FlexNews
**March 23, 2010, President Obama signed into law new
health care reform legislation. This legislation brings far-reaching
changes for employer-provided health coverage. The purpose of this memo is
to provide summary information regarding how the health care reform
legislation will affect Health Flexible Spending Arrangements (FSA) and
Health Reimbursement Arrangements HRA) over the next few years.
1. Extended Coverage to Adult Dependent Children.
For purposes of the Health Expense FSA and HRA, a qualified dependent is an
individual who is not age 27 or older during an employee’s taxable year
(calendar year). The dependent as defined under Section 152(f) of the Code
is a son/daughter, step son/daughter, adopted child or eligible foster
child. Health expenses incurred on or after April 1, 2010 are eligible for
reimbursement through the parent’s FSA or HRA benefit.
Effective for plan years beginning on or after
September 23, 2010, group health insurance plans must provide coverage for
children to age 26.
2. Over The Counter Drugs and Medication
Restrictions. Effective January 1, 2011, OTC drugs and medicines are
no longer reimbursable by health FSAs or HRAs except for insulin or OTC
drugs and medicine prescribed by a physician to treat a specific medical
condition. The written prescription should include the medical condition
being treated as well as the time frame for which the drug is prescribed
(i.e. 90 day prescription). For non-calendar years, this will be a mid-year
change.
3.
Health FSA Salary Reduction Limits. Effective January 1, 2013, the
annual maximum for employee contributions to the Health FSA will be limited
to $2,500.00. This limitation is only for employee contributions to the FSA
account. Any contributions made by the employer on behalf of the employee
to the benefit would be in addition to the $2,500.00 annual limit. HRAs are
not subject to the $2,500.00 annual limit.
It will take time to sort out all the details of the
health care reform. Over the next few years, there should be more detailed
guidance for administering employee benefit plans.
**The mileage rate for
medical travel in 2010 is $.165 per mile.
**The IRS recently issued proposed regulations regarding eligible
employment related day care expenses. (1) expenses of pre-school or similar
programs below - and not at or above- kindergarten level; (2) the full
amount paid for day camp or similar program for the care of a qualifying
individual, even if the camp specializes in a particular activity, such as
soccer or computers; (3) the cost of transportation (such as transportation
to a day camp or to an after-school program not on school premises) a
dependent care provider furnishes; (4) a care provider's additional room and
board costs, and indirect expenses such as application and agency fees; and
(5) short temporary absences from work, such as for minor illness of
vacation for the taxpayer who must pay for dependent care expenses on a
weekly or longer basis.