Jacmo

Last summer I left an employer with a negative balance in my FSA (I overspent deductions to date). I got a notice from the TPA that I owed the money. I ignored it. I got notices that insinuated I could legally get that overspent money by taking COBRA (basically, paying it back in.) I ignored it. I got other notices--ignored them too. 4 months ago, they finally gave up, although I did get a final accounting in January. I've heard nothing since.

Seems to me that the employee has been denied the pre-tax choice on the basis of having a domestic partner.

There are a number of different tests to run. Best bet is to subscribe to a tax/law service, such as EBIA, and get their 125 manual. It will tell you how to run tests. Another option: Research these archives. To J Simmons--I think you may be referring to the 25% test. (I don't know of a 1/3rd test). The 25% test states that key employees shall pretax no more than 25% of all dollars being pre-taxed by all employees. Thus the formula would read "K over K+N = 25% or less" where K is the total dollars being pre-taxed by key employees and N is the total dollars being pre-taxed by non-key employees. This is just one of several tests.

Actually, the employer IS the benefits police, as needed per section 125. Even though an employer may hire a TPA to administer an FSA, ultimately the employer is the plan sponsor and subject to all of the requirements of section 125, including determining if an expense is eligible or not. The employer IS held to the "lofty" standard of the law--section 125.

Yes--similar to the way you would do it for an IRA. And most likely, the custodian will require you to fill out the correct form and designate which year you are making the contribution for.

Each will have to carry separate coverage for both to get the employer contribution--dependents can't get employer contributions. Is the employer's contribution tied to the election of a coverage or available to all employees who are HSA eligible (i.e, covered by a HDHP)? You state that employer contributions are made to all employees. In the last scenario, the indication is that she does not have a separate HSA, in which case they don't have to split the limits.

1) Dental and vision out of pocket expenses can be filed under either the FSA or HSA, depending on which the employee has. 2) Dental and vision out of pocket expenses are medical expenses under 213 3) Some employees might not be able to tolerate the exposure of an HDHP because it takes time to build a balance in the HSA. Under an FSA, they have the right to their total annual election up front. So they don't have to worry about getting caught early in the year with large out of pocket expenses. For a list of types of folks who might not find an HSA suitable for their situation, go to www.gao.gov/new.items/d06798.pdf

No. Your HSA can be in place no sooner than the first of a month you are covered by a HDHP. And of course it can be in place as late as April 15th, 2007 for 2006. (All of this is subject to other funding requirements such as the 1/12th rule for 2006 and prior.) Extensions are not included.

1) It is something that the plan administrator must allow for, i.e., include as a now legal, mandated option (assuming they have an FSA grace period) 2) The rollover amount does not count toward the allowable HSA max. 3) The FSA rollover amount has no impact on the original annual election. It's simply an additional option (call it an "eligible expense"?) for remaining year end balances.

Sounds to me like they've got to hold open enrollment all over again. They have made a major material modification to their plan. I assume you have their announcement in writing. It may be time to see an ERISA attorney.

Thanks, Bob. But---that doesn't make sense for future participants. Someone comes into the workforce for the first time, and must refer back to a date when they were a high school or college student, when their FSA balance was a "zero"? That kind of legislation would be self defeating, and increasingly irrelevant with the passage of time. I believe the 9/21/06 date was just for '06 FSA participants.

They can do exactly what they wish to do through an HRA, with no problems. Don't know why the ins. carrier is crying foul, unless maybe because it's an HMO type of health plan? Even that probably wouldn't make a difference. An employer can set up an HRA to do whatever they choose to do that's health related, doesn't discriminate in favor of highly compensated employees, and treats all employees of a particular class of coverage equally.

I can't give you specific code quotes but it wouldn't make sense to require the banishment of all general health FSAs, which could be used with the other health options, just because another combo is available (limited purpose FSA/HDHP/HSA). Just because an employee elects the HSA option, should that mean that those who don't elect that option be punished? That is not the spirit or intent of the law. In many years past, when guidance was lacking under 125, (not enough regs and/or no final regs), the general approach was that any decisions made should not benefit highly comped or key employees more than 50% of the time, or to a point that an anti-discrimination test would be failed. In this case, keeping the general FSA option for use with the other health options would not likely violate that approach. Act in the best interests of the non-highly-comped employees until further guidance is available. You can adjust later if necessary.

MaryMM: Don't you kinda think he will, since he is a Republican and HSAs are a Republican "pet"?

Included.

Rollover_Memo_no_name_pre_1107.docAnybody see anything wrong with the attached memo to employees regarding FSA/HSA rollover? Group has a grace period for FSAs.

If the employer already has a 125 plan in place, it's a slam dunk no brainer to add HSA elections as an eligible benefit. If you've seen some of the sorry interest rates being paid by HSA custodians, (like any typical bank savings account) then you will understand the value of SLuskin's comment above. Anything that can add an extra 7.65% (plus state income tax per cent) is very worth doing. Furthermore, most plan administrators are familiar with 125 requirements but not the 223 comparability requirements. When pre-taxed under 125, the 223 comparability requirements go away.

Everybody now understands of course that contributions are no longer limited to the "lesser of" deductible or reg. max. Eff. Jan. 1st everyone can make the max contribution of 2850 or 5650 regardless of the deductible, due to changes in the law made 12/9 for 1/1/07.

Answer to 3rd paragraph: Yes. The plan document and spd spell out what preventive services are payable. Actually, I don't see why you couldn't provide for both post-deductible and preventive care services in the same documents. They would amend their current documents to make these changes (keep the same plan #).

How much did they fail the test by? I.E., was it 30%, 50%, etc? To find out how much the keys must pay tax on, back down their total annual contributions in the formula until they pass. Then you'll know how much to add back to their W-2s.

Why not go online to the IRS or call the IRS in Washington DC?

Rollover_Memo_to_ee__s__pre_1107.docAnybody see anything wrong with the attached example of a memo to the employees regarding the new rollover option? Thanks!

I think you've got the terminology wrong. There is no "maximum deductible". There is a maximum out of pocket, which is $11,000 for 2007 for family coverage. The $5650 figure you quoted is the Maximum annual contribution for family coverage. Hope this helps. See Gary Lesser's chart in this forum.

Two things: An FSA IS subject to ERISA Secondly, the 125 plan itself may not be subject to ERISA (except as mentioned above) but the underlying or internal health components are.

The IRS has always required claims substantiation. Nothing has changed in this regard. The problem comes when employees use the card to buy teddy bears and magazines at a drugstore. The drugstore has an approved MCC code. But it also sells items that are not health care related. The only choice is to pay and chase, unless you want to remove drugstore MCC codes from the approved codes list (which can be done). Some TPAs are now deleting drugstores--and any other provider, such as convenience stores, which also sell aspirin and band aids as well as gasoline and candy--so that their cards will only be useable at Dr.s offices and hospitals. In other words, those TPAs want to be able to "autoadjudicate" all claims--no pay and chase. Keeps their admin expense down. To maintain the broadest ease of use for the employee, you pay and chase. Abusers have their cards shut down and must file paper claims. We have an employee at one group that has been banned from ever having a debit card again. She can only file paper claims if she wants to participate in the FSA.