34 TAC §§85.1, 85.7, 85.9, 85.11
The Employees Retirement System of Texas (ERS) proposes amendments
to 34 Texas Administrative Code §§85.1, 85.7, 85.9, and 85.11, concerning
the Flexible Benefits Program. These sections are amended to define and direct
the administration of the state of Texas Employees Flexible Benefit Program
(TexFlex). These sections also comply with and conform to the provisions of
the Internal Revenue Code, as amended, and the Texas Insurance Code, Chapter
1551.
Section 85.1 adds definitions of grace period and run-out period. Internal
Revenue Service Notice 2005-42 authorizes plan sponsors to offer a grace period
to participants of healthcare reimbursement accounts (HCRA) and dependent
care reimbursement accounts (DCRA). These changes define the grace period
as authorized by the board of trustees and the run-out period which describes
the period of time following the end of the plan year during which participants
may file claims.
Section 85.7 makes changes to the forfeiture provisions by adding the grace
period to the end of the Plan Year thereby extending the period during which
a participant may incur claims using balances accrued during the prior plan
year.
Sections 85.9 and 85.11 add the timeframe for the grace period. IRS Notice
2005-42 authorizes a grace period of up to two (2) months and 15 days. This
change specifies the grace period as authorized under the TexFlex Program.
This change also renames what was previously referred to as the "grace period"
and more appropriately refers to it as the "run-out period."
Paula A. Jones, General Counsel, has determined that for the first five-year
period the rules are in effect, there will be no fiscal implications for state
or local government as a result of enforcing or administering the rules, and
small businesses and individuals will not be affected.
Ms. Jones also determined that for each year of the first five years the
rules are in effect the public benefit anticipated as a result of enforcing
the rules will be updated information and clarification of the rules, as well
as an extended grace period to benefit plan participants who may otherwise
be required to forfeit plan contributions, but will instead be permitted to
incur claims during the grace period that may be paid from balances attributable
to the plan year. There are no known anticipated economic costs to persons
who are required to comply with the rule as proposed.
Comments on the proposed new rule may be submitted to Paula A. Jones, General
Counsel, Employees Retirement System of Texas, P.O. Box 13207, Austin, Texas
78711-3207, or e-mail Ms. Jones at pjones@ers.state.tx.us. The deadline for
receiving comments is Monday, August 1, 2005 at 10:00 a.m.
The amendments are proposed under Texas Insurance Code, §§1551.009,
1551.052 and 1551.206(e) and affect Texas Insurance Code, Chapter 1551. No
other statutes are affected by this amendment.
§85.1.Introduction and Definitions.
(a) - (b)
(No change.)
(c)
Definitions. The following words and terms when used in
this chapter, shall have the following meanings, unless the context clearly
indicates otherwise, and wherever appropriate, the singular includes the plural,
the plural includes the singular, and the use of any gender includes the other
gender.
(1) - (20)
(No change.)
(21)
Grace period--A two (2) month
and 15 day period, adopted by the TexFlex plan pursuant to IRS Notice 2005-42,
immediately following the end of the plan year during which participants may
continue to incur expenses for reimbursement from the prior year account balance.
(22)
[
(21)
] Health care expenses--Any
expenses incurred by a participant, or by a spouse or dependent of such participant,
for health care as described in or authorized in accordance with the Code, §105
and §213, but only to the extent that the participant or other person
incurring the expense is not reimbursed for the expense by insurance or other
means. The types of expenses include, but are not limited to, amounts paid
for hospital bills, doctor bills, prescription drugs, hearing exams, vision
exams, and eye exams.
(23)
[
(22)
] Health care reimbursement
account--The bookkeeping account maintained by the plan administrator or its
designee used for crediting contributions to the account and accounting for
benefit payments from the account.
(24)
[
(23)
] Health care reimbursement
plan--A separate plan, under the Code, §105, adopted by the board of
trustees, and designed to provide health care expense reimbursement as described
in §85.5(b) of this title (relating to Benefits).
(25)
[
(24)
] Institution of higher education--All
public community/junior colleges, senior colleges or universities, or any
other agency of higher education within the meaning and jurisdiction of the
Education Code, Chapter 61, except the University of Texas System and the
Texas A&M University System.
(26)
[
(25)
] Leave of absence without
pay--The status of an employee who is certified monthly by an agency or institution
of higher education administrator to be absent from duty for an entire calendar
month, and who does not receive any compensation for that month.
(27)
[
(26)
] Option--Any specific benefit
offering under the plan.
(28)
[
(27)
] Participant--An eligible
employee who has elected to participate in the plan for a period of coverage.
(29)
[
(28)
] Period of coverage--The plan
year during which coverage of benefits under the plan is available to and
elected by a participant; however, an employee who becomes eligible to participate
during the plan year may elect to participate for a period lasting until the
end of the current plan year. In such case, the interval commencing on such
employee's entry date and ending as of the last day of the current period
of coverage shall be deemed to be such participant's period of coverage.
(30)
[
(29)
] Plan--The flexible benefits
plan established and adopted by the board of trustees pursuant to the laws
of the
state
[
State
] of Texas and any amendments which
may be made to the plan from time to time. The plan is referred to herein
as TexFlex, and is comprised of a dependent care reimbursement plan, a health
care reimbursement plan and an insurance premium conversion plan.
(31)
[
(30)
] Plan administrator--The board
of trustees of the Employees Retirement System of Texas or its designee.
(32)
[
(31)
] Plan year--A 12-month period
beginning September 1 and ending August 31.
(33)
Run-out period--The period
following the end of the plan year between September 1 and December 31, during
which participants may file claims for reimbursement of expenses incurred
during the plan year and grace period.
(34)
[
(32)
] Statutory nontaxable benefit--A
benefit provided to a participant under the plan, which is not includable
in the participant's taxable income by reason of a specific provision in the
Code and is permissible under the plan in accordance with the Code, §125.
(35)
[
(33)
] Spouse--The person to whom
the participant is married. Spouse does not include a person separated from
the participant under a decree of divorce, or annulment.
(36)
[
(34)
] TexFlex--The flexible benefits
plan adopted by the board of trustees.
(37)
[
(35)
] Texas Employees Group Benefits
Program--The employee insurance benefits program administered by the Employees
Retirement System of Texas, pursuant to the Texas Insurance Code, Chapter
1551. The program consists of health, voluntary accidental death and dismemberment,
optional term life, dependent term life, short and long term disability, and
dental insurance coverages.
(38)
[
(36)
] Third Party Administrator
or TPA--The vendor, administrator or firm selected by the plan administrator
to perform the day-to-day administrative responsibilities of the TexFlex program
for participants of the Texas Employees Group Benefits Program who enroll
in either the health care reimbursement plan, dependent care reimbursement
plan or both.
§85.7.Enrollment.
(a) - (d)
(No change.)
(e)
Forfeiture of account balances.
(1)
The amount credited to a participant's reimbursement account
for each benefit election for any plan year will be used to reimburse or pay
qualified expenses incurred during the eligible employee's period of coverage
in such plan year
and the grace period
, if the claim is electronically
adjudicated or if the participant files a correctly completed claim for reimbursement
on or before December 31 following the close of the plan year.
(2)
Any balances remaining after payment of all timely and
correctly filed claims postmarked no later than December 31 following the
close of the plan year
and the grace period,
shall be forfeited
by the participant and be available to pay administrative expenses of the
flexible benefits program.
(f)
Reimbursement report to participant. The plan administrator
or its designee shall provide to the participant periodic reports on each
reimbursement account, showing the account transactions (disbursements and
balances) during the plan year
and the grace period
. These reports
may be provided periodically through electronic means.
§85.9.Payment of Claims from Reimbursement Accounts.
(a)
Claim for reimbursement.
(1)
Claims for reimbursement of expenses incurred during an
eligible employee's period of coverage in the plan year
or during the
grace period
may be submitted at any time during the plan year
or grace period
, but not later than December 31 following the close
of the plan year.
(2)
Claims shall be paid to the extent of available flexible
benefit dollars allocable to the applicable type of expenses and shall only
be paid out of flexible benefit dollars for the plan year
, which may
include the grace period,
in which the expense was incurred. The TPA
shall compare the participant's available balance and the amount of the expense
to make certain that claims are paid according to the provisions of the Code
and these rules.
(3)
Expenses incurred prior to becoming a participant or after
the last day of a plan year
or the grace period
, [
August 31,
]shall not be covered by this plan. A terminated participant may continue
to file claims for eligible expenses incurred during the employee's period
of coverage within the plan year
and grace period, if applicable,
to
exhaust reimbursement account balances no later than December 31 following
the close of the plan year.
(4)
Claims shall be submitted in a manner prescribed by the
Employees Retirement System of Texas or its designee, accompanied by such
bills, receipts or other proof of incurring the expense as the plan administrator
or its designee may require.
(5)
A claim form must be submitted each time reimbursement
or payment is requested, unless using the debit card.
(6)
The dependent care and health care reimbursement accounts
are separate accounts, and funds from one account may not be used to reimburse
expenses of the other account.
(b)
Debit Card transactions.
(1)
Debit card payments for eligible expenses incurred during
a participant's
[
an employee's
] period of coverage in the
plan year
and the grace period
may occur at any time during the
plan year
and the grace period
, but not later than
November
15th
[
August 31st or the last day of the plan year
].
(2)
Transactions shall be processed to the extent of available
flexible benefit dollars allocable to the applicable type of expenses and
shall only be paid out of flexible benefit dollars for the plan year
, which may include the grace period,
in which the expense was incurred.
The TPA shall compare the participant's available balance and the amount of
the expense to make certain that claims are paid according to the provisions
of the Code and these rules.
(3)
Expenses incurred prior to becoming a participant shall
not be covered by this plan. Expenses incurred by a participant may be covered
only in the plan year
, which may include the grace period,
in which
the expense is actually incurred. Upon a participant's termination, the debit
card will be automatically deactivated. Paper claims may be filed for eligible
expenses incurred during the participant's period of coverage within the plan
year
, and the grace period, if applicable,
in which he was a participant.
All claims for reimbursement from account balances must be filed no later
than December 31 immediately following the close of the plan year.
(4)
Participants may be required to submit bills, receipts
or other proof of incurring the expense as the plan administrator or its designee
may require.
(5)
Reimbursements or payments made using the debit card may
require additional supporting documentation as may be requested by the plan
administrator or its designee, and the participant must maintain his own records
to substantiate the eligibility of all expenses for individual income tax
purposes, if necessary.
(c) - (d)
(No change.)
§85.11.Administration.
(a) - (c)
(No change.)
(d)
Miscellaneous provisions.
(1)
The participation in the plan of an employee is subject
to changes in applicable state and federal laws and regulations and the sections
in this chapter.
(2)
The plan year begins on September 1 of each year and ends
on August 31. The
run-out
[
grace
] period for filing
claims for services used during the plan year
and the grace period,
ends
on December 31.
The grace period begins at the end of the plan year and
ends two (2) months and 15 days later.
(3)
The mailing address of the plan administrator is: Plan
Administrator, TexFlex Plan, Employees Retirement System of Texas, P.O. Box
13207, Austin, Texas 78711-3207.
(4)
If a provision in the sections in this chapter conflicts
with a federal law, rule, or regulation governing the plan, then the law,
rule, or regulation prevails over the provision.
(5)
The participation of an employee in the plan does not give
the employee a legal or equitable right against the participant's employing
state agency, institution of higher education, the plan administrator, TPA
or the
state
[
State
] of Texas except as provided in
the sections in this chapter. The plan does not affect the terms of employment
between a participant and the participant's employing state agency or institution
of higher education.
(6)
Except for the grace period, if
[
If
]
a time limit is expressed in terms of a number of days and the last day of
the time limit falls on a weekend or holiday recognized by the
state
[
State
] of Texas for observance by state employees, the
last day of the time period shall be the first business day after the weekend
or holiday.
The end of the grace period shall be the actual day on which
it falls, even if it is a weekend or holiday.
(7)
The sections in this chapter prevail over any document
used in the administration of the plan that has provisions or requirements
which conflict with the sections.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on July 1, 2005.
TRD-200502711
Paula A. Jones
General Counsel
Employees Retirement System of Texas
Earliest possible date of adoption: August 14, 2005
For further information, please call: (512) 867-7421