Human Resources On-Demand Health Benefits Implementing Health Savings Accounts James G. O’Sullivan...

Human Resources On-Demand

Health Benefits

Implementing Health Savings Accounts

James G. O’Sullivan

Senior HR Professional

March 2008

© 2005 IBM Corporation

Discussion Points

IBM Landscape

Implementation Challenges & Remedies– ERISA

– File Feeds

– The Address Issue

– Calibrating Among Five

– Managing Contributions & Unopened Accounts

– Communications

– Coordination with Health Care Spending Accounts

Current Challenges

Future Interests

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Health Benefits Implementing Health Savings Accounts © 2005 IBM Corporation

IBM Landscape - General

To Be Shared at the Conference

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Initial Implementation Challenges & Remedies

E R I S A

Challenge - Determine if your H S A will be an ERISA Plan ?– Some considerations

– HIPPA and COBRA rules apply to ERISA Plans

– Fiduciary Responsibility around financial testing required by ERISA

Remedies– We decided Not to offer the H S A Component as an ERISA Plan

– Offering an H S A through a Cafeteria Plan has advantages

– Allows flexibility over comparability rules governing contributions (e.g., May not require retroactive employer contributions for those who join late)

– Allows matching employer contributions

– Allows offering of incentives for Disease mgt., Wellness, and Completion of Health Risk Appraisals as employer contributions

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File Feeds

Challenges– Needed to Implement a process to Accept Trustee Account Numbers for

employer & employee contributions

– Needed to Implement a banking file to support contributions

– We Needed our IBM Business Controls team to conduct an Application Systems Control and Audibility Review of both the employer and employee payroll contribution processes to validate them

– Some Trustees had different protocols for opening accounts

Remedies– Has Trustees key off the existing eligibility files to establish accounts

– Used established transmission protocols (e.g., ACH for banking transactions)

– Worked closely with Plans, Trustees, Fidelity, Fidelity Payroll, Business Controls and I/T

– Required lots of flexibility of ALL partners to meet deadlines

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Address Issue

Challenge

– Some H S A Trustees would not accept P. O. Boxes as legitimate

addresses to open an account based on their interpretation of the

Patriot Act

Remedy

– Record two addresses (Full Street & P. O. Box Addresses)

– Sent both addresses to the Trustee

– Mailed correspondence to the member’s preferred address

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State Tax Exemptions

Challenge

– Some states (e.g., Pennsylvania) would not exempt H S A

Contributions or qualified expense withdrawals from State Income Tax

– Timing was bad as we first learned of the issue during 2005 open

enrollment, after many had made elections

Remedies

– Gave people the opportunity to opt out of the plan

– Addressed the issue and other nuances in an Informational Document

we developed in lieu of a Summary Plan Description

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Calibrating Five Administrators & Trustees

Challenge

– Getting all five plans to work the same way

Remedies– Placed emphasis on communicating with all five plans simultaneously

– Hosted weekly joint calls with all five

– Maintained & Published an anonymous Q & A document that was updated weekly

– Allowed for some nuances among plans (e.g., Account Openings)

– Negotiated simultaneously with all five on many process elements

– Continuous Perseverance

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Managing Contributions & Un-open Accounts

Challenges– Many PPO H S A enrollees did not open their accounts in timely fashion

– Some plans required a wet signature to open accounts while others did not

– We do not administer retroactive contributions

Remedies– Trustees sent Welcome Kits and two follow-up letters as planned

– Asked Trustees to make telephone calls to those with Un-open Accounts

– Followed with final communication from IBM

– Most plans migrated toward an electronic signature Account Opening process

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Communications

Challenges– Communicate effectively with five administrators and their trustees

– New Benefit Structure with no set precedents

– The Evolution of information and guidance from the IRS and Treasury teams

– The Need to accurately depict information to employees and retirees

Remedies– Kept close to issues via Consultants and our Legal team

– Sent clarifying communication during AE as information evolved

– Developed & Published an H S A Participant Information Document in lieu of ERISA SPD

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Initial Implementation Challenges & RemediesCommunications - continued We spelled it out for members in an H S A Information Document

– Told them H S As are new and continue to evolve, participants are responsible for understanding the rules and following them, and we recommend you contact a tax advisor for more specific information

– Told them H S As cover Qualified Medical Expenses as defined by the IRS and a list of qualified expenses can be found at http://www.irs.gov/pub/irs-pdf/p502.pdf

– Reminded them that all financial instruments contain some inherent degree of risk and that they are assuming that risk

– Informed them the Trustee may charge Ad Hoc fees for certain services, and to contact the Trustee for details. This information was also published in Trustee Welcome Kits.

– Informed them how Employer Contributions would be administered

– Covered what happens to outstanding balances on death of a participant

– Told them Other coverage such as HCSA is not permitted

– Informed them State Income Tax treatments may vary by state

– Highlighted the Portability aspect

– Spoke to the P.O. Box Issue

– Told them where to find additional info and gave them Treasury URL

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http://www.irs.gov/pub/irs-pdf/p502.pdf


Coordination with Health Care Spending Accounts

Challenges– 2006 IRS/Treasury Allowed One-time Exception to enable people

crossing over into H S As with HCSAs to contribute up to the full annual

contribution amount If they had exhausted their HCSA balance at YE

– 2007 IRS/Treasury made this a permanent option

Remedies

– 2006: Allowed for the exception and covered in AE communications

– 2007: Allowed again

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Current Challenges

Challenges

– Keeping up with the Regulation Changes and dealing with their timing

– December 20, 2006 Reg changes came after our AE Cycle closed

– Guidance documentation came out Mid- February 2007

Remedies

– Delayed implementation of new features to a later time

– E.G. One time Roll-over of HCSA balance to HS A

– Working to implement with our 2008 AE Cycle

– Communicate with members as changes occur or as we seek to implement new features

– Provided feedback to IRS & Treasury on the timing impacts through the National Business Group on Health and other solicitation channels

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Future Interests

Implement One-time Rollover Option to allow HCSA (FSA) members

migrating into H S A to Rollover unused HCSA funds

Implement a preventive drug benefit

See a higher level of employee contributions and savings in H S As

See our Health Plan partners provide more cost and quality

information to members so they can make more informed decision re:

their care

Realize more of the financial benefits of Health Care Consumerism

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