March/2009

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Urgent Cafeteria Plan Bulletin--Requires Action

Children's Health Insurance Program (CHIPS) Reauthorization Act of 2009

President Obama signed the Children's Health Insurance Program Reauthorization Act of 2009 on February 4, 2009. This law amended the CHIPS program several ways and imposes new reporting and notice requirements on employers. While most of the new requirements primarily affect group health plans, the special enrollment notice requirement also includes the insurance pre-tax premium account in your Cafeteria Plan. A brief summary of the provisions of the Act follows:

First, states may elect to subsidize employer sponsored group health plans that meet certain requirements for low income children. This is done by giving subsidy money directly to the employer. Fortunately, the employer may opt out of this arrangement and have the state send the subsidy directly to the employee. Please note that employer sponsored high deductible health plans and Health FSA are not eligible for the subsidy.

As you are aware, HIPAA currently requires employers to offer individuals the right to enroll in the health plan midyear when certain events occur. This is called a special enrollment period. These special enrollment periods also allow a qualified status change for insurance premiums pre-tax through the Cafeteria Plan. The new law creates two new circumstances that allow the person to enroll in the health plan mid-year and have their premiums pre-taxed through the Cafeteria Plan.

First, if the employee or dependent loses eligibility under Medicaid or CHIPS coverage, the person can enroll in the employer's group health plan within sixty days of the event (not the normal 30 days). Second, if the employee or dependent becomes entitled to the premium subsidy explained above, they can enroll in the plan mid-year. If this happens the employer must enroll the person within sixty days of the event.

This part of the law is effective April 1, 2009 and will require a plan amendment and notice to employees. Pacific Benefit Consultants, Inc. will be amending your Cafeteria Plan by sending by email to our clients a sample Summary of Material Modifications (SMMS) to be distributed to the Cafeteria Plan participants. The sample SMMS should be reviewed by your legal counsel before adopting the new Plan language. A similar notice and amendment is required for your group health plan.

The law also requires employers to notify employees about the new subsidy. If the employer is in a state that provides premium assistance, the employer must notify the employees of the premium assistance. The government is supposed to issue a template by February 4, 2010 that employers can use to comply with this notice requirement. Fortunately, employers do not have to comply with this subsidy notice requirement until the template is released by the government.--so this is not of immediate concern.

Finally, employers have to respond to requests for information from the state regarding their benefit plans.That is, the state may contact the employer regarding plan benefits--this also does not appear to be immediate. If this happens, the employer or insurance carrier is required to provide the information to the state. Failure to comply with the new law can result in civil penalties of up to $100 per day.

Pacific Benefits does not practice law and this is our best understanding and a concise simplification of this very complex Act. This is necessarily a very brief summary and omits many details of key points. This is meant to serve you more as a notification rather than a complete explanation. We strongly urge you to contact your legal counsel and your Insurance Agent/Consultant for their valuable input. You will be receiving our SMMS for the Cafeteria Plan within the next two weeks.

FYI Corner: Did you know?

Pacific Benefits has been administering HSAs for our clients since HSAs were first introduced.

Our partnership with

my HSA Today, one of the largest HSA providers in the country, brings all the technology plus our personal brand of service to your employees. For more information contact one of our "Team HSA" administrator/consultants below:

1-800-800-2090

Barb Rainone, ext. 247;

Pam Criswell, ext. 232;

Mimi Silvestre, ext, 226;