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Health Care Reform/Cafeteria Plan Amendments Required by December 31, 2010

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Sherry A. Stein
Foster Swift Employment, Labor & Benefits Quarterly
Summer 2010

The Patient Protection and Affordability Care Act as amended made several changes to cafeteria plans. In most cases, these changes will require the adoption of an amendment to the cafeteria plan by December 31, 2010. These changes are summarized below.

Health Care Reform/Summary of Cafeteria Plan Changes

Title Summary Effective Date
Exclusion from gross income of employer-provided health coverage for employee's child An employee's gross income does not include the value of health coverage for the employee's child who has not reached age 27 at any time during the taxable year.   The child is not required to be a "dependent" for the exclusion to apply, and therefore does not have to meet the residency, support and other tests for a "dependent". March 30, 2010
Mid-year change in status election Employees may amend a salary reduction election to make pretax contributions for health benefits (including health insurance premiums and health FSA benefits) for children under age 27 if the cafeteria plan is amended by December 31, 2010. March 30, 2010
Dependent health coverage until child reaches age 26 Group health plans that offer dependent coverage must provide coverage for a dependent child until age 26, regardless of student or marital status. Plan years beginning after September 23, 2010
Over-the-counter drugs are not eligible medical expenses Over-the-counter drugs are not eligible for reimbursement through a health FSA or HRA. Tax years beginning after December 31, 2010 (i.e., January 1, 2011 for calendar year taxpayers)
New limits on health FSA contributions Pretax contributions to a health flexible spending account under a cafeteria plan will be limited to $2,500 per year.  The amount will be indexed for inflation after 2013. Tax years beginning after December 31, 2012 (January 1, 2013 for calendar year taxpayers)

Please contact your Foster Swift employee benefits counsel if you have any questions regarding these changes.