The flexible, affordable answer to rising health care costs
It's no secret the cost of health care keeps rising, even faster than the rate of inflation. MERS Health Care Savings Program is an innovative way to help employees prepare for those rising healthcare costs, with a tax-free medical savings account for use after leaving employment.
How It Works
Individual employee accounts are invested in MERS investment funds and grow tax-free. After leaving employment, the vested account balance is available for tax-free reimbursement of IRS-approved medical expenses, for the employee, any eligible dependents, and even a beneficiary on a taxable basis. The program can be used alone, or to complement an existing health care plan.
Features & Benefits
The MERS Health Care Savings Program is a great benefit employers can offer employees, and a great way to help employees prepare for future health care costs:
|Features of the Health Care Savings Program for Employers
||Features of the Health Care Savings Program for Participants
- Tax-free contributions are exempt from FICA (7.65%)
- MERS administers the entire plan
- No charges or fees for employers
- Access to MERS investment funds
- Ability to name beneficiaries
- Use of mySourceCard® debit card for eligible participants
Qualified Medical Expenses
They are those specified in the plan that would generally qualify for the medical and dental expenses deduction. These are explained in Publication 502, Medical and Dental Expenses. However, even though non-prescription medicines (other than insulin) do not qualify for the medical and dental expenses deduction, they do qualify as expenses for Health Care Savings Program purposes.
Note: After 2010, non-prescription medicines (other than insulin) do not qualify as an expense for Health Care Savings Program purposes.
Qualified medical expenses from your Health Care Savings Program include the following.
- Amounts paid for health insurance premiums
- Amounts paid for long-term care coverage
- Amounts that are not covered under another health plan
What is a reimbursable health care expense? View Publication 502
Wage and Contribution Reporting
Click here to learn more about these updates.
Update: MERS has implemented a new process to assist you with providing MERS benefit information to your new hires. Click here for more information.
Important Health Care Savings Program Reminders
1094-B and 1095-B Forms
Earlier in 2016, MERS legal counsel reviewed the Affordable Care Act (ACA) guidance to determine if the MERS Health Care Savings Program is minimum essential coverage (MEC) and therefore reportable under the 1094-B and 1095-B forms. While the MERS Health Care Savings Program is not specifically addressed in the ACA, it does share some similarities with plans such as Health Reimbursement Accounts (HRA) or VEBAs, which are addressed.
The IRS requires retiree-only HRAs to be reported, so it is likely the IRS may require employers to report the HCSP for any month a terminated / retired employee has a Health Care Savings Program balance.
For the purposes of the Health Care Savings Program (HCSP), MEC applies to individuals who have access to their HCSP account for reimbursements of medical expenses (generally, this means retired participants with a balance). As such, employers who sponsor such programs are required to file a 1094-B Transmittal of Health Coverage Information Returns form (one per municipality) and complete 1095-B Health Coverage forms for each of your terminated employees who have an HCSP account balance. Additionally, employers are required to provide a copy of the completed 1095-B form to each terminated employee that you are filing for.
Employers who plan to file for HCSP as an MEC offering as part of their benefit package should know the following regarding this filing:
- Medicare exempts from reporting for employees who are over age 65; thus, these participants do not need to receive a form.
- The Health Care Savings Program is not considered MEC for active employees because they are not eligible to access their account.
- Employers who offer a health insurance option to retirees, or COBRA coverage to those employees who have recently left employment, are not required to submit a separate filing for each benefit as they will be filed under those MEC benefits; one per social security number is sufficient.
The deadlines to file this information in 2017 are as follows:
- 1095-B forms must be postmarked to terminated employees on or before January 31, 2017.
- 1094-B form and 1095-B forms are due to the IRS on or before February 28, 2017 - if you are mailing paper forms.
- 1094-B form and 1095-B forms are due to the IRS on or before March 31, 2017 - if you are submitting the forms electronically.
If employers have other programs similar to the MERS Health Care Savings Program, we recommend that they contact their other service provider(s) to ensure they complied with this requirement.
MERS will make available to all Employers in January 2017 the data needed to populate these forms within their secure, online Employer Portal. Check back here for additional information in the coming weeks on steps to obtain this information.
You may also contact MERS Service center at 800-767-MERS (6377), if you need instructions on where to access this information.
Reminder! MERS continues to pay the Patient-Centered Outcomes Research Institute (PCORI) fee, as required by the Affordable Care Act, on your behalf. This fee funds research to understand consumer health decisions. We will pay this fee on your behalf through 2019, when the requirement to pay this fee ends. We are pleased to provide this service in partnership with our employers.