What We’re Reading: “Rule Changes Increase Flexibility in Pretax Health Care Accounts”

“This article published recently in The New York Times caught my attention because – with the advent of the rollover for FSA election dollars – the big question is “Why wouldn’t someone open a FSA and withhold at least $500?” That’s the question we ask at every open enrollment for the FSA today! Once an employee experiences the advantages of pre-tax payroll deduction, most continue it every year.

We see many of our employer groups electing to use the rollover option and eliminate the 2 ½ month extension. When employees elect payroll redirection, it is a win-win. Not only does the employee have the advantage when paying for health care costs, but the employer reduces their gross payroll – which affects their FICA and FUTA payments and worker’s comp premium.

We have many groups who offer a HDHP plan as well as a traditional plan. In this situation, groups can amend their plan document to allow a limited purpose/post-deductible FSA. Or, for those employers offering a single solution HDHP, simply add a limited purpose FSA so the employees can use those dollars for dental and vision and conserve the HSA dollars – which are triple tax advantaged – for later, or to walk into retirement with.” – Sterling EVP of Business Development, Chris Bettner

Rule Changes Increase Flexibility in Pretax Health Care Accounts

By Ann Carrns, The New York Times

As open enrollment season approaches for those with workplace health benefits, employees may want to take a fresh look at health care flexible spending accounts, if their employers offer them, because the rules for the accounts have changed.

Flexible spending accounts, or F.S.A.s, can help save money by letting people use pretax dollars to pay for costs a health plan doesn’t cover. That might include dental care, fertility treatments or equipment like blood pressure monitors. About 14 million families participate in health F.S.A.s, the federal government estimates.

While roughly 85 percent of big employers offer health care F.S.A.s, fewer than a quarter of eligible employees use them, according to 2013 data from the benefits consultant Mercer. One deterrent was the “use it or lose it” rule: If you set aside part of your salary in an F.S.A. but didn’t spend it, you would forfeit it at the end of the year. Even though many employers allow a two-and-a-half-month grace period for workers to submit claims, many employees remained cautious.

That’s changing, however. Late last year, the Treasury relaxed the rules and gave employers the option of letting workers carry over unused F.S.A. balances of up to $500 into the next year. Some employers made the change right away, but adoption was limited because the rule was announced after open enrollment was already underway at many workplaces. More employers are expected to adopt the carry-over for 2015, which means their workers will be made aware of it this fall. “Every indication is that most are choosing to offer the rollover opportunity,” said Robert Natt, executive chairman of Alegeus Technologies, which provides payment systems for employers and benefits administrators that offer various tax-favored accounts.

Just how many will in fact make the switch, however, remains to be seen. Steve Wojcik, vice president for public policy at the National Business Group on Health, which represents large employers, said that of 60 members responding to an internal poll, more than a third said they would adopt the change for 2015, and roughly a quarter more said they were considering it.

At PrimePay, a payroll services and human resources consultant, participation has increased by 17 percent at clients that have already made the switch, said Steve Jackson, the company’s senior vice president for strategic development.

“I honestly think it will make people more comfortable about putting money into F.S.A.s,” said Bruce Elliott, manager of compensation and benefits for the Society of Human Resource Managers.

One caveat: More companies are offering high-deductible health insurance plans, which are often paired with tax-advantaged health savings accounts, or H.S.A.s, to help pay for costs the plans don’t cover. If you have an H.S.A., you can’t also have an F.S.A., said Roy Ramthun, a health benefits consultant — unless the flexible spending account is limited to certain categories, like vision or dental costs.

Here are some questions about F.S.A.s:

  • Does my employer have to offer the carry-over option?
    No. It’s optional. Employers may choose to allow a grace period instead (but they can’t offer both a carry-over and a grace period). Employers also can set a cap on the carry-over amount below $500, if they choose. Check with your human resources department for details.
  • How much income can I set aside in an F.S.A.?
    The maximum annual contribution is $2,500, adjusted for inflation; employers can set a lower cap, if they choose. (The I.R.S. hasn’t announced the 2015 limit, but it’s likely to be $2,500 or slightly higher, Mr. Natt said.) Minimum contributions vary by employer. The federal government, which recently announced it would adopt the carry-over option for employees starting in 2015, also lowered the minimum contribution to $100 from $250, to encourage more federal workers to use the F.S.A. benefit.
  • How should I decide how much to contribute to my F.S.A.?
    If you know you’ll have a big expense, you may want to set aside the maximum amount allowed. If a child needs braces, for instance, you could spend $2,500 fairly quickly. If you’re unsure, you could stick with $500, or whatever carry-over your employer allows, since you won’t risk losing access to the funds. You can also try using an online contribution calculator like the one at FSAstore.com, a website that sells F.S.A.-eligible items.
  • If I carry over $500, can I still contribute the annual maximum?
    Yes. The carry-over amount is in addition to the maximum contribution amount set by your employer. So if you carry over $500, and the maximum contribution is $2,500, you’ll have $3,000 available in your account.


For Employers: It’s Not Too Late – We Can Still Help You Meet the September 30 Compliance Deadline

Are you an employer with employees in the greater San Francisco Bay Area? If so, you need to know about the new Bay Area Commuter Benefits Program and how to comply.

The Bay Area Commuter Benefits Program requires employers with 50 or more employees located in the greater Bay Area to provide commuter benefits to their employees by September 30, 2014.

The Bay Area is defined as the following counties:

  • Alameda
  • Contra Costa
  • Marin
  • Napa
  • San Francisco
  • San Mateo
  • Santa Clara
  • The western portion of Solano County (including Fairfield and points west)
  • The southern portion of Sonoma County (including Windsor and points south)

An easy way to comply is by setting up a transit & parking FSA through Sterling. We’ve administered these plans for years and can quickly help you meet the deadline.

In addition, employers are also required to register for the Bay Area Commuter Benefits Program and can do so here.

You can find more information on the San Francisco Commuter Benefits Ordinance Overview here and more information on the new requirements here.

From the Archives: Top Ten Back-to-School Health Tips

With the school year starting back up now is the time to prepare so that you can make the most of your child’s school experience.

  1. See a doctor and a dentist. Doctors need to see kids regularly to catch problems, be they physical, mental or behavioral, before they become serious. Make sure your child is up to date on all shots. Dentists are a must too. Untreated tooth decay can result in dangerous bloodstream infections. Dental problems are the most common chronic disease in kids, according to the Centers for Disease Control and Prevention.
  2. Tell your child’s school about medicines and health conditions. Most schools require medicines taken during the day be administered by a school nurse, with the exception of inhalers for asthmatics and sugar pills for diabetics. It can be tempting not to tell the school about other medicines, but nurses need to be able to look out for side effects. And not knowing about a potential problem like attention deficit disorder can make it harder for a teacher to understand what may be going on with your child.
  3. Practice infection control. Wash hands frequently and consider using hand sanitizer. Clean all cuts and scrapes immediately, and shower after athletic activity to prevent staph infections. Don’t share drinking glasses, plates or other personal items. Probiotics may also reduce the risk of some infections, particularly diarrhea.
  4. Don’t share combs/brushes, hats or other hair accessories. Children have a habit of sharing things with their friends. While sharing is a great concept, children should be taught not to share these items to avoid the spread of head lice – which is more common in children during the school year.
  5. Keep sick kids home. If a child has a fever, he or she should not go to school. Any potentially contagious infection should also result in a sick day. Make sure that you have child care arrangements set up ahead of time–if everyone kept sick kids home, fewer kids would be sick. Also teach kids to cough and sneeze into the inside of their elbow to prevent germs from spreading.
  6. Maintain good nutrition. Children need a well balanced diet every day. Good nutrition helps a person’s immune system works at top performance and therefore aids in fighting off germs and viruses. In addition to aiding in the immune system, a well balanced diet is important for brain health as well. Children have longer attention spans and retain more information when they eat healthy.
  7. Get exercise. Kids need an hour of exercise every day, according to the CDC. With many schools cutting back on recess, this can be tough. Organized sports are one route, but for less athletic kids, an after-school run or walk can make the difference.
  8. Get plenty of sleep. Kids don’t usually get enough sleep. Children ages 6 to 11 need 10 hours of sleep; teenagers need nine hours. Technology and over-scheduling are usually the big problems here. Establish a regular bedtime and enforce it; keep the TV, video games and computer out of the bedroom. Limit “screen time” to 10 hours a week. People who are sleep deprived are more likely to perform poorly at tasks and more likely to suffer from frequent illnesses.
  9. Be consistent. In order to sleep, eat and study, kids of all ages need a routine. Schedule time for exercise and homework, and keep things consistent. But many experts say that children these days tend to be over-scheduled, which may lead to stress, nervousness, and even depression.
  10. Watch mental health too. Especially as they get older, look for changes in behavior and habits that could indicate a problem. Girls can have body image problems as young as elementary school, and eating disorders are not uncommon. Children can get anxious or depressed. Talk to your kids about the risks of alcohol and drug use.

Sterling Named One of Best Places to Work in Insurance

Sterling Administration is pleased to announce that we are among the companies being recognized in this year’s Business Insurance Best Places to Work in Insurance program.

The national Best Places to Work program, now in its sixth year, is a joint effort of Business Insurance and Best Companies Group and involves months of in-depth evaluation. The assessment involves a two-part process. One part, responsible for 75% of a company’s score, involves a confidential employee engagement and satisfaction survey, which is used to evaluate employees’ workplace experience and the company’s culture. The other part, which is responsible for the remaining 25% of the score, consists of an employer questionnaire, which collects information about each company’s benefit programs, policies, practices and other general information.

The Best Places to Work in Insurance program “is dedicated to identifying and recognizing the best employers in the insurance industry.” The companies being recognized this year “have created high-quality workplaces in which employees can thrive and enjoy doing so.”

You can read the entire announcement here.

Check back as Business Insurance will reveal how each company ranked and take a closer look at the 75 companies honored in a special report in their September 29 issue. We will post that update here on the blog.


About Sterling Administration
Sterling is an independent, privately held company. We offer administration services for HSAs, HRAs, FSAs, POPs and COBRA. We are also experts in compliance services that include ERISA Wrap, Form 5500 Filing, non-discrimination testing, and requirements under the Patient Protection Affordable Care Act (PPACA).

Founded in 2004, Sterling was a pioneer in the HSA industry and is today considered to be among the top administrators in the country. Sterling is led by experts in the health benefits and healthcare financing industries for one primary purpose – to put employers and consumers in control of healthcare spending and in touch with resources to help manage their money and their health.

We enable employers to control rising health care costs, accountholders and members to get the services they need and save money, and insurance professionals to enhance the range of services they offer to their clients.