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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"">Earlier this year while working to provide information and resources to participating entities about the potential impacts of federal healthcare reform, OEBB became aware of some of the impacts
entities needed to be aware of relating to health reimbursement arrangements (HRAs). At that time, the Board also learned HRAs are considered benefit plans under OEBB’s governing statute and, subject to only a few exceptions found in ORS 243.886, OEBB has
exclusive authority to provide benefit plans to Districts.<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-family:"Arial","sans-serif"">Since our initial message to you on this subject at the end of May 2013, the Board has continued to look at how HRAs should be treated under OEBB’s statute. Proposed amendments to Division
10 of the OEBB administrative rules (under Chapter 111) went through the public comment period and the Board authorized staff to file Division 10, with amendments, as a Permanent Rule at its July 11, 2013, OEBB Board meeting. The marked up version showing
the specific changes can be found at:<span style="color:#1F497D"> </span></span><span style="font-size:12.0pt;color:#1F497D"><a href="http://www.oregon.gov/oha/OEBB/docs/MeetingAttachments/2013/Attachment5a.pdf">http://www.oregon.gov\oha\OEBB\docs\MeetingAttachments\2013\Attachment5a.pdf</a>
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><a name="_GoBack"></a><span style="font-family:"Arial","sans-serif"">Here is a link to some of the questions OEBB staff have been receiving relating to HRAs over the past several months and OEBB’s responses:
</span><span style="color:#1F497D"><a href="http://www.oregon.gov/oha/OEBB/docs/FAQs/FAQ_HRA_HSA_071613.pdf">http://www.oregon.gov/oha/OEBB/docs/FAQs/FAQ_HRA_HSA_071613.pdf</a></span><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-family:"Arial","sans-serif"">We hope the FAQ document is helpful. However, if you currently offer, or plan to offer an HRA, please check with your legal advisor to determine if the type of HRA you offer, or are considering
offering, complies with state law. </span><span style="font-family:"Arial","sans-serif"">OEBB is only able to respond to questions as they relate to the OEBB benefits program.
</span><span style="font-family:"Arial","sans-serif""><o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#1F497D">***********************<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">Also, as a reminder, there are several other areas that you might want to keep in mind if you are offering, or considering offering, an HRA:
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#244061">Federal Healthcare Reform (a.k.a., ACA, PPACA) compliance</span></u><span style="font-family:"Arial","sans-serif";color:#244061">:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#244061">Federal income tax compliance, including constructive receipt</span></u><span style="font-family:"Arial","sans-serif";color:#244061">:
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p><span style="text-decoration:none"> </span></o:p></span></u></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p><span style="text-decoration:none"> </span></o:p></span></u></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><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:#244061">Oregon Insurance Code compliance</span></u><span style="font-family:"Arial","sans-serif";color:#244061">:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><u><span style="font-family:"Arial","sans-serif";color:#244061">GASB compliance</span></u><span style="font-family:"Arial","sans-serif";color:#244061">:<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#244061">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:#244061"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-family:"Arial","sans-serif";color:#1F497D">******************<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-family:"Arial","sans-serif"">I hope this updated information on HRAs and OEBB’s benefit program and reminder on other areas to be aware of is helpful. We will be discussing both OEBB documents at the Benefit Information
Exchange (BIE) meeting on Monday, July 22, from 2:30 to 4:00 p.m. Jackie Cowsill, OEBB Communications Coordinator, will be sending the agenda and a link you can use to join that meeting on Monday.<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-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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************************************</span><span style="color:#1F497D"> </span><span style="font-size:10.0pt;font-family:"Book Antiqua","serif";color:#1F497D"><o:p></o:p></span></p>
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