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FSA 5500's for small plans


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It seems that in the old days (10-15 years ago), it was common to find FSA plans filing small plan 5500's with < 100 participants and a Schedule I, often with very small balances remaining in a General Assets bank account. In line with IRS Notice 2002-24 which eliminated the requirement to file 5500 for small Cafeteria plans, it seems many of these plans simply stopped filing, no Final filing, no 4R code.

So my curiosity today is, do we revive these 5500's so as to Final them, particularly where a wraparound document has been created which would incorporate this plan?  In so doing, should the last filing from years ago be amended to imply 4R? Or just leave them as is from many years ago?

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Even in the old days (and continuing today) it was/is never correct to file a 5500 and Schedule I or H for the FSA part of a cafeteria plan unless someway/somehow the employer was silly enough to set up a Trust and segregate "plan" assets from the employer's general assets.

What the agencies realized was it was pretty silly to require cafeteria plans (whether or not they included a FSA) to file a 5500 and Schedule F (I think it was).

So I wouldn't amend or resurrect any prior year filings.

 

 

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  • 1 year later...

It's been just over a year since you responded to my question, so I thought perhaps it's a good time to respond back..

For clarification, doesn't an FSA plan without a trust still need to file a 5500 (when there are > 100 participants)? It's just that there is no Schedule A since there is no insurance carrier.

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I continue to contend that an FSA is not a "welfare benefit plan" but just a payroll practice or tax gimmick authorized by IRC section 125.

Alternatively it would be a "voluntary" benefit exempt from ERISA where the employer simply provides the pre-tax deduction and tax-free reimbursement of claims.

I don't think there's a 5500 code that would be applicable if you decided to file.

If you're nervous how about checking the "general assets" box on the 5500 you're filing for the group health plan which would allow you to argue that covers the FSA.

I think others on BenefitsLink disagree.

 

 

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My understanding is that Medical FSA plans are considered Health plans subject to ERISA and would use Code 4A and check off General Assets (assuming no trust is set up).

DCAP (Dependent Care) and Transportation related plans are not subject to ERISA and do not have to file 5500.

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So I think we're in agreement:

1. If <100 participants no 5500 for "real" group health plan or FSA so long as "real" plan is fully insured or general assets (no trust).

2. If 100+ participants and have "real" group health plan file 5500, indicate code 4A and check "General Assets" (if not already applicable to "real" plan). Checking General Assets covers the FSA to the extent you believe it's reportable.

Only place we disagree is if 100+ participants, no "real" group health plan but somehow you have an FSA for excepted benefits do you have to file 5500?

I say NO but sounds like you may disagree.

 

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Flyboyjohn.  I apologize, but I do not know what you mean by the term “real” group health plan used in some of your prior comments.  So I would not necessarily say that I am in agreement with your comments regarding the 100+ plans.

Health FSAs are employee welfare benefit plans, and unless they fall under a regulatory exemption, employers must file an annual Form 5500 for those plans. Health FSAs are exempt from the annual filing if they:
• Cover fewer than 100 participants and are unfunded, fully insured, or a combination of insured and unfunded;
• Are a governmental plan; or
• Are a church plan under ERISA.
Many health FSAs are not fully or partially insured, so they would not fall under the first exemption. An unfunded welfare benefit plan is one that “has its benefits paid as needed directly from the general assets of the employer or employee organization that sponsors the plan.” Plans that use employee contributions or use a trust or separate fund to hold plan assets would be considered funded, unless the welfare benefit plan with employee contributions is offered under a cafeteria plan. In that instance, the plan would be considered unfunded.

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Under no conceivable circumstance is a health FSA a "payroll practice" or a "voluntary benefit."  A health FSA is a self-insured group health plan that is subject to (except in limited circumstances such as if it was a church plan) COBRA, HIPAA, and ERISA, among other laws applicable to group health plans.

A health FSA with 100 or more participants is required to file a Form 5500. (It can be included as part of a "wrap" plan.)

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