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Agree. The ACA market reforms require no life time or annual limits that an FSA would never be able to meet. So, you need to keep the health FSA an excepted benefit. There are two conditions to keep it an excepted benefit: a maximum benefit condition and an availability condition. If someone is eligible for the FSA but not eligible for the group medical plan then you have not met the availability condition and are potentially subject to a $100 per day per employee ($36,500 per year per employee) excise tax under 4980D for each employee in the FSA.

If an employee is not eligible for an employer-provided ACA compliant group health plan, the FSA becomes subject to the ACA market reforms.

Is there an election of some sort? For what?

Also note that Derrin discusses this in questions 9:4 through 9:9 in Who's the Employer, 6th edition. You may want to look at 9:8 in particular where they tried to make a controlled group by using options but set such a high price that the government ignored the option.

The following true story is only marginally related, but your bovine stories here brought it to mind. Many years ago, we had a neighbor up the road who stopped by one day. (I should preface all this by saying that at one time, there was a theory that it was the "wrinkles" on the brain that were responsible for intelligence). This neighbor, who has since passed away, was what might be called a character. VERY bright man, but he talked like a true backwoods type who had never been off the mountain. Somehow, the subject of cows came up. He said, "There ain't NUTHIN as stupid as a cow. Brain as big as a washtub, and not a Gawd D*** wrinkle on it!" It occurs to me that if this theory were true, there are a whole lot of bowling balls running for election this year. What am I going to be thankful for this Thanksgiving? That the blasted elections are over!!!

I can almost guarantee that Fidelity is not the Plan Administrator, but is merely providing a "QDRO Service" package to the Plan Administrator. If you want to apply pressure you, or preferably your lawyer, should apply pressure on the Employer, which is either the Plan Administrator or to a certain extent in control of the Plan Administrator. It might do some good if the Employer is understanding and is willing to raise hell with its Fidelity contact person.

This is what DOL told me as well, for the 2015 filing. I may try "kicking it upstairs" when I call back again. If they don't fix this nonsense, we have several plans that will be in the same situation in a couple of years. Have you pointed out to the DOL that filing a final 5500 for the old plan name would include falsely indicating that a resolution to terminate the plan has been adopted, falsely indicating that the plan has no participants and no assets at year end and falsely indicating that all assets were transferred to another plan? The 5500 is signed under penalty of perjury. In most cases, I would comply with whatever nonsense the DOL or IRS representative wants just to get the matter closed. But, not with something like this.