Peo Blog

By Ric Joyner, MBA, CEBS, GBA, CFCI

Harry Beker Chief, Health & welfare Branch Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities) confirmed today that sex change operations are considered qualified expenses for section 213d and can be reimbursed in HRAs, FSAs, and HSAs. If an employer wishes to prevent this type of reimbursement in the future the plan document must specifically exclude the procedure.

Following is Mr. Beker’s confirmation email.

Question posed by Ric Joyner:

From: Ric Joyner [mailto:ric.joyner@eflexgroup.com]
Sent: Wednesday, February 03, 2010 4:07 PM
To: Beker Harry
Cc: Jamie Johnson
Subject: sex Change operations

Does this mean FSA, HRA, HSA too?

Sex-Change Costs Are Tax-Deductible, U.S. Court Rules

Answer

From: Beker Harry [mailto:Harry.Beker@XXXXXXXX.TREAS.GOV]
Sent: Thursday, February 04, 2010 7:07 AM
To: Ric Joyner
Subject: RE: sex Change operations

Yes

Court’s decision and discussion is provided for background:

Sex-Change Costs Are Tax-Deductible, U.S. Court Rules

Ryan J. Donmoyer Ryan J. Donmoyer

1 hr 14 mins ago

Feb. 3 (Bloomberg) — Costs incurred in sex-change operations and procedures are tax-deductible, the U.S. Tax Court ruled.

The Washington-based court decided yesterday that hormone therapies and sex reassignment surgeries are necessary to treat gender identity disorder, a disease, in the case of a Boston- area man who became a woman named Rhiannon O’Donnabhain.

“The Court is persuaded that petitioner’s sex reassignment surgery was medically necessary,” Judge Joseph Gale wrote in a 69-page decision for the majority.

The decision is the first to rule that sex-change operations qualify as medical care and overturns a 2005 Internal Revenue Service policy denying medical expense deductions in such operations on the grounds they are ‘cosmetic.’’

The case involves a $5,679 tax bill assessed by the IRS, which denied medical deductions claimed by O’Donnabhain after she underwent sex reassignment-surgery in 2000. O’Donnabhain, a civil engineer who joined the U.S. Coast Guard during the Vietnam War, was diagnosed with gender identity disorder in 1997.

O’Donnabhain sued the IRS after it denied her deduction of $25,000 in out-of-pocket medical costs associated with the surgeries and other care such as hormone treatments and counseling, according to Boston-based Gay & Lesbian Advocates & Defenders, which represented her in court.

Deduction Rules

Medical expenses are deductible after they exceed 7.5 percent of adjusted gross income. Cosmetic surgery generally doesn’t qualify.

O’Donnabhain, who became a woman after 20 years of marriage that produced three children while simultaneously struggling with her gender identity, argued her medical costs were no different than heart surgery.

Yesterday, a majority of the court sided with her, ruling the IRS was wrong to deny her deductions.

The contention that O’Donnabhain “undertook the surgery and hormone treatments to improve appearance is at best a superficial characterization of the circumstances that is thoroughly rebutted by the medical evidence,” Gale wrote.

The decision “recognizes that expenses related to medical care for transgender people should be treated no differently than expenses related to an appendectomy or chemotherapy,” said Karen Loewy, a lawyer with Gay & Lesbian Advocates & Defenders in Boston who represented O’Donnabhain. “The dismissal of these medical expenses as illegitimate and not deductible was discrimination, pure and simple.”

Differing Opinion

In an opinion that dissented in part, Judge David Gustafson said that O’Donnabhain may have suffered a “serious mental condition.” Still, he said her condition met a strict definition of non-deductible “cosmetic surgery.”

“Congress did not provide that an appearance-improving procedure will nonetheless be deductible if it merely ‘mitigates a disease,’” Gustafson wrote.

The decision was first reported by the TaxProf Blog, run by University of Cincinnati law professor Paul Caron.

The case is O’Donnabhain v. Commissioner, 134 T.C. No. 4 (Feb. 2, 2010).

———————————————————————————————————————————————————————————————————————

Sources: Selected from yahoo news 2-2-10 at 11.59am CST Original source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=alx_Ag1iU8Q8: Retrieved 12.09 pm 2-4-10 EST

Harry Beker email received 2-4-10 at 7.07am EST sent to ric.joynerATeflexgroup.com

By Shailagh Murray and Paul Kane
Washington Post Staff Writer
Thursday, January 21, 2010; 12:05 PM

House Speaker Nancy Pelosi said Thursday that the Senate will have to amend its version of a health-care reform bill before her chamber can pass it.

"I don’t think it’s possible to pass the Senate bill in the House," Pelosi told reporters after a morning meeting with her caucus. "I don’t see the votes for it at this time."

Pelosi has been struggling for days to sell the Senate legislation to reluctant Democrats in order to get a health-care bill to the president’s desk quickly. But moderates in her caucus have raised doubts about forging ahead without bipartisan support — a challenge as the midterm election approaches — while liberals rejected the Senate bill as not going far enough.

Pelosi described House Democrats as vehemently opposed to several provisions in the Senate legislation, including one that benefits only Nebraska’s Medicaid system — a deal to win the support of Sen. Ben Nelson (D-Neb.) — and a tax plan on expensive health-care benefits.

"There are certain things the members simply cannot support," she said.

Aides said afterward that the best option would be for the Senate to pass a bill that fixes those and other issues under fast-track rules that require a simple majority. But the Senate has not agreed to do so.

Republican Scott Brown’s victory Tuesday in a Senate special election in Massachusetts blindsided Obama and Democratic leaders, who had nearly reached the finish line on an ambitious overhaul of the nation’s health-care system and were beginning to turn their attention to other challenges, namely creating jobs and lowering the deficit.

The loss of their Senate supermajority has required a frantic reassessment of their strategy. Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) have pledged to complete work on the massive bill they started nearly a year ago, but they have yet to identify a clear way forward that will appeal broadly to their rank-and-file.

Obama added to the confusion Wednesday when he seemed to endorse one option: having both the House and the Senate start from scratch, by voting on a scaled-back package of popular provisions that would crack down on insurance companies but provide health coverage to far fewer additional people.

"We know that we need insurance reform, that the health insurance companies are taking advantage of people," Obama told ABC News in an interview. "We know that we have to have some form of cost containment because, if we don’t, then our budgets are going to blow up. And we know that small businesses are going to need help."

But the White House quickly moved to clarify that the president still wants comprehensive reform.

"Right now there are a lot of discussions going on about the best path forward," spokesman Reid Cherlin said in a statement. "But let’s be clear that the president’s preference is to pass a bill that meets the principles he laid out months ago: more stability and security for those who have insurance, affordable coverage options for those who don’t, and lower costs for families, businesses, and governments."

reiterated Wednesday her resolve to send a health-care bill to Obama’s desk. "We heard the people, and hopefully we will move forward with their considerations in mind. But we will move forward in the process," Pelosi told the U.S. Conference of Mayors in a speech.

Reid, meanwhile, struck a more cautious note. "We’re not going to rush into anything," he told reporters after a Senate Democratic lunch. "Remember, the bill we passed in the Senate is good for a year. There are many different things that we can do to move forward on health care, but we’re not making any of those decisions now."

Caution from moderates

Moderate members of Reid’s caucus also urged restraint, interpreting the Massachusetts outcome as a clear signal against advancing such a huge bill along party lines.

"I felt from the beginning that the best way to adopt anything as major as health-care reform was to do it in a bipartisan way," said Sen. Joseph I. Lieberman (I-Conn.). "You’ve got to listen to the message from Massachusetts, and I think it was all about, they want us to work together, they don’t want us to do too much at once, and they want to feel that we’re listening to them."

The health-care legislation is only one of several major bills on which Reid now needs, in the wake of the Massachusetts result, to win Republican votes.

The Senate on Wednesday took up a proposal to increase the nation’s debt ceiling, but it is not clear whether, even before Brown is sworn in, enough Democrats are willing to vote for the measure to overcome GOP objections. Bills to change immigration laws and curtail greenhouse-gas emissions, two other Obama priorities, will not even come to the Senate floor without Republican support.

Tuesday’s election also deepened the uncertainty surrounding another top administration goal — overhauling the nation’s financial regulatory system. A version of the legislation passed the House last month, but it has met stiff resistance from Republicans on the Senate banking committee, primarily over the creation of a Consumer Financial Protection Agency.

Brown on health care

Brown was elected to replace the late Edward M. Kennedy (D), the Senate’s longtime champion of universal health care. He struck a conciliatory note during a Wednesday news conference in Boston, telling reporters that he supports expanding health-care coverage.

"I think it’s important for everyone to get some form of health care," Brown said. "So to offer a basic plan for everybody, I think, is important. It’s just a question of whether we’re going to raise taxes, we’re going to cut half a trillion from Medicare, we’re going to affect veterans’ care. I think we can do it better."

But if the senator-elect was willing to consider a health-care bill, most Republicans voiced relief that they may have dodged the current Democratic effort. Asked Wednesday whether the bill is dead, Senate Minority Leader Mitch McConnell (R-Ky.) responded, "I sure hope so."

Sen. Susan Collins (Maine) is one of a handful of Republican moderates whose votes are certain to be sought by Obama and Reid in the months ahead on various bills. She said she remains open to a health-care compromise, but she worried that economic issues are more pressing.

"Many of us have heard from our constituents that, in addition to their overall concern about health care, they would like to see the administration and Congress focus on economic issues," Collins said. "That’s the message from back home."

Staff writers Lori Montgomery and Perry Bacon Jr. contributed to this report.

Via DOL News

The Department of Labor’s Employee Benefits Security Administration COBRA page was updated to add a link to a compliance webcast on the COBRA premium reduction extension provisions being held on January 22 at 1 pm EST. To register, go to https://compx11.eventcenterlive.com/cfmx/ec/register/reg.cfm?BID=1&RegID=284EB0ED

sent via IRS News

WASHINGTON — Workers who lose their jobs during January and February may qualify for a 65-percent subsidy on their COBRA health insurance premiums, and these newly-eligible individuals, along with those already receiving the subsidy, can now receive it for up to 15 months, according to the Internal Revenue Service.

Created by the American Recovery and Reinvestment Act of 2009, the COBRA subsidy eligibility period was originally scheduled to expire at the end of 2009, and eligible individuals only qualified for the subsidy for nine months. But the Department of Defense Appropriations Act, 2010, enacted on Dec. 19, extended the eligibility period and the maximum duration of COBRA premium assistance.

As a result, workers who are involuntarily terminated from employment between Sept. 1, 2008, and Feb. 28, 2010, may be eligible for a 65-percent subsidy of their COBRA premiums for a period of up to 15 months. Involuntarily terminated employees who meet certain other requirements, and certain family members of those individuals, are referred to as “assistance-eligible individuals.”

Employers must provide COBRA coverage to assistance-eligible individuals who pay 35 percent of the COBRA premium. Employers are reimbursed for the other 65 percent by claiming a credit for the subsidy on their payroll tax returns: Form 941, Employers QUARTERLY Federal Tax Return, Form 944, Employer’s ANNUAL Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees. Employers must maintain supporting documentation for the claimed credit.

The administrator of a group health plan or other entity must notify certain assistance-eligible individuals of the extension by Feb. 17, 2010. For assistance-eligible individuals whose nine months of subsidy had already ended, the new law also provides an extended period for the retroactive payment of their 35 percent share during a transition period.

There is much more information about the COBRA subsidy, including questions and answers for employers, and for employees or former employees, on the COBRA pages of IRS.gov.

By Ric Joyner, CEBS

Many of you have watched the race in Mass which is Ted Kennedy’s old seat. Mass is a heavily democratic state. Although this is also a large registered independent state. (see insert below)

There are two people running. Scott Brown a Republican and Martha Coakley a Democrat.

Wall Street Journal: It all comes down to turnout. "The contest may come down to whether the Democratic Party’s traditional allies can overcome what appears to be a surge of local enthusiasm for the Republican candidate."

Boston Globe: Kevin Cullen writes that the black community isn’t energized for Coakley and that’s an "ominous sign" for the Democratic candidate. He came to that conclusion after visiting Blue Hill Avenue and the streets around it — "heart of the biggest minority community in the state."

USA TODAY: John Fritze writes that independents — who make up 51% of the state’s voters — are the key to the election, and polls show they are breaking for Brown.

New York Times: Democrats in Washington are working on Plan B, trying to come up with a way to pass health care with 59 votes in the Senate. One possibility is having the House approve the Senate bill without changes and send it to the President Obama. But Bart Stupak, D-Mich., says the abortion language and the "special-interest provisions for certain states" makes that impossible. He says: “House members will not vote for the Senate bill. There’s no interest in that.”

Politico: In a replay of the Virginia gubernatorial race, Politico writes that Democrats are already playing the blame game. Coakley ran a "sluggish campaign." Obama didn’t do enough "to sell the party’s agenda." The Democratic Senatorial Campaign Committee didn’t see this coming and didn’t do enough to stop it.

What will this mean for health care vote? Scott Brown says he will vote against the health care bill, and this fact places the 60 vote super majority of the democrats in the Senate in Jeopardy.

Coakley promises to keep the progressive agenda (more government, taxes and government regulation) and Brown espouses a conservative position (lower taxes, less government and fiscal restraint).

This race is an earthquake for the President Obama’s agenda on many fronts, and a forecast of what may happen in the fall 2010 elections.

Early this morning I was watching several news organizations and the voter turnout is high. Fox was reporting that exit interviews of voters were saying; “I am voting for Brown to send a message to Washington about the high taxes, government run health care (note, Mass has a new government run health care program which is what the Obama Care is modeled from. So they know the problems and cost associated with having a government run program) and bailouts and payoffs for voting for health care.

In watching the exit interviews at noon, Fox again was reporting the turnout is heavy, and that many democrats are voting along party lines. Remember that independents are 51% of the voters.

So this should be an interesting race to watch because it could change the entire landscape of health care.

Notices

ARRA, as amended by the Department of Defense Appropriation Act, 2010 (2010 DOD Act), mandates that plans notify certain current and former participants and beneficiaries about the premium reduction.

The Department created model notices to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions, including those added by the 2010 DOD Act.

Updated General Notice

Plans subject to the Federal COBRA provisions must provide the updated General Notice to all qualified beneficiaries (not just covered employees) who experienced a qualifying event at any time from September 1, 2008 through February 28, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice. This model notice includes updated information on the premium reduction as well as information required in a COBRA election notice.

Note: Individuals who experienced a qualifying event (that was a termination of employment) in December 2009 but who were not eligible for COBRA coverage until January 2010 were likely not provided proper notice. These individuals should get the updated General Notice AND the full 60 days from the date the updated notice is provided to make a COBRA election.

Premium Assistance Extension Notice

Plan administrators must provide notice to certain individuals who have already been provided a COBRA election notice that did not include information regarding ARRA, as amended. This model Premium Assistance Extension Notice includes information about the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act. Listed below are the affected individuals and the associated timing requirements.

• Individuals who were "assistance eligible individuals" as of October 31, 2009 (unless they are in a transition period - see below), and individuals who experienced a termination of employment on or after October 31, 2009 and lost health coverage (unless they were already provided a timely, updated General Notice) must be provided notice of the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act by February 17, 2010;

• Individuals who are in a "transition period" must be provided this notice within 60 days of the first day of the transition period. An individual’s "transition period" is the period that begins immediately after the end of the maximum number of months (generally nine) of premium reduction available under ARRA prior to its amendment. An individual is in a transition period only if the premium reduction provisions would continue to apply due to the extension from nine to 15 months and they otherwise remain eligible for the premium reduction.

Note: To some extent, the groups listed above overlap - creating a situation where an individual may be entitled to multiple notices. Providing the Premium Assistance Extension Notice by the earliest date required will satisfy the notice requirement(s).

Updated Alternative Notice

Insurance issuers that provide group health insurance coverage must send the updated Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Premium Assistance Extension Notice or the updated model General Notice appropriate for use in certain situations.

DOL

The Department of Labor’s Employee Benefits Security Administration COBRA page now has available model notices updated for the extension provisions of the 2010 Department of Defense Appropriations Act. They are available at http://www.dol.gov/ebsa/COBRAmodelnotice.html

DOL

The Department of Labor’s Employee Benefits Security Administration COBRA page now has available model notices updated for the extension provisions of the 2010 Department of Defense Appropriations Act. They are available at http://www.dol.gov/ebsa/COBRAmodelnotice.html

By Ric Joyner and etal

Commentary: What about the promises of not raising taxes?

News Alert

1:19 AM EST Monday, December 21, 2009

Health-care bill clears crucial procedural vote in Senate, 60 to 40

The Senate cleared a crucial procedural hurdle to bring its health-care bill to the brink of final passage by Christmas Eve. The partisan vote of 60 to 40 shut down a Republican filibuster of the $871 billion package and followed days of tough negotiations with Democratic holdouts.

For more information, visit washingtonpost.com - http://link.email.washingtonpost.com/r/RRHKUP/CVT9N/1CUL7C/35TNTA/HSVVO/PJ/t

From the KS Health and Welfare Team:

Although Washington has been paralyzed by 2 feet of snow, the Senate has kept up its frantic pace for health care reform, and our team has been following the developments when we have not been shoveling snow.  Senator Reid has finally unveiled an "amendment" to the Senate health care bill.  Both the amendment and a summary are attached.  Currently, a vote is scheduled to take place on Monday, December 21st at 1am to approve the amendment. 

Because this is structured as an amendment it actually amends the current Senate health care bill, which then in turn amends the Code, ERISA, etc.

We are still combing through the amendment, but it includes a number of tax-related changes, including an increase in the Medicare payroll tax and a new tax on indoor tanning services.  The Medicare payroll tax would increase from 1.45% to 2.35% for individuals earning more than $200,000 per year (or $250,000 for married couples).  This begins in 2013.

As reported previously, the public option and the Medicare buy-in are eliminated.  These have been replaced by a plan that appears to operate similar to the Federal employees’ health plan that will be administered by private insurers but operated by OPM. 

Supporting documents are stored here:

Summary

Amendment

Mark L. Stember
Kilpatrick Stockton LLP
Suite 900
607 14th Street, NW
Washington, DC 20005
t 202-508-5802
f 202-585-0018

The Senate passed the Department of Defense Appropriations Act Saturday which includes an extension of the ARRA COBRA subsidy for qualified individuals.  

The learner outcomes are the requirements for employers, brokers, and health plans to perform under the new ARRA Extension Regulations. What are the differing notice obligations to those with qualifying event dates before October 31, 2009, after that date but before December 31, 2009, and after? We will address all the new changes. This seminar will get you ready for the new ARRA Extension rules.

For example, Qualifying Events (QE) occurring after the original December 31, 2009 cutoff date is extended.  The 9 month subsidy for individuals that new involuntarily terminated as defined by the IRS are extended.

Most importantly, employers and plan sponsors now have new notice obligations. An example is that employers are required to send the new extension letters within 90 days of the enactment of the bill.

Please join us for our presentation on the new law, the new obligations and to engage us with your questions.

This seminar is free for our eCOBRA clients. The cost is $25.00 for brokers, $99.00 if the broker wishes to extend an invitation to clients and $25.00 for all others.  Please email Cheri.Belz@eflexgroup.com for payment instructions.

Register for a session now by clicking a date below:

Wed, Dec 23, 2009 2:00 PM - 3:00 PM CST

Thu, Jan 7, 2010 10:00 AM - 11:00 AM CST

Thu, Jan 7, 2010 2:00 PM - 3:00 PM CST

Once registered you will receive an email confirming your registration
with information you need to join the Webinar.

System Requirements
PC-based attendees
Required: Windows® 2000, XP Home, XP Pro, 2003 Server, Vista

Macintosh®-based attendees
Required: Mac OS® X 10.4 (Tiger®) or newer

By Ric Joyner, MBA, CEBS, GBA, CFCI

Technorati Tags: health care reform bill,Senate,House,Pelosi,Senator Ben Nelson,Flexible Spending Accounts,FSA,COBRA,ARRA cobra extension

COBRA ARRA Extension

Last night, as part of the defense spending measure the Senate passed the ARRA extension. For details on the extension read this blog report.

eflex will be having seminars next week on the details and changes that clients and brokers are required to implement. Look for blog posts on the seminar details.

Health Care in the Senate

A deal was reached with Senator Nelson of NE regarding several key issues, abortion and Medicaid. Nelson was siding with the republicans on the filibuster. For details, read an excellent piece from the Washington Post. To read Nelson’s press conference click here. This will allow the Senate to vote next week or as early as this weekend on the Senate version of the bill.

Flexible Spending Plans to be indexed

Part of the Senate compromise to acquire Nelson’s support was to allow FSAs is to be indexed.

“The Democrat from Nebraska also ensured that non-profit insurers are exempted from the bill’s $6 billion annual excise tax on insurers. And Nelson won a concession to index for inflation the $2,500 cap on contributions to flexible health spending accounts.” Politico

What is next in Health Care?

Nancy Pelosi, House Speaker has sent the House Members home for the Holidays. The result is that once the Senate passes the bill next week, the House and Senate will have a conference committee to determine and negotiate a final bill. Pelosi is struggling with the left wing of her party which desires a single payer health care system (marketing spin=public option). The Senate is looking at reforms that will lower costs, which the SP system will not do according to the CBO.

Look for an exciting next few weeks in health care, and as always, let your voice be heard. And Bill O’Reilly stated last week on his show that he believes the Democrats could lose both houses and the Republicans will repeal this historic legislation. Stay tuned for the best football game on the planet. Ideas versus Ideology!