In this episode, Podcast originals Suzanne Spradley and Chase Cannon discuss wellness and other employer programs that advertise big employment and income tax savings to employers and employees. Suzanne and Chase discuss the various names and iterations of these types of programs – including the Classic 105, Freedom Plan, Section 105 Reimbursement Plans and Premier 105 – and how they vary in plan design. Chase outlines the basic iteration: an employer takes some amount as pre-tax deduction from the employee for a type of basic wellness program, the employee participates in the wellness program (completes a health screening, sits in on educational webinars and so on), and the employer provides a tax-free wellness program “reward” that happens to be very close to the pre-tax deduction amount. Chase and Suzanne discuss the federal income and employment tax ramifications and why these types of programs don’t meet the standard tax exclusion requirements of IRC 105. The two then close with a discussion of IRS guidance that prohibits these types of tax-free wellness program rewards and a shocking federal indictment of the promoters of the Classic 105 program.
Every other week, NFP's legal experts make the subject of compliance personal for a wide audience. By breaking down the daunting details of emerging policies and bridging the gap between legislation and what it means for the listener, Chase Cannon and Suzanne Spradley make compliance issues relatable and relevant. Visit our Visit our Soundcloud page every two weeks for the most up-to-date episode.
The ACA requires insurers to submit an annual report to HHS accounting for plan costs. If the insurer doesn't meet the medical loss ratio standards, they must provide rebates to policyholders. Rebates must be distributed to employer plan sponsors between Aug. 1, 2018, and Sept. 30, 2018. Employers should keep in mind that if they receive a rebate, there are strict guidelines as to how the rebate may be used or distributed.
For more information, please contact your advisor for a copy of "Medical Loss Ratio Rebates: A Guide for Employers" or "Medical Loss Ratio: PPACA's Rules on Rebates."