Limits and Spending Accounts
Lifetime maximums are used to indicate a lifetime (not an annual) maximum payment, such as a $50,000 limit on all payments after age 65. Annual limits (caps) are used to specify an annual limit on the employer cost of a benefit, such as a $5,000 limit on claims to be paid each year. Spending accounts are used to limit total future payments to an account balance.
Once specified, lifetime maximums, annual caps, or spending accounts are applied to a benefit (or set of benefits) under the Limits and Spending Accounts topic of a Plan Definition.
For calculation details, see the Technical Reference article Lifetime maximum, annual cap and spending account calculations.
Name is a text field in which to enter a description of the limit. This may be any descriptive phrase, including spaces.
Each lifetime maximum, annual cap, or spending account Applies to either Actives or Inactives.
Select the Type, either a Lifetime maximum, an Annual cap or a Spending account. Each type is discussed below in detail:
For a Lifetime maximum, the original amount of the limit, the Initial limit, may be specified as a:
Constant dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) or, for active members, as of the date of decrement from active status;
database Field (for inactive members only) containing the dollar amount of the limit as of the Valuation Date (or baseline Valuation Date in a forecast);
Benefit formula (for active members only) defining the amount of the limit as of the date of decrement from active status.
A field or formula is useful when the limit varies by division, location, status, etc., or has a different value for each participant.
For inactive members, the Initial limit amount entered, or contained in a database field, for a Lifetime maximum should include any increases granted after the decrement from active status occurred, such as refreshes of the limit (discussed below).
If the limit is renewed at Medicare age (see the following parameter discussion), the dollar amount, field or formula specified for the Initial limit applies only to pre-Medicare age claims.
If the Renew at Medicare age box is checked, you may specify a Renewed limit (renewed once the Medicare Coverage Age specified under the Plan Attributes topic is attained). This permits separate limits on pre-Medicare age and post-Medicare age claims. The original amount of a Renewed limit may be specified as a:
Constant dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) of the limit on post-Medicare age claims or, for active members, the dollar amount of the post-Medicare age claims limit as of the date of decrement from active status;
database Field (for inactive members only) containing the dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) of the limit on post-Medicare age claims;
Benefit formula (for active members only) defining the amount of the limit on post-Medicare age claims as of the date of decrement from active status.
A field or formula is useful when the limit varies by division, location, status, etc., or has a different value for each participant (e.g., a medical spending account).
For inactive members, the Renewed limit amount entered, or contained in a database field, for a Lifetime maximum should include any increases granted after the decrement from active status occurred, such as refreshes of the limit.
For actives, if you select the Benefit formula option, click the Edit button to define the formula for the Initial limit and/or Renewed limit.
For a inactive members, specify the database field that contains the accumulated value of Payments-to-date for the limit that applies currently, that is, as of the Valuation Date (or baseline Valuation Date in a forecast). This amount represents how much of the original lifetime maximum limit, including any increases granted since the decrement from active status occurred, has been used up prior to the Valuation Date by claims applied against it. If the limit is renewed at Medicare age, then the field specified for the Initial limit applies only to pre-Medicare age claims and the field specified for the Renewed limit applies only to post-Medicare age claims. Although accumulated payments to date may be specified for both the initial limit and the renewed limit, in most cases a field will be specified for only one of these limits. However, if the lifetime maximum is applied to the sum of member and spouse benefits (i.e., a family maximum) and the member’s and spouse’s individual ages are considered against Medicare eligibility age, both the initial and renewed limits might currently apply. For example, for a spouse age 62 and member age 70, projected spouse claims for the next 3 years (ages 62, 63 and 64) will apply against the pre-Medicare limit (assuming a Medicare age of 65). Projected member claims and spouse claims beyond 3 years will apply to the post-Medicare limit.
You may refresh the limit, that is, increase it in the future, by checking the Increase limit box and completing the remaining parameters, which become accessible.
You may increase the maximum with increase rates or apply increases just for participants who hit the limit, in the year after the year in which the claims payments received reach the limit. If Apply increase rates to limit is selected, the increase rates entered in Valuation Assumptions or Projection Assumptions will be applied to the maximum. If When hitting limit is selected, enter, in the text fields the dollar amount by which the lifetime limit will be increased when it is hit. You can specify a different increase amount after Medicare age if the Change at Medicare age box is checked. If both the Renew at Medicare age box and the Change at Medicare age box are checked, the pre-Medicare increase amount will apply to the Initial limit and the post-Medicare increase amount will apply to the Renewed limit.
The Future payments (to apply against limit) parameter determines which projected claims apply against the limit. Regardless of whether Gross benefit or Net benefit (gross benefit – participant contribution) is selected, both the gross benefit and participant contribution will be set to zero after the limit is reached.
For an Annual cap, the Cap may be specified as a:
Constant dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) or, for active members, as of the date of decrement from active status;
database Field (for inactive members only) containing the dollar amount of the cap as of the Valuation Date (or baseline Valuation Date in a forecast);
Benefit formula (for active members only) defining the amount of the cap as of the date of decrement from active status.
A field or formula is useful when the cap varies by division, location, status, etc., or has a different value for each participant.
For inactive members, the Cap amount entered, or contained in a database field, should include any increases granted after the decrement from active status occurred, such as refreshes of the cap (discussed below) and, include any increases granted after the Valuation Date.
If the Renew at Medicare age box is checked, you may specify a Renewed cap (renewed once the Medicare Coverage Age specified under the Plan Attributes topic is attained). This permits separate caps on pre-Medicare age and post-Medicare age claims. The amount of a Renewed cap may be specified as a:
Constant dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) of the cap on post-Medicare age claims or, for active members, the dollar amount of the post-Medicare age claims cap as of the date of decrement from active status;
database Field (for inactive members only) containing the dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) of the cap on post-Medicare age claims;
Benefit formula (for active members only) defining the amount of the cap on post-Medicare age claims as of the date of decrement from active status.
A field or formula is useful when the cap varies by division, location, status, etc., or has a different value for each participant.
For inactive members, the Renewed cap amount entered should include any increases granted after the decrement from active status occurred, such as refreshes of the cap and, similarly, the Renewed cap amount for an Annual cap should include any increases granted after the Valuation Date.
For actives, if you select the Benefit formula option, click the Edit button to define the formula for the Initial cap and/or Renewed cap.
The Future payments (to apply against cap) parameter determines which projected claims apply against the cap. Regardless of whether Gross benefit or Net benefit (gross benefit – participant contribution) is selected, both the gross benefit and participant contribution will be set to zero after the cap is reached.
Select Apply increase rates to cap to apply increase rates entered in Valuation Assumptions or Projection Assumptions to the cap.
For a Spending account, the original amount of the balance, the Initial balance, may be specified as a:
Constant dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) or, for active members, as of the date of decrement from active status;
database Field (for inactive members only) containing the dollar amount of the balance as of the Valuation Date (or baseline Valuation Date in a forecast);
Benefit formula (for active members only) defining the amount of the balance as of the date of decrement from active status.
A field or formula is useful when the balance varies by division, location, status, etc., or has a different value for each participant.
For inactive members, the Initial balance amount entered, or contained in a database field, should include any increases granted after the decrement from active status occurred, such as refreshes of the balance (discussed below).
If the balance is renewed at Medicare age (see the following parameter discussion), the dollar amount, field or formula specified for the Initial balance applies only to pre-Medicare ages.
If the Renew at Medicare age box is checked, you may specify a Renewed balance (renewed once the Medicare Coverage Age specified under the Plan Attributes topic is attained). This permits separate balances on pre-Medicare age and post-Medicare age. The original amount of a Renewed balance may be specified as a:
Constant dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) of the balance on post-Medicare age or, for active members, the dollar amount of the post-Medicare age balance as of the date of decrement from active status;
database Field (for inactive members only) containing the dollar amount as of the Valuation Date (or baseline Valuation Date in a forecast) of the balance at post-Medicare ages;
Benefit formula (for active members only) defining the amount of the balance on post-Medicare ages as of the date of decrement from active status.
A field or formula is useful when the account balance varies by division, location, status, etc., or has a different value for each participant.
For inactive members, the Renewed balance amount entered, or contained in a database field, should include any increases granted after the decrement from active status occurred, such as annual increases (discussed below).
For actives, if you select the Benefit formula option, click the Edit button to define the formula for the Initial balance and/or Renewed balance.
For inactive members, specify the database field that contains the accumulated value of Balance-used-to-date for the balance that applies currently, that is, as of the Valuation Date (or baseline Valuation Date in a forecast). This amount represents how much of the original balance, including any increases granted since the decrement from active status occurred, has been used up prior to the Valuation Date by claims applied against it. If the balance is renewed at Medicare age, then the field specified for the Initial balance applies only to pre-Medicare age claims and the field specified for the Renewed balance applies only to post-Medicare age claims. Although accumulated payments to date may be specified for both the initial balance and the renewed balance, in most cases a field will be specified for only one of these balances. However, if the spending account is applied to the sum of member and spouse benefits (i.e., a family maximum) and the member’s and spouse’s individual ages are considered against Medicare eligibility age, both the initial and renewed balances might currently apply. For example, for a spouse age 62 and member age 70, projected spouse claims for the next 3 years (ages 62, 63 and 64) will apply against the pre-Medicare balance (assuming a Medicare age of 65). Projected member claims and spouse claims beyond 3 years will apply to the post-Medicare balance.
For inactive members, set the Balance-used-to-date equal to the outstanding balance and <zero>, respectively. Otherwise, both of these inputs should be accumulated with interest. If the account is renewed at Medicare age, then the field specified for the Initial balance applies only to pre-Medicare age claims and the field specified for the Renewed balance applies only to post-Medicare age claims.
The Annual increase parameter is the dollar amount of annual increase in the spending account. You can specify a different increase amount after Medicare age if the Change at Medicare age box is checked. If both the Renew at Medicare age box and the Change at Medicare age box are checked, the pre-Medicare increase amount will apply to the Initial balance and the post-Medicare increase amount will apply to the Renewed balance. The Annual increase may be specified as a Constant dollar amount or a database Field for the Initial balance and if the Change at Medicare age box is checked for the post-Medicare age increase amount. The Annual increase amount may be Applied at end of year or beginning of year.
You can also check the boxes to Apply increase rates to the outstanding balance and/or the annual credits to apply increase rates entered in Valuation Assumptions and/or Projection Assumptions to the outstanding balance of the spending account after reduction by claims applied against it.
The Future payments (to apply against balance) parameter determines which projected claims apply against the spending account. Regardless of whether Gross benefit or Net benefit (gross benefit – participant contribution) is selected, both the gross benefit and participant contribution will be set to zero after the balance is depleted.