Reminder To Amend Health FSA Plan Terms To Include ACA $2500 Contribution Before 2013 Plan Year Begins

Employers and other health plan sponsors, insurers, and their administrators and service providers are reminded that the $2500 limit on pre-tax contributions to health flexible spending account plans under Internal Revenue Code section 125(i) takes effect on the first day of the 2013 plan year.   Notice 2012-40 makes clear that the IRS requires that this limitation be included in the plan document before the first day of the plan year for the plan to remain qualified under Code section 125.  Employers making this amendment likely wll want to draft this provision to preserve the option to adjust the limit as adjusted in the Code for post-2013 plan years.  Code section 125(i) provides for inflation adjustments the $2500.00 limit after 2013.

Most health flexible spending account plans already cap the annual contribution that employees can contribute to limit exposure to the “at-risk” requirements of current IRS regulations.   The at risk rule is a requirement imposed by IRS regulations that mandates that a health flexble spending account plan must make the full amount of the annual contribution of an employee available to the employee beginning with the first day of the plan year.  This provision has been highly contested as there is no express Code language authorizing or mandating this at risk requirement.  Along with providing guidance about the Code section 125(i) limit Notice 2012-40 also indicates that the IRS is reconsidering the need for and future of the at-risk requirement.

Health FSA Limit Change Just Tip of Iceberg

The new Code section 125(i) limit is only one of a plethora of statutory and regulatory changes impacting health benefit arrangements enacted by health care reform.  The effective date of these requirements spans from 2009 to 2017.  As implementation of these changes moves forward health plan design and administration requirements are changing rapidly as the Departments of Health and Human Services IRS, Department of Labor and state insurance agencies finalize arrangements and guidance governing the implementation and enforcement of the ACA health care reforms scheduled to take effect and to tweek guidance on provisions already effective under the law.  Employers and insurers now must get cracking to update their programs and cost estimates to comply with both existing and new guidance while keeping a close eye out for potential changes to ACA or other federal or state health coverage laws as the new Congress is expected to continue to discuss refinements or other changes when the new Congress begins work in January 2013.

What Should Employers Do To Cope With These & Other Health Plan Mandates?

Facing the operational and financial challenges of meeting these mandates, many business leaders continue report significant concern about what they should do to respond to these requirements.  For some practical steps that businesses confronting these issues should take to cope with ACA and other health plan responsibilities, check out the “12 Steps Every Employer With A Health Plan Should Do Now” article by Cynthia Marcotte Stamer in the October 26, 2012 online edition of Texas CEO Magazine. To read the full article, see here.

Clearly in light of the new guidance, employers, insurers, health plan fiduciaries and their service providers need to act quickly to familiarize themselves with the guidance and make any need adjustments to their plans, communications, practices and budgets warranted by the new guidance and remain vigilent for and prepared to do the same with other guidance and reform proposals as it is released.

Beyond responding to the new guidance and other future developments, most health plan sponsors, insurers, administrators and other fiduciaries, and their vendors also should consider conducting this specific analysis and update of their health benefit programs in the context of a broader strategy.

In her 12-Steps Article, Ms. Stamer writes, “While most employers and insurers of employment-based group health plans view with great concern radically expanded health plan responsibilities taking effect in 2014, many are failing to take steps critical to manage exposures and costs already arising from the Affordable Care Act (ACA) and other federal health plan regulations.”

In the article, Ms Stamer discusses the following 12 steps that she suggests most businesses consider to help catch up with current responsibilities and to help their business manage future costs and responsibilities:

  1. Know The Cast Of Characters & What Hat(s) They Wear
  2. Know What Rules Apply, and How They Affect a Group Health Plan
  3. Review and Update Health Plan Documents to Meet Requirements and Manage Exposure
  4. Update the Plan For Changing Compliance Requirements and Enhanced Defensibility
  5. Consistency Matters: Build Good Plan Design, Documentation and Processes, and Follow Them
  6. Ensure the Correct Party Carefully Communicates About Coverage and Claims in a Compliant, Timely, Prudent, Provable Manner
  7. Prepare For ACA’s Expanded Data Gathering and Reporting Requirements
  8. Select, Contract and Manage Vendors With Care
  9. Help Plan Members Build Their Health Care Coping Skills With Training and Supportive Tools
  10. Pack The Parachute and Locate The Nearest Exit Doors
  11. Get Moving On Compliance and Risk Management Issues
  12. Provide Input On Affordable Care Act Rules

For Help or More Information

If you need help reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices to respond to emerging health plan regulations, monitoring or commenting on these rules, defending your health plan or its administration, or other health or employee benefit, human resources or risk management concerns, please contact the author of this update, Cynthia Marcotte Stamer.

About Ms. Stamer

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to watch and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals.  A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations.   She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications.   You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns  see here or contact Ms. Stamer via telephone at 469.767.8872 or via e-mail to

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources at including:

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©2012 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.

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