🗓️ June 2024
Keeping HR pros updated with important compliance, benefits, and human resources information.
IRS Releases 2025 Limits for HDHPs and HSAs
The IRS recently issued Revenue Procedure 2024-25 to announce the 2025 inflation-adjusted amounts that apply to health savings accounts (HSAs), excepted benefit health reimbursement arrangements (EBHRAs), and high-deductible health plans (HDHPs). The newly announced figures result in increases in the applicable limits for 2025, including the maximum contribution limit for an HSA, the maximum amount that can be made newly available in an EBHRA, the minimum permissible deductible for an HDHP, and the maximum limit on out-of-pocket expenses for in network services (e.g., deductibles, copayments, and other amounts aside from premiums) for qualifying HDHPs. The maximum permitted catch-up HSA contribution for eligible individuals who are 55 or older at any time during 2025 is not adjusted for inflation and remains unchanged for 2025.
The higher HSA contribution limit and HDHP out-of-pocket maximum will take effect on January 1, 2025. The higher HDHP deductible limits will increase for plan years that begin on or after January 1, 2025.
IRS & Treasury Release Guidance on Educational Assistance Programs
On June 17, 2024, the IRS and Treasury issued frequently asked questions (FAQs) in FS-2024-22 regarding Educational Assistance Programs. The FAQs provide guidance to taxpayers and clarify the rules surrounding tax-free educational assistance benefits for student loan payments.
National Business Associations File Suit to Block New DOL Overtime Rule
On May 22, 2024, a group of national business associations filed a lawsuit seeking to prevent the U.S. Department of Labor (DOL) from implementing its new Final Rule on overtime. Remember, the new rule significantly increases the annual salary threshold required to classify employees as exempt under the Fair Labor Standards Act (FLSA). The threshold initially increases to approximately $43,888 per year, effective July 1, 2024, and increases again on January 1, 2025, to $58,656 per year. The rule also implements automatic increases every three years thereafter (beginning July 1, 2027). And the rule raises the minimum salary for exempting “highly compensated employees” (“HCEs”) from $107,432 to $151,164 as of January 1, 2025.
The lawsuit, filed in the United States District Court for the Eastern District of Texas, challenges whether the DOL has the appropriate legal authority under the FLSA and the Administrative Procedures Act to increase the minimum salary thresholds for executive, administrative, and professional employees.
Unless and until the court stays the implementation of the rule, it will become effective on July 1, 2024, and employers will be required to comply.
Non-Discrimination Testing (NDT)
When it comes to Non Discrimination Testing (NDT), ownership and corporation type is very important. We thought we would share more information on which entity owners can and cannot participate in pre-tax health and welfare benefits. Keep in mind that these rules apply to insurance premium contributions, HSA contributions, and FSAs:
- C Corp Owners and LLCs Filing their taxes as a C Corp – Owners in a C Corp Owners or LLCs may participate in the Section 125 plan. Owners’ family members may also participate but may be considered Key or highly compensated employees.
- S Corp Owners and LLCs Filing their taxes as an S Corp – More than 2% owners’, owners’ spouse, parents, children, and grandchildren (working for the same employer) cannot participate in the Section 125 plan. This includes pre-tax premium withholdings as well as pre-tax contributions into a HSA, and FSA. They cannot receive benefits under an HRA.
- Partnerships, LLP, and Sole Proprietor (including an LLC filing as such) – Owners cannot participate in the Section 125 Plan. This includes pre-tax premium withholdings as well as pre-tax contributions into a HSA, and FSAs. They cannot receive benefits under an HRA. Owners’ spouses working for the same employer may participate but will be considered Key employees.
Lastly, we’d recommend testing two times during a plan year. At a minimum. Our FSA & HRA clients have free access to pre-tests and final testing. And we have a compliance team that is happy to assist should they need any help with their NDT.
PCORI Fee Update
The Patient-Centered Outcomes Research Institute (PCORI) fee supports research on health outcomes, clinical effectiveness, and the risks and benefits of medical treatments and services. The IRS treats this fee as an excise tax, applicable to all covered lives including employees, retirees, spouses and dependents. This fee will be in effect through 2029.
For plan and policy years ending between October 1, 2023, and September 30, 2024, the PCORI fee is $3.22 per covered life, a 7.33% increase from the previous year’s fee of $3.00 per covered life. The fee is due July 31, 2024.
Employers with self-funded medical plans or applicable health reimbursement arrangements (HRAs) must use Form 720 to report and pay the PCORI fee. Calculating the fee requires determining the average number of covered lives using an IRS-approved method.
- Be prepared to file Form 720 and pay the fee by July 31.
- Refer to IRS Form 720 instructions, FAQs, and the chart of applicable coverage types for guidance.
Medical Debt Cancellation Act Introduced
On May 8, legislators introduced the Medical Debt Cancellation Act (S.4289), aiming to eliminate existing medical debt in the United States. This proposal involves the federal government paying off medical-related debts under specific conditions and includes several components to address current and future medical debt issues. The Act is currently in draft form and may be amended before it proceeds to a congressional vote.
The Medical Debt Cancellation Act aims to relieve Americans of existing medical debt and impose stricter regulations on future debt, highlighting its potentially broad impact on healthcare and debt collection practices.
Read more here.
Question of the Month
Q. We have a client that never filed their 2022 plan year D1 and P2 files for RxDC reporting (assuming the carrier filed the D2-D8). Was the $100-a-day penalty in place for this filing in 2023?
A. There was penalty relief for 2020 and 2021, but not for 2022 filings. The penalty is found in Internal Revenue Code Section 4980D. The good faith relief came from the Departments of Labor, Health and Human Services and Treasury in the form of FAQ 56 issued on December 23, 2022.
