Health FSA Forfeitures Plan Assets

[Guest newtobenefits]

Everything I've found seems to make clear that salary reductions to a Health FSA are plan assets when they can be reasonably segregated from the employer's general plan assets, even if they are not actually segregated.

Employer holds salary reductions in a large general account and uses the funds to reimburse a TPA who pays the actual claims.

Anyone see and leeway here to avoid calling these plan assets since they are held in large generally named account??

any help/cites are appreciated.

[J Simmons]

Everything I've found seems to make clear that salary reductions to a Health FSA are plan assets when they can be reasonably segregated from the employer's general plan assets, even if they are not actually segregated.

Employer holds salary reductions in a large general account and uses the funds to reimburse a TPA who pays the actual claims.

Anyone see and leeway here to avoid calling these plan assets since they are held in large generally named account??

any help/cites are appreciated.

You're right, amounts corresponding to the salary reductions are plan 'assets' in essence commingled with the ER's general account assets. However, the DoL has a non-enforcement policy yet in effect as to the requirement that these particular plan assets be held in a separate trust subject to ERISA audit and reporting rules. ERISA Technical Release 92-01, 57 Fed. Reg. 23272 (June 2, 1992). For a fact sensitive application, see Phelps v. CT Enterprises, No. 05-2071 (4th Cir. 08/09/2006).

More problematic is whether also exempted would be as your title points out (a) the plan's net experience gains for a plan year from flex accounts, particularly to the extent such might exceed the plan's operational costs and past years' net experience losses, and (b) amounts paid by COBRA continuees for their coverage.