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Employers

Employer Bulletin

State Agencies
Vol. 19, State C
February 19, 2002

Employee Reimbursement Account (ERA) Program Procedures for Change in Status, Leave of Absence, and Termination

Employee Reimbursement Accounts (ERA) Program elections can be changed during the plan year only if an employee experiences a qualified change in status (CIS) event as required by Internal Revenue Service (IRS). To make the process easier and less confusing for employees and employers, a new Change in Status Form has been developed. This Employer Bulletin reviews the change in status procedures, including procedures to follow when an employee goes on a leave of absence or terminates employment.

CHANGE IN STATUS REQUEST:

Employees are responsible for initiating a change in status request within 30 days after the event occurs. Change in status requests may not be submitted before the event occurs and may only be made on a future basis. Before filing a CIS form, employees should review the 'Change in Status' section of the ERA Enrollment booklet to determine if a valid change in status event has occurred. However, experiencing a change in status event does not automatically permit a mid-plan year election change. The requested change must also be on account of and correspond with the event.

All questions about the eligibility of a requested change or completing the form should be directed to Bill Aye at Fringe Benefits Management Company's Madison office or FBMC Customer Service before completing the form (refer to the contact numbers at the end of this article). The attached chart illustrates common CIS events and may help employees determine whether a CIS event has occurred. This chart is available on the ETF Internet site at etf.wi.gov.

Completing the Change in Status Form:

  1. Employee Information: The employee will complete all requested information.
  2. Qualified Change Events: The employee will check the box for the event the change request is based on and include the date the event occurred. If more than one qualifying event has occurred (i.e. birth of baby and unpaid leave of absence), check and date all that apply. The employee should retain a copy of documentation supporting the mid-plan year election change request, but it does not need to be submitted with the request. Examples of documentation are marriage licenses, divorce decrees, birth certificates, etc.
  3. Type of Change Requested: Check only the account(s) that is to be started, changed, or terminated. Depending on the circumstances of the event, an employee may change, start, or terminate one or both accounts. For instance, an employee who divorces may wish to terminate a dependent care account, because the employee no longer has custody of the child, but make no change to the medical expense account because the employee still has qualifying medical expenses.
  4. Calculate Your New Per Paycheck Deductions: To help the employee complete this section, the employee may obtain current personal ERA account information from FBMC using the numbers listed at the end of this article or through FBMC's Customer Service site on the Internet. (Log onto http://www.fbmc-benefits.com and click on the "Customers" link.)
    1. Current Total Annual Contribution (if applicable): This is the amount the employee originally elected to contribute this plan year. If the employee does not currently participate, this line will be blank.
    2. New Total Annual Contribution: This is the new annual amount the employee wishes to contribute this plan year.
    3. Amount Contributed Thus Far (if applicable):  This is the amount the employee has already contributed this plan year. It is the current per paycheck amount multiplied by the number of paychecks with deductions that the employee has received this plan year. When determining how much has been contributed, be sure to include contributions that may already be deducted on an upcoming paycheck, but not yet posted to the account.
    4. Amount Needed to Meet New Annual Goal (B. minus C.): This is the amount that needs to be contributed for the remainder of the plan year in order to reach the new annual goal.
    5. Number of Paychecks from which deductions to be taken:  Most often this is the number of available paychecks left in the plan year. Employees may also choose to complete the annual contributions with less than the number of pay periods remaining. Employees may need information from the employer to correctly determine the number of paychecks remaining in the plan year and the deadline for submitting the form to have it effective on the desired date.
    6. New Per Paycheck Deduction Amount (D divided by E):   This is the amount that will be deducted from the employee's paycheck for the specified account for the remainder of the plan year.
  5. Tax Filing Status: This is necessary for Dependent Care Accounts only. The maximum allowable contribution is based on the tax filing status.
  6. Sign and date the form. The employee must mail or fax the completed form to FBMC's Madison office for authorization and processing.
  7. To Be Completed by FBMC's Madison, Wisconsin Office: FBMC will review, on a uniform and consistent basis, the facts and circumstances of each properly completed and timely Change In Status Request Form. Employers will receive a copy of the CIS form from the Madison FBMC office after it is approved/denied. A copy will also be sent to FBMC's Florida office to be processed. The effective date of the change will be the date of the first paycheck that reflects the change. Do not start deductions until the change request has been approved by the Madison FBMC office.

UNPAID LEAVE OF ABSENCE:

Employees who wish to continue ERA coverage during an unpaid leave of absence have several options.

  1. Prepay: Employees may make pre-tax contributions from their paycheck(s) before the leave begins. The employee' coverage will remain in force during the leave period and claims for reimburse-ment may be submitted during the leave for as long as there is paid up coverage.
  2. Employer Action: Deduct the total amount of contributions that will be missed from the employee's final paycheck. If that amount is too large to be taken from the final paycheck, it may be spread out over the last several paychecks if the employee knows of the impending unpaid leave far enough in advance. The deductions must be taken in multiples of the current per paycheck deduction amount.
  3. Pay-as-you-go: Employees may make after-tax contributions through the employer. The employee's coverage remains in force during their leave period and claims for reimbursement may be submitted during the leave period for as long as there is paid-up coverage.
  4. Employer Action: Collect the contributions from the employee. This may be done on a per paycheck basis, or may be collected for several pay periods in advance in multiples of the current per paycheck amount. On the ERA Remittance Report (ET-1517), list the employee's name, Social Security number, amount contributed and the payroll periods for which contributions are being remitted in the 'adjustments' section. FAX the ERA Remittance Report to FBMC Consolidated Billing using the number listed at the end of this article. FBMC will then post the contributions to the employee's account.
  5. File a Change in Status Form. Employees may file a Change in Status (CIS) Form to change or terminate their account to reflect changing needs as a result of the leave. Employees must complete the Change in Status Form and send it to FBMC's Madison office within 30 days after going on and/or coming back from an unpaid leave. The effective date of the change will be the date of the first paycheck that reflects the change.
  6. Employees who are going on an unpaid leave may:
    1. Terminate ERA coverage. If the employee files a CIS form electing to terminate coverage, coverage will cease at the end of the pay period following the last pay period from which ERA deductions were taken. Any claims incurred after the coverage end date will not be reimbursable and any money left in the account after all eligible claims have been reimbursed will be forfeited.
    2. Reduce the annual election amount. An employee may reduce the amount and either pay the remainder through a deduction from the last paycheck before leave begins, or pay the employer out-of-pocket during the leave. The out-of-pocket payment may either be in a lump sum or coincide with pay periods.

7. Employees returning from an unpaid leave may:

    1. Reinstate ERA coverage. Employees who revoked ERA coverage when they went on an unpaid leave, or failed to make contributions during their leave may choose to reinstate coverage upon return to work. The employee must file a CIS form electing a coverage amount for the remainder of the year within 30 days after return to work. Any claims that were incurred during the unpaid leave will not be reimbursable.
    2. Change the annual election amount. Employees who continued coverage while on leave may file a CIS form to change the annual amount for the remainder of the plan year.

Employer Action: Advise the employee of the CIS option and assist those who choose to file with determining pay dates, payroll cutoff dates, etc. Do not make a change to the employee's payroll deduction amount until you receive approval of the CIS request from FBMC.

Make Up Missed Deductions: If an employee does not prepay, make out-of-pocket contributions while they are on leave, or file a Change in Status Form when going on unpaid leave, coverage will cease at the end of the pay period following the last pay period from which ERA deductions were taken. Claims incurred while on unpaid leave will not be eligible for reimbursement. However, in limited situations, such as when an employee goes on an unexpected unpaid leave of short duration or a deduction is inadvertently missed, the missed deductions may be made up upon return to work to restore coverage. Up to four biweekly or two monthly payroll deductions may be made up. After the missed contributions have been made up, claims that were incurred during the employee's leave will be reimbursable.

If more than four biweekly or two monthly deductions are missed, coverage for the period that was missed may not be restored. However, an employee returning from an unpaid leave may enroll for coverage for the remainder of the plan year by filing a Change in Status Form within 30 days of their return. The employee's new period of coverage will begin on the date that the new deduction amount is first taken from their paycheck. Claims will not be reimbursable for the period of time that deductions were missed.

Employer Action: If you know that a payroll deduction has been missed, indicate the employee's name, Social Security number, etc. and the circumstances that precipitated the missed contribution (unpaid leave, "short" paycheck, termination) etc., and send it to FBMC Consolidated Billing department, along with your ERA Remittance Report (ET-1516). If information about missed deductions is not included with the remittance report, FBMC will create an "exception" report that lists missed deductions and send it to the payroll processing center for research.

Up to four biweekly or two monthly ERA deductions may be taken from the employee's next paycheck(s) to make up for the missed deductions. No CIS form is necessary if the employee will contribute the full annual election amount by making up all missed deductions. If the amount is too large, the employee may choose to file a Change in Status Form to recalculate the balance due so that it can be divided evenly over the remaining paychecks.

PAID LEAVE OF ABSENCE:

Medical Expense Account: Employees on a paid leave (FMLA or non-FMLA) will continue to have ERA contributions deducted from their paycheck on the same basis as before the leave.

Dependent Care Account: Employees on a paid leave (FMLA or non-FMLA) may file a Change in Status Form to terminate or reduce their dependent care account during their leave. If an employee terminates their dependent care account while on paid leave, they may file a Change in Status Form to re-enroll when they return to work and again have valid child care expenses.

EMPLOYEE TERMINATION:

Medical Expense Account: Employees may choose to continue a medical expense

account after terminating employment either by deducting the remaining contributions for the plan year from their paycheck prior to termination, or by electing COBRA continuation coverage and paying out-of-pocket after-tax contributions directly to ETF.

Employer Action:

  1. If the employee has already contributed the entire amount of his or her annual election, no action is needed. ERA coverage will continue until the end of the current plan year.
  2. If the annual election amount has not been reached at the time of termination of employment, the employee may choose any of the following:
    1. Take multiple deductions from the last paycheck(s) prior to termination. Deductions may either be taken in multiples of their current deduction amount, or the remaining annual amount may be divided to be taken equally over remaining paychecks.
    2. File a Change in Status Form. Termination of employment is a Change in Status event that allows an employee to decrease their election amount. However, Federal regulations do not permit terminating employees to change a medical expense account election to match the amount paid into his or her account and continue to receive reimbursements for the remainder of the coverage period. It is IRS opinion that allowing such a practice violates the principles of "risk-shifting" that must be present in a legitimate medical expense reimbursement account.
    3. File a Continuation Form. If the employee has not contributed the entire annual election amount when employment terminates and does not have the remaining balance taken from his or her paycheck, Federal law requires that medical expense account participants be notified of their right to continue coverage under COBRA for the remainder of the plan year through monthly payment with after-tax dollars. Give the employee a Continuation of ERA Medical Expense Account Coverage form (ET-1518) within 14 days of their termination date. The employee then has up to 60 days to elect continuation of their medical expense account. It is the employee's responsibility to return the form, along with their ERA payment, directly to ETF.

Dependent Care Account: Employees who terminate employment may not continue to contribute to a dependent care account. However, if there is money remaining in the dependent care account, employees may continue to submit claims for eligible expenses until the account is exhausted. For example, an employee may have eligible dependent care expenses if he or she terminated State employment but took another non-State job that requires the use of childcare services.

REHIRED EMPLOYEES:

An employee who terminates State employment but is rehired within 30 days or less in the same plan year will have the same ERA annual election amount as was in effect immediately prior to the separation of service.

An employee who terminates State employment but is rehired more than 30 days after terminating State employment may enroll or re-enroll with a new election for the remainder of the plan year. Coverage will start on the date that the new deduction amount is first taken from the paycheck. Expenses incurred during the separation from State service will not be reimbursable.

Employer Action: If an employee is rehired within 30 days of their termination date, it may be necessary to do a catch-up deduction if a pay period was missed in the interim. The employee will have access to the medical expense reimbursement account balance, up to the full annual limit (reduced by prior reimbursement), for expenses incurred after return to work. An employee who is rehired more than 30 days after termination of employment may enroll as a new hire within 30 days of their new hire date. Give the employee an enrollment form and ERA booklet. The completed form should be returned to the payroll office for processing, then forwarded to FBMC in Tallahassee.

EMPLOYEE TRANSFER (from another State agency):

An employee who changes employment from one State agency* to another within 30 days is considered to be a "transferred" employee. They may not enroll if they do not already participate and may not make any change in their ERA annualized amount(s) if they do participate.

*State agency includes all UW campuses, State governmental agencies and legislative offices, as well as the agencies listed in Wis. Stat. 40.02 (54).

Employer Action: Continue deducting the amount that the employee had from previous employment. If an employee is going from a biweekly payroll to a monthly payroll (or vice versa), recalculate the remaining annual election amount for a monthly deduction, rather than the biweekly amount. Whenever an employee transfers to your agency from another state agency and/or goes from a biweekly payroll to a monthly payroll or vice versa, e-mail FBMC Consolidated Billing department with the employee's name, Social Security number, previous agency, deduction amount, and date of the first deduction from your agency.

Questions about the Employee Reimbursement Accounts program may be directed to Marcia Blumer at (608) 266-2640 or marcia.blumer@etf.state.wi.us. For questions about ERA benefits and processing, contact FBMC. Change in Status (CIS) Forms are available on ETF's Internet site etf.wi.gov, or you may order a supply of forms by calling Bill Aye or FBMC Customer Service.

FRINGE BENEFITS MANAGEMENT COMPANY

P. O. Box 1878
Tallahassee FL 32302-1878
FBMC Customer Service: 1-800-342-8017
E-mail: webcustomerservice@fbmc-benefits.com

FBMC Consolidated Billing (Kim Christie)
Phone: (800) 872-0345
FAX: (850) 425-6220
E-mail: kchristie@fbmc-benefits.com

Bill Aye
7818 Big Sky Drive, Suite 210A
Madison, WI 53719
Phone: (608) 829-0435
FAX: (608) 829-0008
E-mail: baye@fbmc-benefits.com

 

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