• Facebook
  • LinkedIn
  • Mail
  • Twitter
  • Youtube
1-800-248-7675    •    Careers    •
Cornerstone Broker Insurance Services Agency
  • Who We Are
    • What is a General Agency?
    • Our Value
    • Community Involvement
  • What We Offer
    • Individual
    • Employee Benefits
    • Agency Services Program
    • Licensing and Commissions
    • Cash Incentive Program
    • Refer-An-Agent Program
  • Resource Center
    • Webinar Series
    • Client Referral Form
    • Carrier Bonuses
    • AGB
    • FormFire
    • EB3 Benefit Booklet
  • Events
  • Blog
  • Contact Us
    • Meet the Team
  • Get Contracted
  • Search
  • Menu Menu

What Happens to Unused Amounts in Employees’ HRAs When Their Employment Terminates?

May 13, 2022/in COBRA, Compliance, Employee Benefits, Whitepapers/by Cornerstone

This post was originally published by EBIA.

QUESTION: Our company is thinking about adding an HRA that would be integrated with our major medical plan. Employees could carry over their HRA balances from year to year. What happens to those balances when an employee’s employment terminates?

ANSWER: Your company has some choices about what will happen to HRA balances remaining at termination of employment. The HRA may be designed so that employees forfeit their unused HRA balances when employment ends (typically after a limited post-termination opportunity to submit reimbursements for pre-termination expenses). Or your company may choose a design that permits employees to “spend down” their HRA balances and receive reimbursement for eligible expenses incurred after employment termination until the HRA balance is depleted. Alternatively, the HRA could be designed so that all but a nondiscriminatory class of employees forfeit unused amounts at termination. Regardless of which design you choose, terminated employees may not be “cashed out” of their HRAs (i.e., provided with cash or other benefits in an amount equal to some or all of the HRA balance), because a cash-out feature would trigger taxation of all HRA distributions, whether or not they were used to pay qualified medical expenses. The design choices you make should be clearly stated in the HRA plan document and explained to employees in the summary plan description and other communication materials.

Whether or not the balance is forfeited, COBRA must be offered unless an exception applies (e.g., because the HRA is sponsored by a small employer that is exempt from COBRA). If COBRA coverage is purchased, the recipient will have access to the HRA balance (notwithstanding any forfeiture rule), increased by any account credits that would be received for the coverage period by a similarly situated non-COBRA beneficiary. Note that COBRA’s application to HRAs raises some complex issues that are beyond the scope of this answer.

If an employee dies while eligible to incur reimbursable expenses, the HRA may allow the employee’s accumulated balance to reimburse the substantiated qualified medical expenses of the employee’s surviving spouse, children who are under age 27 as of the end of the taxable year, or tax dependents for health coverage purposes. A deceased employee’s balance may not be used to reimburse the medical expenses of anyone other than those individuals (there is a limited exception for certain state governmental HRAs), or paid for any reason other than medical expense reimbursement. For more information, see EBIA’s Consumer-Driven Health Care manual at Sections XXI.F.12 (“Forfeit Account Balances or Permit Spend-Downs?”), XXII.C.2 (“Treatment of HRAs Upon a Participant’s Death”), XXIV.F (“No Cash-Out of Unused Amounts”), and XXV.B (“HRAs and COBRA”). See also EBIA’s COBRA manual at Sections IV.C (“Small Employer Exception”) and XI.G (“How COBRA Applies to HRAs: Unique COBRA Administration Issues”).

https://www.crnstone.com/wp-content/uploads/2022/05/What-Happens-to-Unused-Amounts-in-Employees-HRAs-When-Their-Employment-Terminates.jpg 480 640 Cornerstone /wp-content/uploads/2019/11/Cornerstone_Logo.png Cornerstone2022-05-13 13:52:012022-05-13 13:52:46What Happens to Unused Amounts in Employees’ HRAs When Their Employment Terminates?

New IRS Form 941 for COBRA Subsidy Filings Due August 2, 2021

July 26, 2021/in COBRA, Employee Benefits, Legislation/by Cornerstone

The Internal Revenue Service issued a new Form 941, the Employer’s Quarterly Federal Tax Return, for second quarter filings due August 2, 2021. The form has several new lines added to obtain credits for the COBRA subsidies offered under the American Rescue Plan Act (ARPA).

Additionally, some revisions have been made to align Form 941 with the extension and amendments made to the Emergency Paid Family Sick Leave and Extended FMLA provisions included in ARPA. Employers should discard any unused Form 941 with revision dates earlier than June 2021.

The new Form 941 may be downloaded here: https://www.irs.gov/pub/irs-pdf/f941.pdf

Contact your Cornerstone representative for more information.

https://www.crnstone.com/wp-content/uploads/2021/07/New-IRS-Form-941-for-COBRA-Subsidy-Filings-Due-August-2-2021.jpg 480 640 Cornerstone /wp-content/uploads/2019/11/Cornerstone_Logo.png Cornerstone2021-07-26 12:59:572021-07-26 12:59:57New IRS Form 941 for COBRA Subsidy Filings Due August 2, 2021

IRS Provides Guidance on Premium Assistance and Tax Credit for Continuation Health Coverage

May 21, 2021/in COBRA, Employee Benefits, Legislation/by Cornerstone

The following information was originally released by the Health Care Administrators Association.

The Internal Revenue Service recently provided guidance on tax breaks under the American Rescue Plan Act of 2021 for continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

Notice 2021-31 PDF provides guidance for employers, plan administrators, and health insurers regarding the new credit available to them for providing continuation health coverage to certain individuals under COBRA.

The American Rescue Plan provides a temporary 100 percent reduction in the premium that individuals would have to pay when they elect COBRA continuation health coverage following a reduction in hours or an involuntary termination of employment. The new law provides a corresponding tax credit for the entities that maintain group health plans, such as employers, multiemployer plans, and insurers. The 100 percent reduction in the premium and the credit are also available with respect to continuation coverage provided for those events under comparable State laws, sometimes referred to as “mini-COBRA.”

Notice 2021-31 provides information regarding the calculation of the credit, the eligibility of individuals, the premium assistance period, and other information vital to employers, plan administrators, and insurers to understand the credit.

COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health plans maintained by private-sector employers with 20 or more full and part-time employees. It also covers employee organizations or federal, state or local governments. State mini-COBRA laws often provide similar benefits for insured small employers not subject to Federal COBRA.

Contact your Cornerstone representative with any questions.

https://www.crnstone.com/wp-content/uploads/2021/05/IRS-Provides-Guidance-on-Premium-Assistance-and-Tax-Credit-for-Continuation-Health-Coverage.jpg 480 640 Cornerstone /wp-content/uploads/2019/11/Cornerstone_Logo.png Cornerstone2021-05-21 13:36:182021-05-21 13:36:18IRS Provides Guidance on Premium Assistance and Tax Credit for Continuation Health Coverage

Answers to ARPA Questions in Accordance with Newly Released Guidance

April 30, 2021/in COBRA, Compliance, Cornerstone Updates, Employee Benefits, Legislation/by Shelly Brownell

Since the American Rescue Plan Act was signed into law on March 11, 2021, the impacts on COBRA and State Continuation were not fully understood until recent guidance was released. We will review the eligibility, the model notice (which is now available), and update the timeline for notification and premium assistance as it relates to COBRA. The states and several carriers have yet to weigh in on State Continuation and how it will work in Ohio, Kentucky, and Indiana, however the notification and subsidization requirements still exist. Following the review of the ARPA legislation, you will find a detailed guide by carrier and plan type outlining who is responsible for the notification, with and without a vendor, and who ultimately files and receives the tax credit.

As previously stated in the initial review of ARPA, assistance eligible individuals (AEI) will receive 100 percent subsidy for their COBRA and State Continuation premiums under two circumstances:

  1. Employee was involuntarily terminated with a qualifying event between November 1, 2019, to present. One qualifier here is that the employee was not terminated for “cause” during this timeframe. In addition, the employee is still within their 18-month period of coverage as stipulated by COBRA guidelines. State continuation eligibility again varies by carrier, plan, and state.
  2. Employee’s hours were reduced by an amount triggering the employee’s loss of eligibility for benefits.

An AEI ceases to be eligible for the premium subsidy if he/she becomes eligible for other group health coverage through a new employer, a spouse’s plan, or with Medicare.

The new model notice for those currently on COBRA and AEI’s who are eligible is available here and here and on the DOL.gov site, which are required to be sent to all AEI’s by May 30, 2021. The notice required to be sent in the case of State Continuation is called the Alternative Model Notice and is located here. So, it is important that employers begin immediately identifying their list of eligible terminated employees to assist the carrier/vendor, if applicable, with the notification requirement or so that the employer can send the model notice in a timely fashion if applicable. Individuals have 60 days to elect COBRA from the date of receipt of the notice. Due to the timing of the model notice and the notification period, it is expected that any eligible individual currently on COBRA will continue to make payments for the months of April and May. Individuals who previously declined COBRA are eligible as long as their 18-month coverage period has not expired. As well, individuals who elected and are currently on COBRA or who elected and later dropped COBRA are eligible as long as their 18-month coverage period has not expired.

COBRA subsidies will be paid at 100 percent for the AEI from April 1, 2021, to September 30, 2021. There is also a requirement for employers (plan) and issuers (carriers) to notify those individuals who elect and are awarded the subsidy when the premium subsidization is due to expire. This notice is due between 15 to 45 days prior to the expiration of the subsidy and the AEI would then be eligible for an SEP to enroll in coverage through the marketplace.

Generally speaking, whichever entity is responsible for paying the COBRA premium subsidy for the AEI, carrier or employer, will also be the party who files and receives the tax credit. The credit is taken against the Medicare tax an employer is responsible for.

The guide below will provide available information to date by carrier and by plan. If you have any questions about the requirements or available notices, please give your broker advisor a call. We recommend that you seek specific advice on filing for the premium tax credit with your accounting professional.

ARPA Cobra Guide

https://www.crnstone.com/wp-content/uploads/2021/04/Answers-to-ARPA-Questions-in-Accordance-With-Newly-released-Guidance.jpg 480 640 Shelly Brownell /wp-content/uploads/2019/11/Cornerstone_Logo.png Shelly Brownell2021-04-30 18:29:592021-04-30 20:16:15Answers to ARPA Questions in Accordance with Newly Released Guidance

Recent Posts

  • Marketplace Learning Management System Closes on July 15
  • Medical Mutual Makes Change to National Network Effective Jan. 1, 2023
  • The Updated Medical Mutual COSE MEWA Small Employer Exception Form is Available
  • Departments Issue Checklist for Surprise Billing IDR Process
  • Learn More About Humana’s EAP LifeWorks Transition

Categories

  • Aetna
  • Aetna Funding Advantage
  • All Savers
  • Ambetter
  • Ameritas
  • Anthem
  • AUL
  • Autopilot
  • Bonus Programs
  • Carrier
  • COBRA
  • Companion Life
  • Compliance
  • Continuing Education
  • Cornerstone Updates
  • COVID Tests (January 2022)
  • Delta Dental
  • DentaQuest
  • EB3
  • Employee Benefits
  • Events
  • FormFire
  • Go365
  • Golden Rule
  • HealthSherpa
  • Humana
  • Individual
  • Legislation
  • Licensing
  • Marketplace
  • Medical Mutual
  • MEWA
  • Molina
  • Ohio Department of Insurance
  • Ohio Farm Bureau
  • On the Spot
  • OneAmerica
  • Oscar
  • Principal
  • Sidecar Health
  • Social Security Spotlight
  • Sun Life
  • Superior Dental Care
  • The Dental Care Plus Group
  • The Standard
  • UnitedHealthcare
  • UnitedHealthOne
  • Webinars
  • Whitepapers

CONTACT US

1-800-248-7675
8:30 am to 5:00 pm EST
Monday–Friday

UPDATES

Events
Blog

WHO WE ARE

Join Our Team
Community Involvement

RESOURCE CENTER

Webinars
AGB
FormFire

WHAT WE OFFER

Individual
Employee Benefits
Agency Services Program
Licensing and Commissions

CONNECT WITH US

Twitter YouTube LinkedIn Facebook

©2020 CORNERSTONE BROKER INSURANCE SERVICES AGENCY, INC. ALL RIGHTS RESERVED | COMPENSATION DISCLOSURE | PRIVACY POLICY
CINCINNATI WEB DESIGN COMPANY WEBTEC
Scroll to top