News & Events
News & Events - What's Happening at Peak1
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August 18th, 2014

EMPLOYER ALERT: Individual Medical Policy Arrangements May Result in Significant Excise Tax Liability

The Employers Council on Flexible Compensation (ECFC) is an industry association made up of leading cafeteria and related benefit plan service providers and plan sponsors. In the aftermath of agency guidance (outlined below), ECFC has received numerous inquiries from employer plan sponsors and member companies as to whether employers can make available individual major medical coverage to employees on a tax-free basis as part of an employer-sponsored arrangement. This practice may have significant adverse tax consequences for employer plan sponsors. This Employer Alert Bulletin is intended to direct employers (and their counsel) to authoritative guidance on the issue.

As recently reported in ECFC’s article titled “Agency Guidance Prohibits Pre-Tax Funding of Individual Medical Coverage For Active Employees” (linked here and attached as Appendix A) (the “ECFC Article”), the Department of Treasury and the Department of Labor (DOL) issued guidance that affects employers’ ability to pay for individual market (IM) policies, (i.e., major medical coverage that is subject to the Affordable Care Act (ACA))1 through a cafeteria plan (the “Agency Guidance”).

The ECFC Article provides that IRS Notice 2013-54 and related sub-regulatory guidance make it clear that a violation of the ACA would arise (resulting in the imposition of an excise tax against employers) due to any pre-tax funding of individual major medical (IM) coverage for active employees through a cafeteria plan. The Agency Guidance clearly provides that an employer’s payment (or reimbursement) of IM premiums for employees violates the ACA and may result in a $100 per employee per day excise tax.

Beware of Entities Promoting Pre-Tax Arrangements to Reimburse or Pay for Individual Health Coverage

Despite the Agency Guidance, ECFC has continued to receive numerous inquiries based on the alleged position of some in the industry that the pre-tax payment of IM coverage premiums by an employer through a cafeteria plan remains a viable benefit option. One of the vendors’ primary assertions is that payment of IM policy premiums through a cafeteria plan is not prohibited by the Agency Guidance because the cafeteria plan is not a group health plan subject to the ACA. 

We agree that the payment of IM policy premiums is a permissible cafeteria plan qualified benefit and that the provision of such coverage through the cafeteria plan continues to be exempt from income and employment tax under the Internal Revenue Code. We also agree that a cafeteria plan, in and of itself, is not a group health plan subject to the ACA. However, the Agency Guidance clearly states that any arrangement, which pays or reimburses an employee’s IM policy premiums on a pre- tax basis would be an “employer payment plan,” which the Agency Guidance clearly indicates is a “group health plan” subject to the ACA. The Agency Guidance is also clear that an employer payment plan violates the ACA and employers who sponsor such arrangements would be subject to a potential excise tax of $100 per employee per day. See the ECFC Article–Practice Pointer on page 2, the second entry in the table on page 3, and Section IV.A. on pages 9-12–for a complete discussion.

1 For purposes of this discussion, IM coverage includes both private IM coverage and IM coverage that is a qualified health plan offered through a government exchange established pursuant to the ACA. IM coverage does NOT include excepted benefit coverage (e.g., accident, vision, dental, and certain specified disease and hospital indemnity plans).

What to Do?

The general information and discussion above is provided to assist employers and their counsel and agents/brokers to analyze compliance issues related to the potential impact of IRS Notice 2013-54 on employer pre-tax funding of individual major medical health coverage and does not constitute legal, financial, or tax advice.

Employers who are considering implementing an arrangement involving pre-tax funding of IM coverage for active employees (through a cafeteria plan or otherwise) should consider the following actions:

  • Seek the advice of independent legal counsel to determine the application of IRS Notice 2013-54 to the employer’s specific circumstances.
  • Request a binding legal opinion from the vendor stating that no adverse tax (including excise tax) or financial consequences will result from adoption of such an arrangement.
  • Request that the vendor provide indemnification for any excise taxes imposed as a result of the pre-tax funding of IM coverage.

Practice Pointer: Indemnification that covers only a finding that the arrangement is impermissible is likely insufficient. As noted above and in the ECFC Article, neither payment of IM Coverage premiums through a cafeteria plan nor establishment of an employer payment plan is illegal. However, the failure of the employer payment plan to comply with the ACA’s market reform requirements will result in significant excise tax liability (up to $100 per employee per day or $36,500 per employee per year).

June 10th, 2014

COBRA and Exchange Rules Clarified

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires covered employers to provide employees and dependents who lose group health benefits with an opportunity to continue their coverage. Individuals who are eligible for health coverage under COBRA are known as “qualified beneficiaries.”

Since Jan. 1, 2014, the health insurance Exchanges established under the Affordable Care Act (ACA) have become an alternative for uninsured individuals seeking health coverage outside of group health plans.

Recently, the Departments of Labor (DOL) and Health and Human Services (HHS) released guidance addressing the impact of COBRA coverage on eligibility for coverage and subsidies through an Exchange.

On April 21, 2014, HHS issued a list of Frequently Asked Questions (FAQ) clarifying the situations in which a COBRA qualified beneficiary may enroll in a

qualified health plan (QHP) through an Exchange and receive subsidies. In general, individuals can voluntarily drop COBRA coverage and enroll in a QHP (and possibly qualify for a subsidy) only during the Exchange’s open enrollment period. Otherwise, they must wait until COBRA coverage expires.

However, on May 2, 2014, HHS issued a bulletin providing an Exchange special enrollment period for certain individuals eligible for or enrolled in COBRA. HHS deemed this necessary because the model COBRA notices may not have provided sufficient information about Exchange options and enrollment periods.

Under this special enrollment period, COBRA qualified beneficiaries may enroll in a QHP through a federal Exchange through July 1, 2014.

State-based Exchanges are encouraged, but not required, to adopt similar special enrollment periods.

June 4th, 2014


IRS Releases Revised Form 720

The IRS has issued a revised Form 720 and instructions for filing the PCOR fees by July 31, 2014. Filers will enter covered-lives counts and applicable rates ($1 for plan years ending before Oct. 1, 2013; $2 for plan years ending on or after Oct. 1, 2013) in Part II of Form 720 (line 133) to calculate the amount owed.

Instructions include a table for use by filers with plans or policies subject to both the $1 and $2 applicable rates. Though Form 720 is generally used for quarterly excise taxes, PCOR filers remit that fee annually - by July 31 - and complete only line 133 (unless also submitting excise taxes).

Under the Affordable Care Act, the PCOR fee applies to each plan or policy year that ends after Sept. 30, 2012, and before Oct. 1, 2019.

Link to a copy of Form 720

Link to instructions to Form 720


April 23rd, 2014

IRS bumps up health savings account contribution max for 2015

By: Jerry Geisel

The maximum contributions that can be made to health savings accounts will increase $50 for individuals and $100 for families in 2015.

The Internal Revenue Service announced Wednesday that the maximum contribution that can be made to an HSA in 2015 will be $3,350 for employees with single coverage, up from $3,300 this year.

The maximum HSA contribution for those with family coverage will be $6,650, up from $6,550.

The maximum out-of-pocket employee expense, including deductibles, will rise next year to $6,450 for single coverage from $6,350. For family coverage, it will increase to $12,900 from $12,700.

Increases in the HSA limits, which are detailed in Revenue Procedure 2014-30, are tied to changes in the cost of living.

February 10, 2014

White House Delays Health Insurance Mandate for Medium-Sized Employers until 2016 

According to the Washington Post, "The Obama administration announced Monday it would give medium-sized employers an extra year, until 2016, before they must offer health insurance to their full-time workers."

Firms with at least 100 employees will have to start offering this coverage in 2015.

By offering an unexpected grace period to businesses with between 50 and 99 employees, administration officials are hoping to defuse another potential controversy involving the 2010 health-care law, which has become central to Republicans' campaign to make political gains in this year's midterm election. 

To continue reading click here.

November 19th, 2013

Enhanced HSA Investment Offerings

After careful research and analysis, Peak1’s HSA investment team made the decision to add several options to our list of available investments. 

Click to read more

November 12th, 2013

2014 Qualified Transportation Fringe Benefits Update

On Monday, November 4, 2013, the Internal Revenue Service announced new monthly limits on the value of qualified transportation fringe benefits that an employer can provide its employees without being included in taxable income. For 2014, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits is $250 (a $5 increase from the 2013 limit of $245). The combined monthly limit for transit passes and vanpooling expenses for 2014 is $130 (a $115 decrease from the 2013 limit).

Click to read more

November 4th, 2013

IRS Announces Other Benefit Limitations for 2014 

Last week, the Internal Revenue Service announced  in Revenue Procedure 2013-35  the annual inflation adjustments for more than 40 tax provisions for 2014, including the tax rate schedules, and other tax changes. This Revenue Procedure provides details about these annual adjustments. 

Click to read more

October 31st, 2013

Exciting News!  Earlier today the U.S. Department of the Treasury and the IRS issued a notice modifying the longstanding "use it or lose it" rule for health flexible spending accounts (FSAs). 

Effective today, employers are able to amend their plan documents and provide an option for either a grace period or allow employees to roll over up to $500 of unused FSA funds at the end of the 2013 plan year and for plan years going forward.

We will be releasing more details soon.

Click to read more

October 31st, 2013

Recent Guidance on the Impact of Health Reform on Cafeteria Plans

On September 13, 2013, the Internal Revenue Service (IRS) issued Notice 2013-54 and the Department of Labor (DOL) issued Technical Release 2013-03. The two pieces of guidance are substantially identical and address many previously unanswered questions regarding how market reform and other provisions of the Affordable Care Act (Act) apply to health reimbursement arrangements (HRAs), including HRAs integrated with group health plans; health flexible spending arrangements (health FSAs); and employee assistance programs (EAPs). 

Click to read more

September 24th, 2013

Peak1 Mobile App: Important Announcement and Update to Version 4.0

Simplifying the business of healthcare, that’s exactly what you are doing when you use the Peak1 Mobile App. The app has been updated and version 4.0 is available for download beginning the week of September 30.

Click to read more

Download iPhone app

Download Android app

September 16th, 2013

HRAs, Health FSAs and Other Healthcare Arrangement Options under the Affordable Care Act

On Friday, September 13, the Departments of Labor, Treasury and Health and Human Services provided guidance on the application of certain provisions of the Affordable Care Act (Act) on health reimbursement arrangements (HRAs), certain health flexible spending arrangements (Health FSAs) and employee assistance programs (EAPs).  

Click to read more

August 19th, 2013

IRS launches Affordable Care Act (ACA) information website

The Internal Revenue Service has launched a new website where employers and employees can obtain information about the responsibilities they will face under the Affordable Care Act. The new website includes a variety of resources designed to help answer some of the many questions about the new health care law. Included are topics for individuals and families, employers, organizations and more. 

To view the website, click here.

July 3rd, 2013

U.S. to delay healthcare employer mandate to 2015

The U.S. administration said late Tuesday it will not require employers to provide health insurance for their workers until 2015, in a move that delays a key provision of President Barack Obama's healthcare reform law by a year. 

According to a Bloomberg report, "The delay, will give the Administration additional time to revise and simplify employer reporting requirements associated with the mandate and will provide businesses more time to adapt their health care coverage. The delay of the employer mandate does not affect implementation of the individual mandate. That most large employers already offer coverage and those with fewer than 50 employees were exempt likely factored into the Administration’s decision."

To read the entire article, click here.

June 6th, 2013

Form 720 is available

The IRS recently imposed a new tax on HRAs that will affect the fees of all HRA participants. The updated Form 720 that is required to pay the new tax has now been modified to reflect the changes.  As a recap, please read the following and see how it may affect you.

Click to read more

June 3rd, 2013

Participant Portal Demonstration Now Online

In an effort to help our participants navigate the consumer portal, we have included a series of helpful demonstrations to our video tutorial section. This demo will allow participants to view a tutorial on all of the most popular and useful options within the portal. Take a look for yourself by clicking here.

May 16th, 2013

Is this the end of "Use it or Lose it"?

The "Use it or Lose it" rule that forfeits unused money from FSA accounts has been discussed for years. The rule was one of the major reasons that some people decided against using Flexible Spending Accounts as a way to help fight the rising costs of healthcare. This rule has been in the news lately and it appears that this may be the end of the rule. 

The following is from our partners with the ECFC: 

"Late yesterday, Senator Ben Cardin (D-MD) along with Senator Mike Enzi (R-WY) introduced S. 966, the Medical FSA Improvement Act, to eliminate the use-or-lose rule by allowing individuals to cash-out unused flexible spending arrangement (FSA) balances with the amounts treated as taxable income."

We will keep you updated as we learn more about these possible changes.

May 14th, 2013

Is a Consumer-Driven Health Plan right for you?

CDHPs offer many benefits to consumers, the biggest being a way to save money in a time of rising healthcare costs. Take a look at the video and see if CDHPs can help you save money. Click here to learn more.

May 2nd, 2013

Peak1 Administration is proud to announce that we have joined ECFC. The Employers Council on Flexible Compensation is a group "dedicated to the advocacy, education, advancement, and innovation of tax-advantaged benefit programs that facilitate choice for employers and their employees."

We feel that the partnership will allow us to do our part to help shape government policies and regulations that support tax-advantaged benefits like the solutions we offer at Peak1.

February 11th, 2013

FAQs about Affordable Care Act Implementation: HRA

On January 24th, 2013 new FAQs were released to help better understand some of the changes with health care reform.  Health and Human Services (HHS), Department of Labor (DOL) and the Treasury department were part of creating this document. 

One major question was the wording that said “integrated” HRA.  The FAQs defined an “integrated” HRA as an “HRA that is available only to employees who are covered by primary group health plan coverage provided by the employer and meeting the requirements of Public Health Service (PHS) Act section 2711.” This section of the PHS Act generally prohibits plans and issuers from imposing lifetime or annual limits on the dollar value of essential health benefits.

Click to read more

February 5th, 2013

Peak1 Mobile App Continues to Grow in Popularity


Over the past few months we have noticed a substantial growth in the use and downloads of our Peak1 mobile app.  We have received great feedback about this app and users are starting to see how it can make things easier for them.

The app is available for both iPhone and Android and has proven to be a convenient way for users to check balances of their account based plans (HRA, HSA and FSA).  Participants can also check their claim history and even take a picture of their receipts for faster claim processing!  Here are more details about the app:


Designed to work just as other apps, making it easy to learn and use


  • Check available balances 24/7
  • View account activity for your accounts
  • Drill into claim transactions for your HRA and FSA accounts


  • View claims requiring receipts
  • Take a picture of a receipt and submit for a claim


No sensitive account information is ever stored on your mobile device and secure encryption is used to protect all transmissions


  • Mobile File A Claim— Enables you to submit a new FSA or HRA claim from your Mobile app at any time, and to add a receipt at the same time a claim is being filed. 
  • HSA Transaction Details—Enables you to drill into details of your HSA transactions. The specific HSA information displayed includes details of cash account activity, and participant and employer contributions. 
  • Enhanced Login (Passcode) —Allows you to login to your Lighthouse1 Mobile App with a convenient 4-digit passcode.   For added security, no login information is ever stored on your mobile device. 

To download, please visit the following sites:

iPhone: Apple Store

Android: Google Play

January 31st, 2013

IRS Imposes New Tax on HRAs

With the implementation of the Patient Protection and Affordable Care Act (PPACA), a new fee has been announced for sponsors and issuers of individual and group policies, called the Patient-Centered Outcomes Research Institute (PCORI) fee.  This fee was developed to support research on clinical effectiveness.  IRS Bulletin 2012-19 explains that this fee is to be paid by the issuer of fully insured group health plans (the insurer) and sponsors of applicable self-insured group health plans (the employer), including HRAs.

Click to read more

January 14th, 2013

Transit and Parking Benefits Get a Cost of Living Increase for 2013

On Friday, January 11, 2013, the Internal Revenue Service announced inflation adjustments for the 2013 tax year, which included items from the recently passed American Taxpayer Relief Act of 2012, which was signed into law last week. The provision to re-instate the parity of transit and parking benefits was included in the inflation adjustment. For 2013, the amount of pre-tax dollars that can be used to pay for Transit and/or Parking Benefits has increased to $245 per month.

Peak1 is making changes to the monthly maximums set in the debit card and Lighthouse1 administration platforms to accommodate the changes. The IRS monthly maximum reimbursement for parking and mass transit plans will be increased to $245 with an effective date of 01/01/2013. The monthly maximums for 2012 will not be changed. Any claims submitted for reimbursement with dates of service in 2012 will be subject to a $240 monthly maximum reimbursement. These changes will be in place on Monday, January 14, 2013.

Any claims entered after this change has been made in your database will be subject to the new monthly maximum. Please contact Peak1 if you have any additional questions.