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Status of Health Flexible Spending Accounts, Health Reimbursement Accounts and Health Savings Accounts under the Affordable Care Act

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in Employment Law

Integrated Health Care Flexible Spending Accounts (FSAs)—Tax Code Sections 105, 106 and 125

Definition of qualifying health insurance: Any major medical group health plan made available for the year to employees by the employer, but only if the ­maximum benefit payable to any participant does not exceed two times the participant’s ­salary reduction election for the year (or, if greater, does not exceed $500 plus the amount of the participant’s ­salary reduction election)

Cost-of-living adjustments for insurance deductibles, copayments, and other monetary provisions: Not applicable (not associated with a particular insurance ­policy)

Source of contributions: By employee (through pretax deductions), by employer (through nonelective payments to employees), or both

Annual contribution limits: Each individual has a limit of $2,500 per account for plan years beginning in 2014. If each spouse is eligible to enroll in an FSA, then each can ­contribute up to $2,500 under their respective employer’s health FSA. Employers may impose a lower limit. Individuals with more than one job may also have more than one FSA account (e.g., an individual with two jobs could have two FSAs with $2,500 in each one)

Minimum value: Not applicable

Affordability: Not applicable

Fee to the Patient-Centered Outcomes Research Institute: FSAs where the employer ­contributes over $500 during the year owe the fee for that year

Reinsurance fees: FSAs where the employer ­contributes over $500 during the year owe the fee for that year

Carryover of unused funds: FSAs may have a 2½-month grace period or allow up to $500 to be carried over from year-to-year. Without these features, balances remaining at year’s end are forfeited to the employer

Ownership and portability of account: The employer owns the account. Balances are generally forfeited at termination, although extensions for those covered by COBRA sometimes apply

Integrated Health Reimbursement Accounts (HRAs)—Tax Code Sections 105 and 106

Definition of qualifying health insurance: Any integrated major medical group health plan

Cost-of-living adjustments for insurance deductibles, copayments, and other monetary provisions: Not applicable (not associated with a particular insurance policy)

Source of contributions: Only by employer

Annual contribution limits: None

Minimum value: Employer contributions that can be used only for cost sharing may be counted toward minimum value

Affordability: Amounts newly made available to employees for the current plan year may be counted in determining affordability, if employees can use those amounts only for premiums or may choose to use the amounts for either premiums or cost-sharing

Fee to the Patient-Centered Outcomes Research Institute: All HRAs are subject to the fee; may be combined with major medical plan

Reinsurance fees: All HRAs are subject to the fee; may be combined with major medical plan

Carryover of unused funds: Permitted, although some employers limit the amount that can be carried over

Ownership and portability of account: Ownership is at discretion of employer, although subject to COBRA provisions

Integrated Health Savings Accounts (HSAs)—Tax Code Section 223

Definition of qualifying health insurance: Must have a high-deductible health plan (HDHP). Self-only deductible must be at least $1,250; the family deductible must be at least $2,500.Annual out-of-pocket expenses for covered benefits cannot exceed $6,350 for self-only coverage; $12,700 for family coverage. Deductible need not apply to preventive care. Out-of-pocket limits don’t include premiums.

Cost-of-living adjustments for insurance deductibles, copayments, and other monetary provisions: Yes; adjustments based on the ­Consumer Price Index for All-Urban Consumers (CPI-U)

Source of contributions: By any person (including the employer) on behalf of an eligible individual

Annual contribution limits: For 2014, $3,300 for self-only ­coverage and $6,550 for family ­coverage

Minimum value: Employer contributions may be counted toward minimum value

Affordability: Not applicable

Fee to the Patient-Centered Outcomes Research Institute: None owed, although the HDHP associated with the HSA would owe the fee

Reinsurance fees: None owed, although the HDHP associated with the HSA would owe the fee

Carryover of unused funds: Full amount may be carried over indefinitely. A qualified funding ­distribution may be made from a ­traditional IRA or Roth IRA into an HSA, subject to eligibility

Ownership and portability of account: The individual owns the account. The account funds remain with the individual when he or she separates from the employer

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