Reminder: December 1, 2008 – Individuals Eligible for Health Savings Accounts (HSAs) are Eligible to Contribute up to the 2008 Statutory Maximum

An individual who is eligible for a health savings account (HSA) on December 1, 2008 is eligible to contribute up to the 2008 statutory maximum of $2,900 for single high deductible health plan coverage and $5,800 for family coverage. However, if the individual does not remain HSA eligible until December 31, 2009, what is known as the testing period, then the individual will be subject to adverse taxation.

IRS Announces 2009 Limits for 401(k) Retirement Plans

On October 16, 2008, the IRS announced the 2009 401(k) maximum limits and thresholds for retirement plans in IR-2008-118:

• Annual defined contribution plan limit is increased from $46,000 to $49,000
• Annual compensation limit is increased from $230,000 to $245,000
• Annual elective deferral limit is increased from $15,500 to $16,500
• Annual catch-up contribution limit for individuals age 50 or over is increased from $5,000 to $5,500
• The “highly compensated employee” compensation limit is increased from $105,000 to $110,000
• The “key employee” threshold for top-heavy plans is increased from $150,000 to $160,000

Social Security Announces Initiative to Expedite Certain Disability Applications

The Social Security Administration has announced an initiative entitled Compassionate Allowances that will expedite processing of disability applications in which the applicant is diagnosed with one of 50 listed conditions. For more information including a list of conditions, please see the link below.

2009 Limits Announced for Transportation, Adoption Assistance and Dependent Care Accounts

On October 16, 2008, the IRS released Rev. Proc. 2008-66 that included the 2009 cost-of-living adjustments (COLAs) for a variety of tax and benefit limits. Employers who offer these benefits should confirm if their plan documents and summary plan descriptions automatically apply the new limits or if an amendment is needed to recognize the cost-of-living increases.

Qualified Transportation Fringe Benefits

• Parking benefit increased by $10 to $230/month
• Transit passes and vanpooling combined limit increased by $5 to $120/month

Adoption Assistance Exclusion/Adoption Credit

• Adoption assistance exclusion (Section 137 plan) increased $500 to $12,150/year
• Adoption credit (Section 23) increased to $12,150/year

Dependent Care Assistance Program (DCAP or Dependent FSA)

• The $5,000/$2,500 DCAP limit has not changed
• However, some federal income tax rate limits which are relevant to the savings under a DCAP have changed

Long-Term Care Premiums eligible for inclusion in Medical Care expenses

• Age 40 or less: $320
• Age 41-50: $600
• Age 51-60: $1,190
• Age 61-70: $3,180
• Age over 70: $3,980

Veterans’ Benefits Improvement Act of 2008 Amends USERRA

On October 10, 2008, President Bush signed into law Pub. L. No. 110-389 the Veterans’ Benefits Improvement Act of 2008, which includes several provisions to improve benefits for veterans. When veterans find it necessary to file a complaint with the Department of Labor (DOL) against an employer regarding employment or reemployment rights, the DOL has five days in which to respond and must complete the investigation within 90 days. Further, there is now no statue of limitations to file claims. Finally, the Act implements a penalty for any group that violates the requirement of the interest rate cap of 6% on 401(k) loans during the servicemember’s military service.

EBSA Issues Final Regulations on Newborns’ and Mothers’ Act

Since 1996, group health plans have been prohibited under the Newborns’ and Mothers’ Health Protection Act from limiting hospital benefits to less than 48 hours for a vaginal delivery or 96 hours for a cesarean section. An attending provider, in agreement with the mother, may authorize an earlier discharge. On October 20, 2008, the Employee Benefits Security Administration released final regulations of the Newborns’ and Mothers’ Act, which were previously released as interim final rules. The new regulations do not change the existing requirements and add a clarification that an attending provider can not be a plan, hospital, managed care organization, or other issuer.

IRS Issues Information Letters Regarding Qualified Medical Expenses

The Internal Revenue Service (IRS) has issued information letters regarding qualified medical expenses. Information Letter 2008-0033 states that legal fees and mileage expenses related to the establishment of a guardianship for an ill husband were qualified medical expenses because the expenses were directly related to medical care. Information Letter 2008-0039 asked if a health FSA participant could be reimbursed expenses for formula for a baby of a mother who was unable to breastfeed due to a double mastectomy. The IRS ruled that the formula was not a qualified medical expense, and thus, not reimbursable under a health FSA, because special foods are only qualified medical expenses if they are prescribed by a physician for the treatment of a specific disease and are a supplement to the individual’s normal diet.

Click here to view Information Letter 2008-0033
Click here to view Information Letter 2008-0039

Hawaii

On October 17, 2008, Governor Lingle announced that funding has ended for Keiki Care, Hawaii’s universal health care program for children. The program has ended just seven months after it started due to budgeting issues. The Hawaii Medical Service Association (HMSA) has indicated that they will pay to continue the coverage of the enrolled children, without government support, through the end of 2008. It is also offering a low-cost plan, so the state is encouraging the families of the covered children to apply for Medicaid coverage or the HMSA low-cost plan. According to some state officials, most of the children enrolled in the universal child care program previously had private health insurance, indicating that it was helping those who didn't need it.

Maryland

On October 24, 2008, the MD Insurance Administration adopted emergency COMAR Regulations 31.10.24.01-.04 that were effective October 1, 2008. The regulations apply to discount medical and discount drug plans sold, marketed, or solicited in Maryland and require that monies collected from plan members must be reimbursed or electronic fund transfers must be reversed, less a nominal fee, if the plan membership is canceled within the first 30 calendar days after the effective date.

Click here to view Regulation 31.10.24.03.

Click here to view Regulation 31.10.24.04.

Massachusetts

On October 17, 2008, the Commonwealth Health Insurance Connector Authority issued final regulations regarding the minimum creditable coverage requirement for residents. Residents that do not have coverage meeting the following requirements in 2009 will be subject to a tax penalty.

The health benefit plan must:

• Include both core services and a broad range of medical benefits, which are defined in the regulations provided below.
• In-network deductible must be no greater than $2,000 for individual and $4,000 for family. A separate prescription drug deductible must be no greater than $250 for individual and $500 for family.
• Preventive care benefits must be payable prior to deductible. The coverage must include a minimum of three visits per year per individual or satisfy nationally recognized guidelines.
• Annual maximum limits may not be imposed for overall benefits or core services.
• Federally qualified high deductible health plans automatically meet the minimum creditable coverage standards.
• If a plan does not meet all of the standards, it could still be deemed to be in compliance by the Connector Authority if it meets certain criteria and has an actuarial value equal to or greater than a Bronze Plan offered by the Connector.

The Code of Massachusetts Regulations (CMR) chapter regarding the protection of personal information has been amended. Effective January 1, 2009, entities that own, license, store, or maintain residents’ personal information such as social security numbers or financial account numbers must implement certain safeguards to protect such information. Entities must also document the policies and procedures in writing and train employees.

Effective January 1, 2009, the Fair Share Contribution requirements for employers has changed. In the past, to be exempt from the Fair Share Contribution assessment, an employer had to pass one of the following tests: a) employer makes a contribution to the cost of employee health insurance premiums and at least 25% of employees participate in the plan or b) employer contributes at least 33% of the health insurance premiums for full-time employees employed 90 days or more. Employers with more than 50 employees will now need to satisfy both tests or satisfy a new standard, which requires at least 75% participation in the plan by full-time employees.

Nevada

Effective October 1, 2008, Nevada has implemented a state Long-Term Care Partnership Program. Qualified Long-Term Care (LTC) insurance policies are designed to comply with the Federal Long-Term Care Partnership Program. An application of coverage for a LTC policy must be accompanied by a Long Term Care Insurance Personal Worksheet to help determine suitability, an informational form entitled “Things You Should Know Before You Buy Long Term Care Insurance,” and an outline of coverage that states whether the policy intends to be a federally tax-qualified LTC insurance contract.

New Jersey

On October 6, 2008, the New Jersey Department of Labor and Workforce Development issued proposed regulations implementing New Jersey's Paid Family Leave Insurance Law, which was originally passed on May 2, 2008, and reported in the May 13, 2008 edition of Compliance Corner. The proposed regulations provide clarification and guidance in a number of areas under the new law, such as the approval process for private plans, the allowance or requirement of employees to first use other accrued paid leave, the claim filing procedures, clarifying when intermittent leave is appropriate, and what notices are required by the employers. Employee contributions must commence January 1, 2009, but employees are not eligible to receive benefits until July 1, 2009.

New York

The State of New York Insurance Department's General Counsel issued several Opinion Letters in October.

• On October 6, 2008, Opinion 10-6-2008, OGC 08-10-01 concluded that individuals covered by a group's health insurance do not have to be in a formal employer-employee relationship, as long as the employer has control over the employee, which does not include most independent contractors. The Opinion also reiterates that there is no New York insurance law that specifies or regulates the amount that an employer must contribute for group health insurance coverage which they sponsor.

  

• On October 14, 2008, Opinion 10-6-2008, OGC Op. No. 08-10-05 concludes that even though the NY Insurance Department does not have any authority over independent self-funded groups, according to ERISA, the NY Department does have authority over self-funded “association” groups, especially where each employer member of the association has 51 or more employees.

  

Texas

On October 28, 2008, Attorney General Abbott issued Opinion GA-0674 concerning group coverage for serious mental illnesses. TX Insurance Code Section 1355.004 requires group health benefit plans to provide coverage for no less than 45 inpatient days and 60 outpatient visits for serious mental health. Section 1355.004 also requires group plans to provide outpatient coverage for serious mental illness under the same terms as outpatient coverage for physical illness. The Opinion concludes that if a plan provides for more than 60 outpatient visits for physical illness, it must provide the same for serious mental illness.

Vermont

On October 22, 2008, the VT Department of Banking, Insurance, Securities and Health Care Administration issued Revised Bulletin HCA-127 that clarifies the Department's policy and commitment to mental health parity. There will be no discrimination in disability income replacement insurance policies against persons who are disabled due to a mental health condition. This bulletin shall apply to individual policies and group policies issued or renewed on or after November 1, 2009 and all other policies must come into compliance no later than November 1, 2012.

Wisconsin

On November 4, 2008, the residents of Milwaukee passed a referendum that will require Milwaukee employers to provide employees with one hour of sick paid leave for each 30 hours worked up to an annual maximum of 72 hours. Employers with less than 10 employees must provide up to 40 hours annually. Employers that currently provide paid leave that satisfies the requirements are not required to provide additional time. The law will become effective in February 2009.