SLuskin

It dependes what you mean by "audit". Each claim has to be looked at to make sure of several things: that it was incurred (date of service and not date of payment)during the plan year and after the employee enrolled, and that it is one of the permissible expenses, that the documentation from the 3rd party provider of the service contains the necessary info. If the IRS audits your plan, one of the things that they will want to see is a denied claim log, showing that not everything submitted was rubber stamped and approved.

The hospital usually divides the charges for the mother and the baby. While I can see the father claiming the baby expenses, everything I have read on domestic partners says that those expenses cannot be run through the FSA.

I don't have statistics, but of our clients, only 3 have eligibility upon hire. Of those, 1 has an extra waiting period for the medical expense FSA. Most clients use their probationary period as eligibility for the group medical plan, and thus the Sect 125 (at least POP)

I agree with Kip. It is virtually the same as someone on vacation in Europe. They get sick and incur expenses there. Some HMOs will cover some of the expense, and some PPOs will treat as out of network. The actual out of pocket in US dollars shoudl absolutely be permitted.

We have just checked with the IRS on this very issue. This is absolutely not a family status change, and the employee cannot be permitted to change. If it were the first time the spouse were eligible for health insurance, yes, that qualifies. Otherwise, it does not. It is one of the most unfortunate aspects of the POP plan and one of the only true negatives.

According to Harry Becker of the IRS, if the daycare provider changes its rates, it is to be treated the same as if a health insurance carrier changes rates mid year. Yes, the election can be changed. However, if the employee changes daycare providers, the elelction cannot be changed.

First, you can't amend the Section 125 Plan to include the group term life as you described it. Second, I would try to file the return and wait for the IRS to send a letter asking why it was late. I would then respond to exactly whatever the IRS asked. We have had good luck getting penalties abated for legitimate reasons. We do not ask when we feel that the client knew and just procrastinated.

I don't think so. This was something caused by the employer and not by the provider of the insurance. Therefore, no changes of any type should be permissible.

We have been using Mayer Hoffman McCann for almost 10 years. It is a dos based system that they indicated will be updated to windows. We use it through windows, however. If it is just for your company, you might be better off having a Section 125 administrative services firm do it for you.

Taking an unpaid leave of absense can be a family status change.

There are many administrators who do not consider 175 employees "small". YOu might look up some on Benefitslink and compare those costs with the costs of doing it yourself. The administrators should always be up to date on changes, etc. and you might find that difficult to do.

Corbel usually has a seminar once a year or so. I also will be attending the EBIA seminar in Minneapolis in May. [Note: This message has been edited by Lisa Hand]

First of all, you have to determine if the wife's aunt is actually a dependent for income tax purposes. If not, you can't run anything through the plan. If she is, you can only run ligit medical expenses through. Not custodial care. So, if she gets prescription meds and MD visits there, those could be run through, but not the room/board/assistance with ADLs type expenses. And not dependent daycare, as it is not employment related.

I don't think you can ever offer dependent life insurance in a Cafeteria Plan.

Does anyone have any experience with a retiree in a flexible spending plan? He will be getting a payout over a few years, and wants to "payroll deduct" for his unreimbursed medical expenses and his wife's COBRA premiums. ------------------

We have also reimbursed expenses for breast pumps. Sometimes the babies are prone to allergies and need the breast milk. If the mother is working, this seems like the only way to accomplish that. The important thing seems to be that it be for the health of the baby and not for the mother.

You do not have to file a separate 5500 for your dependent daycare plan. You will need 1 for the Cafeteria Plan as a whole, 1 for the unreimbursed medical FSA if more than 100 participants in it. As for the rest, it depends on how you have them defined. If 1 plan, it will include health, di and life. If 3 plans (3 different plan years, for example) you will need a 5500 for each.

The only insurance that I am aware of that typically is offered to parents is group long term care. The employee must generally purchase coverage on him/herself first. I think you can also purchase it on a spouse.

I don't think that anything can be done retroactively in a Cafeteria Plan. In the documents that we prepare, we always have a definition of "fulltime" if this is a criteria, ie number of hours generally worked per week. Part time workers may not be eligible for the employer-sponsored heatlh and dental plans, but the employer may still want to have them participate in the voluntary products. It might help in the discrimination testing. We have generally had good luck with getting mercy from the IRS for non or late 5500 filing if we can reconstruct exactly why it wasn't done and promise that the 5500s will be on time as long as we are involved with the plan.

Actually, LTC policies were always prohibited from Cafeteria Plans. After Congress/IRS decided that they would give the LTC plans tax qualification, they just restated that "LTC Plans can still not be a part of a Cafeteria Plan". Therefore, I would not put it in, even as a taxable benefit. It can be offered on a group basis outside of the plan just like UL should be offered outside the plan. The Benefits and Health Insurance lobbies are working on this issue.

There are a few categories that we might thing were "employees", but are actually considered by the IRS to be self-employed, and therefore ineligible to participate in a Cafeteria Plan: 2% or more shareholders in an "S" Corporation, partners in a partnership and sole proprietors, partners in an LLP or an LLC. Don't forget to use the stock attribution rules for this as well.

It is a C corporation, with no plans to make an S election.

A premium only 125 Plan currently has 1 owner/officer. Discrimination testing has been passed. This owner wants to somehow give ownership in the company to the other 6 employees on an equal basis. That means all would own about 14%. There would be no non-key people in the plan. What happens? Do they have to stop the plan or since the plan does not discriminate in favor, can they keep it?

We have been administering cafeteria plans for "mini-employers" for about a year (over 9 years for larger employers). It works the same for non-profit organizations as for the "for profit ones". Generally, an employer would expect to generate at least enough in FICA savings to "pay for" the administrative expenses of the plan. With less than 10 employees, that doesn't happen. Often, with only 4 employees it is hard to pass the discriminiation tests. However, for non-profts, there are no shareholders, so testing becomes easier. It might work, depending upon what benefits you wanted to offer to your workforce.

You could also establish a Section 125 Plan with a medical expense reimbursement account. You could cap it at $4000 or whatever amount you wanted. The employer has a number of risks in doing this. For example, if an employee submitted a claim for $1000 of counselling and had not payroll deducted that amount yet, the plan would still have to reimburse him. Then, if the employee leaves your employment, you would lose the balance between the employee contributions and disbursements. The account can be limited in the document to mental health expenses only, although very few employers actually place limits like this in their plans. Most open it up to a wide variety of permitted medical/dental/vision/mental health/etc. expenses