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CCH® BENEFITS — 01/12/10

Employers Take Note: Employers Must Report Costs, FSA Distributions Limited To Prescribed Drugs In Health Reform

from Spencer’s Benefits Reports: As the House and the Senate discuss their differing health reform proposals, Spencer’s Benefits Reports continues a series examining health reform provisions that would affect employer-sponsored health plans and would take effect soon after enactment of any legislation.

This series will look at features of the legislation already passed in the House (H.R. 3962) and the Senate (H.R. 3590). These features are likely to survive in health reform legislation and will directly affect employers. Today, an employer requirement to report health care costs and a distribution limitation on flexible spending arrangements (FSAs) are discussed.

Health Care Cost Determinations

H.R. 3590: Sec. 9002 would require employers to identify and report the annual cost of employer-sponsored health care coverage. This cost, which excludes salary reduction amounts in an FSA, would be included on an annual W-2 form and would be determined using the cost calculation methods for COBRA continuation of coverage under IRC Sec. 4980B(f)(4).

This provision would be effective for taxable years beginning after Dec. 31, 2010.

H.R. 3962: There is no similar provision in the House bill.

Distributions Restricted To Prescribed Drugs, Insulin

H.R. 3590: Sec. 9003 would limit distributions to prescribed drugs and insulin from health savings accounts under IRC Sec. 223, medical savings accounts under IRC Sec. 220, and FSAs and health reimbursement arrangements under IRC Sec. 106. Existing law also allows reimbursements for over-the-counter medications.

This provision would be effective for taxable years beginning after Dec. 31, 2010.

H.R. 3962: Sec. 531 contains the same limits and the same effective date as the Senate provision.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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