IRS priority guidance list for fiscal year 2007-2008 which began July 1, 2007 was published on August 13, 2007. 

Highlights include:

• Guidance on automatic enrollment as added by the Pension Protection Act of 2006.
• Guidance on Form 5500 reporting as a result of the Pension Protection Act of 2006.
• Guidance on issues on Health Savings Accounts (HSAs)
• Guidance on welfare benefit funds.
• Guidance on deductions for contributions to a welfare benefit fund.
• Final regulations under section 3121 regarding the definition of salary reduction agreement.
• Proposed regulation under section 4980G regarding calculation of the applicable premium for COBRA continuation coverage.
• Final regulations under section 4980G on comparable HSA contributions. Proposed regulations were published on June 1, 2007.

For the complete list, click here.

Indiana uses an HSA like account to encourage enrollees to behave more like consumers. The Personal Wellness Responsibility (POWER) account is the centerpiece of the Indiana Check-up law, which goes into effect on January 1, 2008. These are for individuals not eligible for Medicaid, but who earn up to $200 % of the Federal Poverty Level (FPL). Enrollees receive a $1,100 contribution to their account to be used for health care services and prescriptions. Unused balances are rolled over at the end of the year. 

A key aspect of the reform is the design of the health plan that will be offered to the newly covered adults. Utilizing the Health Savings Account model combined with comprehensive insurance coverage above the deductible, individuals would annually receive $500 of pre-deductible, free preventive care and have a $1,100 deductible.

The deductible is paid for through a POWER (Personal Wellness Responsibility) Account established in the individual's name. The account will contain the monthly contributions made by participants in addition to a State contribution for a combined total of $1,100 per adult, which covers the cost of the deductible. The State's contribution will vary according to a sliding scale based on a participant's financial ability to contribute to the account. The State will subsidize the account to ensure there is a total of $1,100 per adult in the account. Participants will contribute no more than 5 percent of their gross family income, and will not have any cost-sharing once the deductible is met. At the end of the year, the balance of the POWER account will roll-over to reduce the following year's required contribution, if the participant has received their age-, gender- and disease-specific preventative services. If they have not received these services, only their own pro-rated contribution to the POWER account will roll-over but the State's contribution will be returned to the State. This design is intended to create an incentive for recipients to utilize services in a cost-conscious manner.

Qualifying Participants will pay for a portion of the POWER accounts on a sliding scale based on income. The state will contribute the rest of the funds necessary to establish accounts of $1,100 per adult. If the funds in the accounts are depleted within a year, the commercial plans will kick in to provide continued coverage.

Employers are always looking for new ways to motivate their employees. Many employers are looking at gift cards as an additional option for employee incentives. This trend is growing rapidly.

Another trend is the use of prepaid debit cards for payment of wages to employees. Many employers have used electronic payments (direct deposit) for years for meeting their payroll needs. Unfortunately many employees do not have bank accounts and so direct deposit was not a viable method of payment for all. Now many employers are offering the option of payroll cards. Prepaid payroll cards create cost savings by reducing lost or stolen check replacements, bank processing and handling fees, check fraud, and check printing costs.

As electronic payments takes place on a national scale in employee reward programs and as a method for delivering wages, we have also seen electronic payment cards used as a method of payment from various employee health care accounts.

With the migration towards consumer driven health care and the effort to make consumers more accountable for their health care choices, we have seen the introduction of the flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and health savings accounts (HSAs). The benefit to employees of participation in one or more of these flex accounts is tax savings.  

The adoption of electronic payment cards for use with various consumer driven health care accounts to expedite claims processing has been proven to show a marked increase in participation by employees. With the addition of Information Inventory Approval Systems (IIAS) which will reduce the amount of paper claims required for substantiation of expenses, the use of the health debit cards is likely to increase. Participant’s appreciate having their claims paid sooner (at the point-of-sale) rather than later (days or weeks after the expense was incurred). Increase of participation in consumer driven health care accounts results in a greater tax savings for employer.

For more information on how DataPath’s electronic payment cards can benefit you, please contact Sales at sales@dpath.com

In April 1992, the American Institute of CPAs created Statement for Auditing Standard (SAS 70), which was designed to establish professional standards for auditing service providers, such as third party administrators (TPAs). SAS 70 engagements were performed primarily on large service providers. Then in mid-2004, when the Public Company Accounting Oversight Board (PCAOB) released Auditing Standard #2 as part of the Sarbanes Oxley (SOX legislation), the use of SAS 70 reports grew in importance.

Basically, PCAOB #2 established new standards requiring external auditors to perform an audit of a company’s internal controls, including those services that are outsourced. This standard also allows the external auditor to rely upon a SAS 70 report prepared by a service provider’s own auditor in meeting this requirement. Needless to say, PCAOB #2 resulted in an increase in the number of SAS 70 engagements.

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A Medicaid program in Florida has incorporated reverse HSAs to encourage healthy behaviors (e.g., smoking-cessation programs, weight management programs, routine preventive care).

Through the new program, enrollees begin the year with a zero balance in a health savings account, but can receive up to $125 a year, which can be used to pay for non-covered health expenses. 

Credits can be rolled over from year to year and balances can be used for up to three years after beneficiaries leave the Medicaid program. 

The IRS released the final regulations under Code Section 21 which have a direct impact on Dependent Care Flexible Spending Accounts (FSA). These final regulations are effective August 14, 2007.

The proposed regulations were issued in May 2006 and you can see highlights listed in the June 2006 DataPath newsletter.

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The IRS published the new proposed cafeteria plan regulations on August 6, 2007.  The new proposed regulations are effective for plans year starting on or after January 1, 2009.

The new proposed regulations replace six previously issued proposed and temporary regulations under the following:

1.125-1: Qualified and non-qualified benefits in a cafeteria plan

1.125-2: Elections in cafeteria plans

1.125-5: Flexible spending arrangements

1.125-6: Substantiation of expenses

1.125-7: Non-discrimination rules

Two areas that remain unchanged are:

1.125-3- Effect of the Family and Medical Leave Act (FMLA) on the Operation of Cafeteria Plans

1.125-4- Permitted Election Changes

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