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<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Dear Superintendents, Business Managers and Benefit Administrators:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Over the past several months, while working to provide information and resources to participating entities about the potential impacts of federal healthcare reform, OEBB became
aware of a few other areas of compliance/interest that entities may need to be aware of relating to Health Reimbursement Accounts or Health Reimbursement Arrangements (HRAs). We wanted to pass along some guidance the Board received from our legal counsel
with the Department of Justice.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Following are some areas you should consider if your entity currently offers an HRA, or is considering offering an HRA. Please check with your legal advisor to determine if the
type of HRA that you offer, or are considering offering, complies with state and federal law.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">OEBB participation compliance:<o:p></o:p></span></u></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Health Reimbursement Accounts and Health Reimbursement Arrangements (HRAs) are considered benefit plans under OEBB’s governing statutes, although they are not yet explicitly identified
in OEBB’s administrative rules. During the initial plan development process in late 2007, no HRA designs were submitted by entities as benefit plans available at that time. Although we believe there were some HRAs being offered through entities prior to
OEBB’s creation, the number of entities utilizing HRAs has grown significantly over the years.<o:p></o:p></span></p>
<p class="MsoNormal"><a name="_GoBack"></a><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">The Board approved filing proposed amendments to OEBB’s Division 10 administrative rules to specify that HRAs meet the definition of a benefit plan. You should be receiving a
notice via email later today announcing this filing and the beginning of the public comment period. Please watch for this. Subject to only a few exceptions found in ORS 243.886, OEBB has exclusive authority to provide benefit plans to Districts. Please check
with your legal advisor to determine if the type of HRA you offer, or are considering offering, complies with state law.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Federal Healthcare Reform (a.k.a., ACA, PPACA) compliance</span></u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Section 2711 of the Public Health Service Act (PHSA), as added by the Patient Protection and Affordable Care Act (PPACA), prohibits lifetime limits, or certain annual limits,
on the dollar value of benefits for any participant or beneficiary. HRAs, by design, generally are subject to such limits -- they provide reimbursements up to a maximum dollar amount for a coverage period and the upper limits for each year of coverage arguably
could create a cumulative lifetime limit. Thus, HRAs that are not integrated with an entity’s group medical plan that otherwise complies with section 2711 (i.e., a medical plan available through OEBB) could be subject to penalties under the PHSA as early
as January 2014. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Please check with your legal advisor to determine if the type of HRA you offer, or are considering offering, complies with the requirements of the PHSA and other federal laws
governing health insurance.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Federal income tax compliance, including constructive receipt</span></u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">:
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Some districts may be offering their employees a choice between an HRA and more wages (or other taxable income). This raises federal income tax issues, including, but not limited
to, what is called the “constructive receipt doctrine.” The constructive receipt doctrine means that an employee who has a choice between a nontaxable benefit and a taxable benefit, and who elects the nontaxable benefit, is treated for tax purposes as if he
or she actually elected the taxable benefit (i.e., the individual will be taxed on the taxable benefit that he or she could have elected). Typically the adverse constructive receipt consequences can be avoided by offering a choice between a taxable benefit
and a nontaxable benefit <u>through a cafeteria plan</u>. <o:p></o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p><span style="text-decoration:none"> </span></o:p></span></u></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">IRS Notice 2002-45 indicates that HRAs may not be funded through a cafeteria plan. Offering a choice between cash or other benefits and an HRA may obligate the Districts to impute
taxable income to the employees who choose the HRA benefit.<u><o:p></o:p></u></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p><span style="text-decoration:none"> </span></o:p></span></u></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Please check with your legal advisor to determine if your HRA complies with all IRS guidelines and, especially if your entity is offering a choice between cash or other taxable
benefits and an HRA, check with your legal advisor to ensure you are reporting and withholding on the proper amount of taxable income.<o:p></o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p><span style="text-decoration:none"> </span></o:p></span></u></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Oregon Insurance Code compliance</span></u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">Because HRAs meet the definition of “insurance” under the Oregon Insurance Code, entities need to consider if their HRAs are subject to the Insurance Code and if so, whether their
HRAs meet the Insurance Code’s requirements. Effective since July 17, 2007, SB 989 (Oregon Laws 2007, chapter 826, section 1) expanded the number of public bodies that are exempt from regulation under the Insurance Code when they self-insure their health insurance
coverage. Now codified at ORS 731.036(6), SB 989 exempts school and community college districts whose covered employees and dependents and retired employees and dependents number at least 500 and who meet other requirements. Prior to this change, the exemption
did not apply unless the number of covered employees and retired employees of a school or community college district, not including dependents, was 1,000 or more. Other public bodies that jointly or individually self-insure their health insurance coverage
will be able to include dependents along with employees and retired employees in order to meet the minimum number of participants required for the exemption.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">If your entity is offering an HRA, please check with your legal advisor to determine whether your HRA is subject to the Insurance Code and, if so, whether it meets Insurance Code
requirements.<u><o:p></o:p></u></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">GASB compliance</span></u><span style="font-family:"Arial","sans-serif";color:#0D0D0D">:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">The Governmental Accounting Standard Board (GASB), an independent, not-for-profit organization that establishes financial accounting and reporting standards for state and local
governments, has issued Statements 43 and 45 on Other Postemployment Benefits. These Statements would affect local governmental financial reporting if the entity offered healthcare and other non-pension benefits, including an HRA, to retirees. Other GASB requirements
may also be applicable. <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">If your entity is offering an HRA, please check with your legal advisor to ensure your entity is in compliance with GASB reporting requirements.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#0D0D0D">We hope this information is a helpful reminder of areas you need to be aware of if your entity currently offers, or is considering offering, an HRA to employees.<u><o:p></o:p></u></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif""><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D">Sincerely,</span><span style="color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"> <o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-size:14.0pt;font-family:"Brush Script MT";color:navy">Denise L. Hall<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D">Denise L. Hall, Deputy Administrator</span><span style="font-size:12.0pt;font-family:"Times New Roman","serif";color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Arial","sans-serif";color:#1F497D">Oregon Educators Benefit Board</span><span style="color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><a href="http://egov.oregon.gov/DAS/OEBB"><span style="font-size:10.0pt;font-family:"Arial","sans-serif"">http://egov.oregon.gov/OHA/OEBB</span></a><o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"> <o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-size:10.5pt;font-family:"Book Antiqua","serif";color:red">OEBB encourages all members to stay healthy and be happy!!!! Pass it on.....
<o:p></o:p></span></b></p>
<p class="MsoNormal"><span style="font-size:10.5pt;font-family:"Arial","sans-serif";color:#1F497D"><a href="http://www.oregon.gov/OHA/OEBB/pages/welllinks.aspx"><b><span style="font-family:"Book Antiqua","serif";color:#9933FF">http://www.oregon.gov/OHA/OEBB/pages/welllinks.aspx</span></b></a></span><span style="font-size:10.5pt;font-family:"Arial","sans-serif";color:#9933FF"><o:p></o:p></span></p>
<p class="MsoNormal"><b><span style="font-family:"Book Antiqua","serif";color:red">
</span></b><b><span style="font-size:10.0pt;font-family:"Book Antiqua","serif";color:red"> </span></b><span style="color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"> <o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:10.0pt;font-family:"Book Antiqua","serif";color:#1F497D">*****CONFIDENTIALITY NOTICE*****<br>
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