Wednesday, October 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

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 provide retiree health insurance or who are covering former employees under COBRA for their 2016 filing 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.

Important Deadlines

Note: When completing the 1095-B form, MERS encourages you to speak with your tax consultant(s) to confirm the sections of the form that apply to your municipality. MERS does not know this information.
Some tips to consider:

  • The information on the form is reflective of the Employer (Employer name, address and FID are required on the form)
  • 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 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."

Note: the IRS revised these deadlines on 12/8/16

Action

Date

Terminated HCSP participant data available in your Employer Portal

12/20/2016

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

3/2/2017

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

Paper: 2/28/2017
E-file: 3/31/2017

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. 

This chart applies only for reporting in 2017 for coverage in 2016.
See IRS Notice 2016-70 for more information.

Terminated Participant Data Now Available
To assist you in completing the 1095-B forms, MERS has posted a file with your terminated participant data in the secure Employer Portal.

To retrieve this report follow these steps:

  1. Log in to the Employer Portal.
  2. Select the first numeric division for HCSP (if more than one division), by clicking on the green Plan ID.
  3. To access the report select Retrieve Files located under Files and Reports.
  4. Find the file titled "2016 Terminated HCSP participant file". 
  5. Click View. At this point you can save the file to your computer.

Steps to request and retrieve files are outlined in detail on page 17 of the Wage, Contribution and Employer Portal Guide.

Note: You may be required to file additional forms with the IRS related to healthcare based on the benefits you provide to your employees. We recommend that you contact your other service provider(s) and/or benefit consultants to ensure you are in compliance.

 

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).