LRDG

Gluten free diets are not eligible for 100% reimbursement from a medical FSA. The cost of a medically necessary diet is reimbursible only to the extent the cost of the special diet exceeds the cost of a regular diet. Example: Gluten free bread cost $4.00, regular bread cost $3.00, the eligible deduction is $1.00.

Edited to add: Curious if there has been any official or unofficial explanation of the impact of recent addition of OTCs paid with FSA funds and the medically necessary standard in Sec. 213? Can the plan deny the claim for Celaic Disease food preperation/dietary instruction in this claim, but reimburse another OTC medical tretement for Celiac, a disorder of the digestive system, for which the primary treatment is a gluten free diet. Versus reimbursing an OTC cold medication that does not require a dx, no supporting documentation, no physician name, no patient name, with presentation of a register receipt with 'Tylenol' or barely recognizable abreviation for same. Sec. 213 is the standard for making an eligibility determination, IMO. I would require a RX from the dx-ing physician, but in light of the OTC standard, I'm not sure I would deny this claim based on the nature of the disorder, the OTC treatment via dietary restriction of gluten, food preperation instruction for gluten free diet, with a record of the dx'ing physician, and patient's identity and dx is known.

This sounds like "Total Compensation", which is a statement prepared for each EE, is comprehensive evaluation of all ER paid/provided benefits expressed as BENEFIT CREDITS. It can be EE directed or simply a statment of ER allocated 'credits'. Usually there is no change in ERs benefit package, is only a means of communicating itemized benefits and dollar value not included in a pay stub.

Sec. 213 defines medical expenses eligible for reimbursement from medical FSA and medical expenses eligible for tax deduction purposes. If lactation consultation is provided for more than 'general health or well being' it may be eligible.

Forgot to mention that dependent care as described in Sec. 129 includes care provided for adult dependent care. This could in limited circumstances include care for disabled adults such as a spouse, mother/father, grandparents, inlaws, sister/brother, aunt/uncle and disabled children older than 12 yoa. If for instance the care is provided in home, and expenses exceed the maximum annual $5,000 allowed under Sec. 129, the balance of the expenses may be paid from the medical FSA of the Sec. 125. Establishing how much of the care is costodial/non-medical, from care that is medical due to disease, disoroder, or level of disability may be indistinguishable. Sec. 129 includes care provided for disabled dependents more than 12yoa, vs. the medically necessary care described in Sec. 213 for the medical FSA. Care that is provided in home, through a child or adult day care center, or long term care facility, can easliy exceed the maximums allowed under a Sec. 129 plan. Taking advantage of both a medical and dependent care FSA to reimburse these costs can be significient financial benefit because of exclusion from taxable income and tax savings through pre-tax payroll deduction and subsequant reimbursement, in addition to the lower income tax bracket based on lower W-2 form income.

No. Kindergarten expenses are eligible DC expenses if they are "employment related DC expenses", meaning the DC is provided in order for you, and spouse if you are married, to work. It can be a private Pre-K through 12th grade school. According to IRC 129, the educational benefit must be an incendential benefit to the day care benefit, even if it is private school and all day w/extended day care hours/expenses for pre-school age children of working parent(s). Parents make the determination that the child is receiving benefit of an education that is incidential to the day care/child care benefit provided. Tutition for 1st grade and beyond is not eligible dependent care expense, with the exeption of before/after school care, which is eligible through age 12. The simplified explanation is that legally, children are required to attend school, which is provided via public schools, paid by tax payers. These general rules apply to dependent care expenses excluded from income via Sec. 125/129 plans, a stand alone Sec. 129 plan, or if the the parent/s claim child care expense deduction. Under the 129 plan, the max amount is $5,000 per year, regardless of the number of children, with possible lower dollar limits for parents who are unemployed but seeking employment, disabled or full time student. The tax credit is slightly different, is based on the number of qualified children in child care. The child care expense tax credit limits expenses to $2,400 for 1 child or $4,800 for 2 or more children no more than 12 year of age. Summer day camp expenses are also eligible DC expenses under Sec. 129 for employment related day care for children no more than 12 yoa.

if the child is leaving private child care/pre-K and is entering kindergarten in the public school system at no cost, than yes this is a change in provider allowing election change, unless the plan prohibits election changes. Caution about overlooking before/after school care fees.

I have collected personal checks from employees for the premium amount, less payroll tax such as Federal, State, Municipal, FICA savings, and adjusted payroll records retroactively. For example, I would collect a personal check for $73.00, representing the uncollected premium of $100, less $27.00, or 27% total tax savings on the premium, and adjust EEs' payroll records.

I agree that, as a practical matter, no more than 30 days from the qualifying event is an appropriate period of time to allow election changes. I would only add that in some circumstances, through no fault of the participant, I have allowed an appropriate time period extension. The circumstances could be a delay in the receipt of documentation, delayed or lost mail, or ER, administrator or third party error. This is the most exhaustive and cohesive evaluation I've seen on the subject of deadlines for election changes, and of Sec 125-4. Although I haven't reviewed the regs. yet. (is there a link, perhaps?)

The ER can't, or shouldn't, do nothing. DC benefits have already been paid as untaxed income received by EEs. That's assuming that no plan exists for ER paid DCB other than as a salary reduction agreement/ reimbursement arrangement under Secs. 125 and 129. There are 2 possible options that come to mind to correct in 2007 the untaxed Sec. 129 benefits received by EEs in 2006. 1st option, ER can allow the EEs to re-pay 2006 benefits on a pre-tax payroll deduction basis from 2007 income. If ER chooses this option, I would recommend distuingishing deductions intended for repayment of 2006 benefits from deductions intended to fund 2007 DC account. Deductions for 2007 should only fund the 2007 DCB reimbursement account, the 2006 deductions used to off-set the 2006 DC benefits EEs have already received. 2nd option, ER can issue amended/corrected W2s for 2006, by including in taxable income the 2006 DCB paid in error by the ER. This may require EEs to amend their individual 2006 tax returns. If this option is choosen, the 2006 salary reduction agreement may need to be voided with clear explanation of events, providing a clear payroll and benefits audit trail. Documentation is important. 5yrs from now, a benefits, payroll or IRS auditor should be able to understand the transactions. Wouldn't want to trigger an otherwise unnecessary audit. Technically this is not an ERISA plan, nor are the amounts tax 'deferred', but are more accurately amounts excludible from taxation.

"Seems to me that this is just a typical 125 plan. But I would be curious to see the Plan Doc. and SPD (or whatever they have in writing)." Jacmo, it seems to be an attempt to avoid establishing a Sec. 125, and possibly to reduce compensation based benefits, payroll taxes, WC premiums. Don Levit, I'm assuming it's not a govt. entity/plan, and no salary reduction agreements. (Regretably more supositions than brain cells can manage this morning.)

In lieu of a salary increase, a close relative agreed to reduce a salary contract by an amount equal to the cost of health and dental premiums. Five years later the new salary administrator/parish priest, advised that the parish could no longer "pay" for benefits. School boards are very political entities, particularly when it involves benefits and salaries. I doubt salary reduction contracts of this type are administered by a public school board.

I'm familiar with the concept of establishing accounts for various benefits, some of which are funded, other accounts operate as an accounting function only, for instance insurance premiums paid pre tax are accounted for under Sec. 125, but the funds are actually paid to the insurance carrier. Health FSA annual elected amounts are made available, but are not typically funded immediately. DOL has issued a negative opinion on this type of arrangement. Not specifically with regard to Sec. 125, because the employer organization that attempted to engage in this practice with employees did so years before IRS wrote Sec. 125 into the tax code. If this type of arrangment were legal, 'we' would have no need for written PDs, SPDs, salary reduction agreements, etc.

"EDIT: Answer my own question, final regs on change of cost/coverage, http://www.irs.gov/pub/irs-irbs/irb01-07.pdf , Mary was on right track. Health FSA's are excluded from change in cost/coverage by reg 1.125-4(f)(1). So EE could drop spouse from other coverage (such as medical/dental/etc) but can't change FSA. " The restriction on changing Medical FSA election for 'change in cost/coverage' applies only if the insurance plan experiences a change in cost (=premiums) or coverage (= copays, out of pocket expenses, providers). In other words, if the insurance plan experiences a change in cost or coverage, the increased insurance premiums paid under a Sec. 125 can autmatically change, but not the medical FSA election. Since this situation concerns an incerserated(sp) spouse of a participant, not insurance plan cost/coverage changes, it has no baring on the medical FSA. The reference to reg 1.125-4(f)(1) does not apply here and has no bearing on DC FSAs. Changes in DC service provider's charges would qualify for DC FSA election change, but not under the cost/coverage change rules established for health/medical related expenses. If the employee's incerserated(sp) spouse's health insurance premiums are paid under a Sec. 125 plan, the same election change eligibility standard would apply for both the premium election change and the medical FSA election change. In other words, if spouse's incersation is considered eligible reason to drop health insurance under the 125 plan, it's an eligible medical FSA election change as well. On the other hand, if the employee's spouse's incerseration(sp) does not qualify for change in Medical FSA election, it can't be considered an eligible change for dropping health insurance coverage and corresponding premium payments. "In fact, when he went to prison, I had elected dependent daycare, and found I could not use it since my spouse was not employed or disabled." In order to qualify to participate in the Dependentent care FSA, employee, and spouse if EE is married, must be employeed (or spouse must be disabled, or full-time student, etc.). Since your spouse was not employed, you could have been considered ineligible to participate and allowed to revoke your prior election. On the other hand, your spouse could not meet the legal burden of parenthood, he was not legally available to act as a full time parent or engage in employment activities. Despite the circumstances, you were not relieved of your parental responsibilities. Legally you are required to provide financial support, because it's illegal to leave children under a certain age unsupervised/unattended, you needed child care. It's possible for Child care to be provided at no cost by a friend or relative. Based on interpertation of the regs, circumstances, intent of the law, it could be handled either way. In my opinion, child care could go either way.

Unless there is some overridding, essential bussiness need to implement the fiscal plan year sooner, I'd suggest doing exactly the same, short plan year 1/1/08 thru 06/30/08. If there is an unavoidable reason for the 07/01/07 PY date, consider conducting a survey of those EE who might forfeite funds. Confidence in the plan is at risk, possibly for a very long time to come. If forfeitures are involved as a result of the short plan year it's possible the plan may never recover former participation levels, and potential consequences on other benefit plans. Based on experience, scorned employees can be brutal.

Prior to 1989, family status/election change rules were far less comprehensive than what exists now, primarily the result of complaints to IRS officials like Harry Becker, lobying groups such as ECFC, adoption of COBRA, etc. 'Family status change' rules prior to 1989 were not an all inclusive list, and for instance did not include reference to change in employment status of the employee or spouse, and did not address child care FSA election changes at all, both were added later. Election change rules did provide underlying guidence that "life event/family status changes beyond the control of the employee" could be considered qualified status changes. That underlying principal for determining if an election change should be allowed has not been revoked or amended that I know of. I don't considered the current status change rules an all inclusive list and don't believe the regs were intended to be all inclusive or to the exclusion of all other possible life events.

Emergency relief provisions were issued in the aftermath of the hurricanes of 2005 for the affected areas of the Gulf Coast. I do not recall if these were issued by DOL, Treasury or IRS. If you or your organization are a member/s of a benefits association, ECFC for instance, they would likely be of assistance. Good luck finding answers and getting the help you need.

Minus the payroll function, it doesn't sound like a Sec. 125 plan. How are FSA's funded and how are Medical/DC FSA expenses paid?

"Health FSA's are excluded from change in cost/coverage by reg 1.125-4(f)(1). So EE could drop spouse from other coverage (such as medical/dental/etc) but can't change FSA." Cost and coverage rules apply specifically under circumstances when the health plan changes result in premium increase/decrease cost, out of pocket and co-pay cost changes. Under such circumstances, the Sec. 125 plan allows for the premium cost changes, but not FSA election changes despite changes in co-pays and out-of-pocket. Did the spouse terminate employment as a result of going to prison? Are prisoners' medical expenses covered under Medicaid or other similar health coverage specifically for prisoners? In any case I would argued that the prison health plan covers 100% of medical cost and would be consistent with a FSA election change.

Your cohort may be thinking of constructive receipt concers, which I agree with. I'd consider that in addition to the Cobra issue/s raised.

I've experienced first hand some interesting interpertatins on the topic of Sec. 125 salary reductions and reducing teacher salary contracts, particularly in private school settings. There is no reason to do this, and many reasons not to. Retirement plans, Disability income, life insurance are all salary based and it's possible for teachers to experience reductions in these benefits. Also, the answer depends on what happens when new salary contracts are drawn up next year, or 5 yrs down the road when there are new salary administrators unaware of the reduced salary contract, and decide the school will no longer 'pay' for the benefits.

One of the principal underwritting considerations for most group coverage is the 'actively at work' provision. Employees 'actively working' includes underwritting assumptions that the employees are not at death's door, and rates are priced accordingly. The application usually has the actively at work for the past 30/60/90? days question vs. the lengthy medical history application for fully underwritten policies. Unless s/he lied about being actively at work, if the insurance company issued a policy and/or accepted premium payments, simply returning the premiums may not be an option. Many states enforce insurance laws requiring benefit payment once Insurance company premiums are billed/paid and a policy has been issued or is pending issuence. Returning premiums may not be an option. Terminating group coverage that would have otherwise covered the employee could be a stronger legal argument.

Medical FSA reimbursements for ineligible claims paid on behalf of civil union/domestic partners should be reversed from each eligible participant's Medical FSA. Offset the ineligible amounts from future claims. The individuals should be notified in writting, explain how the error occured and how it will be corrected. Benefit statements, FSA EOBs and all other mid year communication pieces should include a written explanation to DP/CU participants of the necessity to correct the administrative error. If it's necessary to 'motivate' participants to cooperate, stress the importance of correcting the error due to adverse IRS consequences of accepting ineligible FSA reimbursements.

Any retroactive corrections must apply to the plan year (or tax years for non calendar plans), in which the error was made, the compensation was earned and excluded under the FSA. Amended W2 should be issued for the corresponding year, and adjustments to corresponding payroll tax withholdings. oops on post #9.

I'm not familiar with FSAFEDS. Sounds like it could be a federal govt., SPD for a FSA. Wish I had a link for you to Sec. 213.