How will your company comply with new medical premium rebate requirements, if a rebate is received from its medical insurance provider?

For us, a tricky element was that the rebate only applied to two of the less popular plans that we offered to employees last year, so it only impacted a small number of employees. Giving out rebates was a bit of a data exercise, because we had to figure out the relative contributions from the employees and company, and allocate the refund accordingly.

It wound up being at most a few hundred dollars per employee, and that had to be taxed, though payroll, because the rebate is a refund of pre-tax money.

The pre-tax to tax issue is one of the tricky ones I was thinking of. Thanks for your comment.

I just finished this exercise yesterday. Although we only had 30 plan participants last year, it took about 4 hours to massage the data and calculate employee rebates ranging from $0.62 to $230. The company pays approximately 80% of employee premiums.

We offer two health plan options with a mid-year renewal, so I essentially had to take four plans into account and then filter out premiums paid for dental and vision because that isn't part of the ACA.

There is an allowance for employers to not distribute funds to former employees if the cost of distribution exceeds the distribution amount, but if you don't rebate them then you have to redistribute those funds among the participants who are receiving rebates.

Very helpful. Thanks.

We have not received any rebates yet, so I can only provide a hypothetical answer. However, I suspect we would determine the best approach would be to keep the money and consider it a reduction to future health care insurance costs.

Robert,

That would have been our preference as well, but the Federal government disagrees.

The DOL has determined the rebate resulting from employee contributions is an ERISA asset so has to be managed as such - basically being returned to the employees within 90 days or else be held in a trust...

Also, if premiums were deducted pre-tax, the IRS rules state that the rebate has to be distributed to the employees in such a way as to create taxable income, either as an outright payment or a reduction in the health insurance deduction on future payrolls.

Brenda, you are correct. Perhaps I didn't explain it very well. I didn't mean to say we would deposit it and forget about it. I was thinking we would use the "employee" portion of the rebate to reduce the following year's health care payroll deductions.

I am being very optimistic to suggest employees share of medical insurance would go down the following year. Given the double-digit increases in annual insurance premiums we have experienced, it is more likely the rebate would only mitigate the increase in the employee's contribution.

The additional consideration I had to deal with was the fact that United Healthcare helpfully sent a letter to all of the participants advising them that the rebate was on the way and they could contact their benefits administrator to see how/when it would be distributed - so it was easier to just pay out the money and be done with it.

Brenda,

Don't forget to thank United for their thoughtfulness and consideration... :)

Yes, I regularly tell them how much I love them.