Bailout Bill Contains Benefits Provisions, Too

(Published October 9, 2008)

 

The massive Emergency Economic Stabilization Act of 2008 contains new provisions on mental health parity, disaster tax relief for victims of this year's hurricanes and floods, and a new tax break for employees who bicycle to work.

 

Mental Health Parity Expanded And Made Permanent

Mental health parity has been on the books since 1996, sunsetting at the end of a calendar year, but always being reinstated by Congress. It was, for example, slated to expire at the end of this year. The emergency stabilization act makes the current mental health parity provisions permanent, effective January 1, 2009.

 

The emergency stabilization act also requires group health plans that provide mental health benefits to extend benefits to substance abuse-related disorders. More parity between medical-surgical benefits and mental health-substance abuse benefits will be required, as well. Small employers — those with not more than 50 employees — are excluded from these provisions. These enhanced mental health parity provisions are effective beginning with plan years commencing one year after October 3, 2009.

 

Under the enhanced parity provisions, group health plans that provide both medical-surgical benefits and mental health-substance abuse benefits must require that mental health-substance abuse benefits are offered on an even par with medical-surgical benefits. Under the 1996 version of mental health parity, plans couldn't set different annual or lifetime dollar limits on mental health benefits than they set on medical-surgical benefits. But plans could, and did, set different co-payments. In addition, there were stricter limits on mental health services. Enhanced parity will be required in the following areas:

• Financial requirements. Deductibles, co-insurance, and out-of-pocket expenses that apply to mental health-substance abuse benefits can't be more restrictive than those that apply to medical-surgical benefits. There can't be any separate cost-sharing requirements that apply only to mental health-substance abuse benefits.
  
  
• Benefits limitations. Limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or duration of treatment, can't be more restrictive for mental health-substance abuse benefits than those imposed on medical-surgical services. There can't be any separate treatment limits that apply only to mental health-substance abuse benefits.
  
  
• Networks. Plans that allow participants to go out-of-network for medical-surgical benefits must allow participants to go out-of-network for mental health-substance abuse benefits.

Plan administrators must make available to employees and beneficiaries the criteria for medical necessity determinations with respect to mental health-substance abuse benefits. Upon an employee's or beneficiary's request, plan administrators must provide the reason a reimbursement or payment for a mental health-substance abuse benefit was denied.

 

Under a cost exemption, if the enhanced parity requirements result in an increase of the actual total cost of coverage for medical-surgical benefits and mental health-substance abuse benefits for the plan year of more than 1% (2% for the first plan year), the parity requirements won't apply to the group health plan during the following year. If a plan seeks to use this exemption, the determination of whether the exemption applies must be made after the plan has complied with the parity rules for the first six months of the plan year involved. Plans must use a qualified actuary to make this determination. Plans that qualify for the exemption must notify the federal and state governments, plan participants, and beneficiaries.

 

Disaster Relief

The emergency stabilization act also provides disaster tax relief to victims located in the Midwestern Disaster Area — Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, and Wisconsin.

 

Qualified disaster-related distributions. Employees can receive qualified disaster-related distributions, capped at an overall total of $100,000 from all 401(k) plans. Employees aren't liable for the 10% early withdrawal penalty or the 20% withholding tax. Distributions must be made after the disaster area declaration and before January 1, 2010.

 

Employees who received distributions after the date that's six months before the disaster area declaration for home-purchasing purposes that were canceled due to the disaster, may recontribute those amounts into the plan.

 

Plan loans. Employees may borrow up to $100,000 or 100% of their vested 401(k) account balances. This is double the regular borrowing limits. Loans must be made after the disaster area declaration and before January 1, 2010. In addition, outstanding loan payments due on or after the disaster area declaration and before January 1, 2010, may be deferred for an additional 12 months, with appropriate interest adjustments.

 

Bicycling To Work

A qualified bicycle commuting reimbursement fringe benefit is any employer reimbursement paid to employees who bicycle to work. Monthly limit: $20 (the $20 isn't indexed for inflation). Employees may use the money to purchase, store, or repair bicycles. Eligibility is limited to employees who don't participate in any other qualified transportation fringe benefit program, and who regularly use their bicycles for a substantial portion of their commute. Bicycle fringes can't be funded on a pre-tax basis. This provision is effective for tax years beginning after December 31, 2008.

 

Related Topic(s): Benefits