1. You Ought To Know: November 25, 2013 – Reminder About Updating Plan Materials
The passage of the Patient Protection and Affordable Care Act of 2010 (PPACA) has brought with
it additional requirements for plan administration, insurance, documentation, and
communication. Accordingly, as 2014 approaches, Willis issues a reminder that plan sponsors
should assure that their plan documents are updated to reflect PPACA provisions which must be in
place by 2014. In addition, recent guidance has addressed Health Reimbursement Arrangements
(HRAs) and the specific requirements that must be met in order to avoid PPACA’s market reform
requirements. Finally, latitude has recently been granted to plan sponsors offering Health Flexible
Spending Accounts (FSAs); while plan sponsors are not required to make changes to the
administration of their Health FSAs, employers may wish to implement the new refinement into
their Health FSAs in order to allow employees to carry over up to $500 in unused Health FSA
funds from one FSA plan year to the next.
Since plan documents and amendments have unique legal significance, plan documents and
amendments should be drafted and reviewed by your legal counsel. To assist in that process (and
with the caveat that Willis cannot draft legally binding plan documents), Willis’ National Legal &
Research Group has drafted the following sample amendments and SMMs that may be helpful to
plan sponsors and their legal counsel for use in updating current plan materials. The model
amendments and SMMs must be reviewed by legal counsel in order to assure that they do not
conflict with existing plan materials.
What Amendments/SMMs Should Plan Sponsors Consider Before 2014?
PPACA Amendment and SMM – If your wrapper plan document and SPD have not been updated
during 2013, those plan materials likely do not reflect the PPACA requirements that apply to plans
in 2014. The model PPACA Amendment and model PPACA SMM (both of which may be
accessed by clicking on links at the end of this section) address pre-existing condition exclusions,
lifetime/annual limits, preventive care cost sharing, dependent child definition, rescission,
selection of providers, emergency services, cost sharing limits, clinical trials, and provider
discrimination. Because there are many plan design variations concerning waiting periods, the
model PPACA Amendment and model PPACA SMM do not address the prohibition on waiting
periods longer than 90 days. Plan sponsors will need to ensure compliance with this requirement,
and if the existing waiting period must change in order to comply with the PPACA requirements,
then the model PPACA Amendment and the model PPACA SMM must also be updated to reflect
that plan change.
model PPACA Amendment
model PPACA SMM
HRA Amendment and SMM – As part of PPACA’s reform requirements, plan sponsors generally
may not impose annual or lifetime dollar limits on essential health benefits. Because of the nature

2. of an HRA and the fact that it offers a limited amount of money to be used for medical expenses, if
not otherwise exempt from PPACA’s requirements, an HRA would be impermissible (and such is
the case for a stand-alone HRA that is not a retiree-only HRA). In 2010, interim final rules were
issued which permitted HRAs to continue in operation as long as they were “integrated” with other
group health plan coverage that complied with PPACA’s reform requirements. The definition of
“integration” was somewhat unclear until the Internal Revenue Service and the Department of
Labor issued guidance on September 13, 2013, which outlined the requirements that must be met
in order for an HRA to be integrated with a group health plan (see Willis News Flash, September
16, 2013, “Federal Regulators Have Been Busy; Two New Developments”). Any employer that
offers an HRA that is not a retiree-only HRA must assure that the HRA is integrated with another
group health plan (and that group health plan is not required to be the employer’s own plan). The
model HRA Amendment and model HRA SMM (both of which may be accessed by clicking on
links at the end of this section) will add a provision to the HRA benefit which permits an employee
to opt out of the HRA and waive future HRA reimbursements. This provision will be helpful to
HRA account holders because the opt out and waiver will not preclude account holders from
qualifying for premium assistance in the event that account holders obtain coverage through a
health insurance exchange. Without the provision that is included with the model Amendment and
model SMM, the HRA would offer “minimum essential coverage,” and if an employer offers
minimum essential coverage with the continued availability of reimbursements, the HRA account
holder would not have the possibility of a subsidy under the marketplace exchange. If an HRA is
not currently integrated, then the plan sponsor will need to consult with legal counsel in order to
modify the plan and accomplish integration. The below links to a model HRA Amendment and a
model HRA SMM will not create integration where it does not currently exist. Rather, the
amendment and SMM create an opt out provision for an integrated HRA.
model HRA Amendment
HRA SMM
$500 FSA Carryover – IRS Notice 2013-71 allows employers to adopt a carryover provision under
which up to $500 in unused Health FSA funds may be carried over to the next plan year (see Willis
News Flash, November 1, 2013, “Two Developments – Plans May Permit Participants to Roll
Over $500 in Unused Health FSA Funds to the Next Plan Year; Further Clarification Concerning
the Transition Rule Permitting Employees in a Non-Calendar-Year Plan to Make Limited Election
Changes Without a Change in Status Event”). The newly-permitted $500 carryover does not affect
the next year’s $2,500 maximum health FSA election, so it is possible that an employee would be
able to incur $3,000 in reimbursable medical expenses within a plan year. The model FSA
Amendment and model FSA SMM are generic and do not account for the variations permissible in
some Health FSAs. While typically the IRS requires that plan amendments be prospective and
finalized within the plan year that the change is effective, the IRS has adopted a lenient standard
for the $500 FSA Carryover, and plan sponsors have until December 31, 2014 in order to amend
their plan materials and offer the carryover in either the 2013 plan year or the 2014 plan
year. Presumably the IRS leniency is due to the late-in-the-year release of the carryover provision

3. and the recognition that plan sponsors are engaged in open enrollment and may find it difficult to
accomplish plan amendments before the end of 2013. Plan sponsors should note that the $500
carryover is not possible if a Health FSA grace period is in place.
FSA Carryover Amendment
FSA Carryover SMM
How Do Employers Incorporate Desired Changes to Update their Plans?
Plan changes require documentation that changes were intended and adopted by the plan sponsor
and in order to communicate the changes to affected employees. Therefore, in order to effectuate
desired changes, plan sponsors need to:
1. Update the legal plan document (usually accomplished through an “Amendment”).
2. Update and distribute he summary plan description to covered individuals -- (usually
accomplished through the creation of a summary of material modifications (SMM)). We
suggest sending before year end for changes effective in 2013 and 2014.
The information in this publication is not intended as legal or tax advice and has been prepared
solely for informational purposes. You may wish to consult your attorney or tax adviser
regarding issues raised in this publication.