Documents associated with the plan(s) chosen by the client. These documents may include the following: Section 125 / FSA Plan: Section 125 Plan Document, Section 125 Summary Plan Description, and Section 125 Plan Document Cover Letter HRA Plan: HRA Adoption Agreement, HRA Master Plan Document, HRA Summary Plan Description, and HRA Plan Document Cover Letter Administrative Services Agreement: If the client hasn t already signed a contract, an Administrative Services Agreement will be included HIPAA Medical Privacy One requirement of maintaining a Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) plan(s) is for the employer to incorporate HIPAA Medical Privacy Policies and Procedures, and have a Business Associate Agreement in place with Kushner & Company (and any other outside entity that handles Protected Health Information for the plan(s)). Depending on the client s situation, they may receive the following from Kushner & Company: HIPAA Medical Privacy Policies and Procedures: If the client does not yet have one in place, Kushner & Company will provide a complete kit to satisfy the requirements. Business Associate Agreement: Regardless of whether or not the client already has HIPAA Medical Privacy Policies and Procedures in place, a Business Associate Agreement must be signed between the client and Kushner & Company.

14 Forms for Kushner & Company - Once the client has received the before mentioned information, and completed open enrollment, there are a number of items that must be sent back to Kushner & Company. These may include the following: Copies of completed enrollment forms or a spreadsheet file listing each employee s election(s). Completed census file according to sent Census Spec for all benefit eligible employees ed to Kushner & Company. If easier for client, this file can also include employee s elections Signed copy of the Business Associate Agreement After the first deduction date, Flexible Spending Account (FSA) plans will need to provide Kushner & Company with a spreadsheet file based on the Spec Sheet. This will then need to be sent to Kushner & Company each pay period.

15 Small Business Administrative Services, LLC (SBAS) is a subsidiary of the Small Business Association of Michigan (SBAM). SBAS is responsible for the promotion and initial enrollment of the POP, FSA, HSA and HRA program. Small Business Association of Michigan (888) (888) GET-SBAM / (888) sbam@sbam.org SBAM s Employee Health Plan Funding & Administration is administered by Kushner & Company in Portage, Michigan. As an SBAM member participating in our program, you will be assigned a Project Team from Kushner & Company who will answer any plan or design questions you have throughout the year. Ben Cohen Project Manager, Kushner & Company (269) (800) KUSHNER / (800) ben.cohen@kushnerco.com Jennifer Alfieri Project Assistant, Kushner & Company (269) (800) KUSHNER / (800) jennifer.alfieri@kushnerco.com