Monday, December 18, 2017

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

Hot Topic – Leave Conversions

As your partner, we want to ensure your plan is in compliance with IRS guidelines. Leave conversions are all or a portion of unused leave payouts that are contributed annually or at separation of employment.

Upon adoption of HCSP, your municipality chose to offer a leave conversion lump sum into HCSP. In order for your plan to maintain its tax-qualified status, contributions must be mandatory. Employees cannot choose how they receive their leave conversion. However, each division may define its own payout option.

If you are currently offering a lump sum amount for leave conversions as an optional benefit to your employees, it is recommended that you immediately stop. Administering your plan in this manner violates the tax-free nature of the program and may require those contributions to be taxable income reported on an individual's W2.

If you are seeking a flexible option that allows your employees to choose how they receive leave conversions, consider amending your HCSP agreement and utilizing the MERS 457 Program. Contact your Benefit Plan Coordinator with questions or for more information.

Wage and Contribution Reporting

Click here to learn more about these updates.

Update:  MERS has implemented a 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
MERS' legal counsel has determined that the Health Care Savings Program may qualify as minimum essential coverage (MEC) under the Affordable Care Act (ACA) and therefore should be reported to the IRS using forms 1094-B and 1095-B. Only those participants who have access to their account for qualified medical expense reimbursements - generally this refers to retired participants or their beneficiaries with an account balance – need to be reported using these forms.

What does this mean for you?
Employers who sponsor such programs are required to file a 1094-B Transmittal of Health Coverage Information Returns form (.pdf) (one per municipality) and complete a 1095-B Health Coverage form (.pdf) for each of your terminated employees (or their beneficiary) who have an HCSP account balance. MERS will provide the data needed to complete the 1095-B forms for your eligible terminated participants or their beneficiaries in your Employer Portal.

Note: that if the terminated participant is deceased and a beneficiary is using their remaining account balance for qualified medical expenses, as the plan sponsor, you will need to file a 1095-B form on behalf of that beneficiary.

Important Deadlines

Action

Date

Terminated HCSP participant (or beneficiary) data available in your Employer Portal

12/22/2017

Provide completed 1095-B to terminated HCSP participants with an account balance

1/31/2018

File completed 1094-B and 1095-B forms with the IRS

Paper: 2/28/2018
E-file: 4/2/2018

Note: If you file 250 or more Forms 1095-B, you must electronically file them with the IRS. Electronically filing ACA information returns requires an application process separate from other electronic filing systems. Additional information about electronic filing of ACA Information Returns is on the Affordable Care Act Information Reporting (AIR) Program page on IRS.gov and in Publications 5164 and 5165.

Important Tips

  • When completing the 1095-B form, MERS encourages employers to speak with their tax consultant(s) to confirm the sections of the form apply to their municipality. MERS does not know this information. 
  • The information on the form should be completed by the Employer (Employer name, address and Employer Identification Number are required on the form). MERS does not know your EID.
  • HCSP is not health coverage; it is a reimbursement arrangement and is considered "employer sponsored" for the purposes of minimal essential coverage.
  • Employers are not required to complete both Part II and Part III on each form - the Tip on page 7 of the Instructions for Forms 1094-B and 1095-B booklet (.pdf) states:
    "Employers reporting self-insured group health plan coverage on Form 1095-B enter code B on line 8, but don't complete Part II. If you entered code B for self-insured coverage, skip Part II and go to Part III."

Frequently Asked Questions

Do I need to report for Medicare-eligible participants?
No.
Medicare exempts from reporting for employees who are over age 65; thus, these participants do not need to receive a form.

Why don't I need to report for my active employees?
The Health Care Savings Program is not considered MEC for active employees because they are not eligible to access their account.

Why am I receiving data to report for someone who is not a former employer?
The report you receive in the Employer Portal will contain the data of anyone who is eligible to use their HCSP account balance for qualified medical expenses and the months in which they were eligible and/or carried a balance. This could be a former employee from your municipality OR their beneficiary. MERS' legal counsel has advised that it is lawful for employers to have access to beneficiary data for the purpose of filing a 1095-B form on their behalf.

I provided retiree health insurance for employees or COBRA in 2017. DO I need to file for those retired employees?
If you provided retiree health insurance or covered former employees under COBRA for their 2017 filing, you do not also need to file a 1095-B on behalf of those former employees. One filing per Social Security number is sufficient. If the retiree or terminated participant is not participating in another health insurance option, or is not taking COBRA, then the employer should file a 1095-B form on behalf of that former participant. It is not enough to just offer COBRA or a health insurance plan; the participant must have been covered under COBRA or the health insurance plan during the 2016 filing year in order to not file a 1095-B on behalf of their behalf.

PCORI Fee

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.

Plan Document

Investments

View HCSP asset allocation, investment menus, and more. Click here.

 

Need Help Finding the Right Retirement Fit?

MERS Regional Team members can help you find affordable answers to your benefit budget. Contact a MERS representative in your area at 800.767.MERS (6377), or click here.


Contribution Limits & Reporting Data

Click here to view data sheet.

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Disclaimer
The information contained in this Web site is being made available as a public service. The information is not intended to constitute legal or investment advice, or to replace official versions of that information. Benefit Estimates or Service Credit Purchase estimates requested through this Web site are not official descriptions of any benefits, and do not represent a promise by MERS to provide any benefit(s) to any person(s). No one can detrimentally rely upon the information provided in, or requested through this Web site. MERS reserves the right to correct any errors, and presents this information without warranties, express or implied, regarding the information?s accuracy, timeliness or completeness. If you believe the information is inaccurate, out-of-date, or incomplete, or if you have problems accessing or reading the information, please call MERS at 800.767.MERS (6377).