SLuskin

We have lots of lazy participants. We ask the employer how long after a swipe is made do they want us to wait before turning the card off. Responses range from 7 days to 30 days. The employee is notified at that time that repayment is required. If they do not repay in 30 days, the employer payroll deducts that amount (after taxes), if possible. If the employee has terminated, they get a 1099.

We have employers who prorate and those who don't. It is spelled out in the docs, and has nothing to do with the ee contribution. In fact, since it is not a match, many of the employees do not contribute at all since the employer contribution covers the amount they think they will use.

I called Elizabeth Purcell, the person at Treasury that drafted the notice. She said that the extension period is only available to someone who was a participant (including a COBRA participant) on the last day of the plan year.

We have been using the informal "90 day supply" since there has never been any question about filling a 90 day prescription.

An HSA is just a trust account. How could it have an SPD? It is the underlying health insurance plan that would have the SPD.

Our software vendor has promised a fix by June 30. My clients are asking for the amendment. Attorney wants to charge an arm and a leg. Does anyone have some suggested wording that won't cost $3000?

Does anyone have an opinion on how this will affect employees who terminate midyear? Suppose that someone has made an election for $1200, makes $300 in payroll deductions, has claims of $500, and then terminates. Can the employer allow someone who has been employer the entire plan year and contributed the entire $1200 to extend the claims incurred period, but not allow this to the terminated employee? Thanks.

The effective date would be 7/1. If you made it a short year, 7/1/05 to 12/31/05, we recommend that you prorate the amount. If a full 12 month year, 7/1/05 to 6/30/06, then the amount can be $5000. There can only be 1 enrollment date per employee. Anyone who doesn't elect is out until the next open enrollment. No change can be made without a change of status. They are more liberal for daycare, but still have to be followed.

George, I thought I understood it until I read the notice. Please call or email so I can hear your thought process on this. I thought that it could be considered the same as a health insurance premium paid by the corp. Deductible to the corp as salary, added to the W2 of the shareholder, and deducted as the 100% health insurance expense deduction is deductible.

I have just read and been confused by IRS Notice 2005-8. It talks about when an hSA is or isn't deductible by an S corp and also if the shareholder can deduct that contribution on her income tax if it has also been imputed as income. Does anyone have a clear explanation? Also, can you do the following?: An S corp has 5 shareholders, including family members attributed due to Section 318. They have a cafeteria plan for the employees, but of course, cannot participate themselves. They purchase an HSA compatible plan for everyone in the company. For the employees, they contribute $1000 per year into the FSA. For themselves, the owners, they contribute $1000 into the HSA. These contributions are outside the cafeteria plan, because the owners cannot participate. Are these contributions subject to the 35% excise tax because the employees did not receive an HSA contribution? Assuming this is ok, can the S corp consider the $1000 per owner a business expense and then attribute the income to the shareholder, who then deducts it on the income tax return? Thank you so much for your help and comments.

Let's see if this is the scenario. Employer X offers 2 group medical plans. One is an HMO with very low copays and very little out of pocket expense for the employees, but with high premiums. The employer pays 80% of the premiums. This same employer wants to introduce an HSA compatible plan, but does not want to establish an HSA for many reasons. So, the employer pays 100% of this premium for the employees and also adds $300/year to the FSA of the participants in this plan, but not to those who elected the HMO. The premium for the high deductible plan plus the $300 FSA contribution is still less per employee than the 80% of the HMO premium. As long as the document permits, and as long as the employee communication pieces are clear, this seems not only ok, but the wave of the future.

Why would it not be handled like any other FSA expense? If the persons providing the treatment are licensed by the state to perform the duties that are required, the venue (inpatient or outpatient) shoud not be a factor.

They actually have to elect coverage. Be careful, though. The employer could have a little group term life or group std policy that covers everyone. Those plans would still need a 5500.

Why would you have advanced funds in the first place? I thought the best way to administer the plans is to make sure that the funds are "general assets of the employer". Is there any chance that the acquiring company would be liable to you?

Wouldn't it depend on factors like - are all employees eligible to participate in the wellness programs, and therefore receive the extra credits? When all is said and done, did the program favor the highly compensated over the nonhighly compensated? I don't think you have to give everyone identical benefits. You just have to make sure that the discrimination tests are passed.

How would you be able to run that additional compensation through the 125 plan? It seems to me that would be taxable compensation to anyone who received it. Of course, the employees could elect to use that money in either the medical FSA or the dependent daycare FSA, and then it would not be taxable.

We use Fisher & Phillips to make those determinations for us. Our attorney there told us we needed to amend all the plans and SPD for the new definition, so we did.

What software are you using to prepare the 5500's. I have been using ATX Saber for years. I like them, but it takes them forever to get the form approved. It's still not ready.

It is certainly ok to allocated between medical expense and dependent daycare expense. We often recommend that the client use excess (over the amount of admin fees) forfeitures to seed the accounts in the following year. That way, the amounts are not taxable, and all the eligibles participate in the plan. It is a great way to teach reluctant employees the benefits of the plan. The funds can also be used as part of the contribution toward the health insurance premium.

I just got the EBIA winter 2004/2005 Cafeteria Plan update. Their chart says only meals in a hospital or medical facility. All other meals they consider to be personal expenses.

Thank you everyone. What I did was put the client in touch with the attorney that we use for docs and thorny questions and let them thrash it out. The jury is still out, but the attorney will put her recommendations in writing and the client will agree or disagree in writing. This attorney will not endorse such a high cap and has certainly advised the client about not offering a benefit that the lowest paid eligible employee could not afford.

I have a new client that has introduced an HSA as the only option. The deductible is $2000 and the employer is contributing $500 in January and $500 in July. They have asked me to put in a limited FSA for dental, vision and preventive. The question is - if an employee, who elects employee only coverage, is married to someone who works for another employer and that employer offers a non-high deductible plan, where does that leave the employee? The employer didn't even tell me that their health plan was an HSA plan - I found out in the open enrollment meeting and did an abrupt about face for the FSA.

A law firm client has asked to raise the cap from $15,000 (they do pass their discrimination tests) to $75,000. I have told them no, based on the fact that they have many employees who do not earn at least $75,000. Therefore, that benefit would not be available to those employees. The law firm is not buying it. Any help or ideas here? Thank you.

It would be great if you could test only on those who elected daycare, or even on only those with eligible dependents. But that is not the case. In some cases, you can exclude those with less than 1 year of service or whose income is less than $25,000. Otherwise, it's everyone. The EBIA cafeteria bible has a great multi page explanation of these tests.

Carly, there has to be a good business reason for changing the plan year. For example, the group health plan renews June 1, and you would like the Section 125 plan to renew at the same time as the group health plan. You can have a short plan year, but not a plan year longer than 12 months. You cannot change plan years often (I had heard rule of thumb not more than 2 times in 5 years), and it cannot be for the purpose of avoiding any of the "use it or lose it" or the employer risk of forfeiture.