HSA Changes and Disability Deadline: Are You Prepared?

4 min

The 2018 HSA Family Contribution Limit Has Been Decreased

On March 5, 2018, the Internal Revenue Service (IRS) reduced the amount that individuals with family medical coverage can contribute to a health savings account (HSA) by $50—from $6,900 to $6,850. The reduction is effective immediately. Although the reduction is not large, it is likely to create administrative complications. Several members of Congress recently sent a letter to the Treasury Secretary requesting that the lower limit not be enforced in 2018, arguing that the IRS announced the higher limit in May 2017, and employees and employers had set their 2018 HSA contributions accordingly.

In response to this unsettled situation, employers could take a wait-and-see approach in the hope that the IRS will agree to delay enforcement. However, employers should not wait too long to communicate the reduction, in order to allow employees to change their HSA contribution elections or, for those employees who have already contributed $6,900 to their HSA, to request a refund of the excess contribution in order to be in compliance with the new limit. If enforcement is not delayed and no refund is issued by April 15, 2019, the excess will be subject to an excise tax. The refund is taxable.

The change in the HSA contribution limit is a result of the Tax Cut and Jobs Act that was passed at the end of 2017 and revised the way in which various tax-related limits are adjusted for inflation. The other HSA-related limits for 2018 remain unchanged.

Updated Disability Claims Procedure

Many employer-sponsored disability plans must update their claims and appeals procedure, effective for claims filed after April 1, 2018. The updates are required for disability plans subject to the Employee Retirement Income Security Act (ERISA)—including most private employers' long-term disability plans and their short-term disability plans that are insured or paid through a trust. The updates generally are not required for disability plans required by state law or for salary continuation arrangements that constitute employer "payroll practices." In addition, other ERISA plans that vest or pay out upon a finding of disability—such as retirement plans and deferred compensation plans—may also need to update their claims procedure.

In December 2016, the Department of Labor published a final rule (the "Rule"), amending the claims procedure applicable to disability determinations by ERISA plans. The Rule was scheduled to take effect on January 1, 2018, but the effective date was deferred.

The Rule was intended to provide more transparency in the claims process and includes the following key changes:

  • A rescission of coverage is considered a denial.
  • At both the claim and appeal levels, benefit denial notices must thoroughly disclose the reasons and criteria used in making the decision. In particular, the notice must explain the basis for disagreeing with or not following the views presented (if any) by the claimant's treating physician, other experts who evaluated the claimant, medical or vocational experts consulted by the Plan, and any disability determination from the Social Security Administration.
  • At both the claim and appeal levels, individuals involved in adjudication must be impartial and independent (for example, compensation cannot be based on the amount or number of denied claims).
  • Before denying an appeal, the Plan must give the claimant a reasonable opportunity to review and respond to any new evidence or new rationale. Appeal denial notices must explain any limits the Plan imposes on the claimant's right to bring a lawsuit seeking benefits related to the claim.
  • The Plan must provide its claim and appeal denial notices in a "culturally and linguistically appropriate manner." If the claimant is located in a county where at least 10% of the population is literate only in the same non-English language (the current list of counties is available here), the Plan must take all of the following steps: (1) On notices provided in English, the Plan must prominently display a notice, in that non-English language, explaining how to access the Plan's language services. (2) Upon request, the Plan must provide the notice in the non-English language. (3) The Plan must provide claims assistance (including a telephone customer assistance hotline) in that non-English language.

In addition to increasing transparency, the Rule increases the negative consequences for plans that fail to comply with the claims procedure requirements. If a plan "fails to strictly adhere" to the claims requirements (with some modest exceptions), the claimant is deemed to have exhausted his or her administrative remedies and may proceed to litigation.

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If you have questions or concerns regarding this client alert, please contact the authors, any member of Venable's Employee Benefits Practice Group, or your regular Venable lawyer.