papogi

Check out this link. The consensus is that these charges are reimbursable. http://benefitslink.com/boards/index.php?showtopic=13346

Under 125-4, it is a status change, and an election change is allowed as long as it is requested within the time frame specified in your 125 doc. The only stipulation is that the cost change must not be imposed by a relative (the daycare provider must be a daycare center, not a relative).

Since we're talking about an HMO, the husband effectively has no coverage anyway since he is out of the service area. Of course, he could still drive back to the network for services. Check your 125 plan doc. You very well may have a valid reason to deny the request since it is after 30 days.

The rules in 125-4 concerning changing elections outline all possible changes to Cafeteria Plan elections. Not all 125 plans adopt all the possible events which can give rise to an election change. In addition, status changes do not give an employee free reign to change elections. Consistency rules must still be adhered to. Check this out for a good summary of what is allowed under Section 125 given the particular change at hand: http://www.125plan.com/COS_Matrix.PDF Also, keep in mind that these 125 rules do not supercede the rules of the underlying plans. For instance, a married couple is employed by two employers, the husband with a 1/1 flex year, the wife with a 7/1 flex year. Assume the husband wants to add his spouse to his plan. She drops her coverage on 7/1. A voluntary drop such as this is not a HIPAA event, so special enrollment provisions won't help. Section 125 will allow the husband to add his spouse with pre-tax dollars, assuming the underlying plan allows the spouse on mid-year with no HIPAA event. You have to look at each particular situation, and check both the underlying plan, as well as what is allowed under 125. Please post again with specifics if you want.

IRC 125-4 deals with address changes and election changes. In that section, it only states that an address change which affects eligibility for an employee, spouse, or dependent is a status change which allows an election change, as long as consistency rules are adhered to. For instance, a change in residence which does not affect eligibility will not allow you to come onto a plan which you haven't already signed up for. The cost and coverage changes section deals more with the restrictions such as having to elect a similar plan if one is available, and these don't apply in this case. Based on the regs, the employee should have the choice of dropping the husband from coverage entirely, or enrolling him in the PPO. As far as 125 is concerned, it's up to the employee. You'll also have to check the provisions of the underlying plans.

Since 125 requires that elections be for 12 months (except in stated short plan years), and that elections cannot be changed outside of situations addressed in 125-4, then I think the employees and employer are bound to honoring their original agreement. The employer needs to take all the necessary deductions. I just don't see any way around it. If an employee's pay is too low to allow the full FSA deductions (state wage law minimums held to, as well), then the employee should submit the extra amount with a post-tax check. What little guidance is given by the IRS concerning mistakes surrounds situations where incorrect reimbursements are made, or where an employee elects a DC account and doesn't even have kids. While payroll has made an error, every participant has also gotten paystubs showing no FSA deductions. I think that the original elections need to be adhered to, but I have no concise IRS cite which addresses the rules of 125 in light of an error such as yours. That is just my interpretation of the regs, and a smattering of IRS guidance.

There is really no reason that the original elections should not be honored, and they should not be given any opportunity to change their elections. The coverage should continue through the hiatus. Payroll should take increased deductions so that the total elections are maintained. There is nothing in the regs that says that deductions must be made weekly/bi-weekly, etc. They can be taken really over any number of pays. This should not really be a problem. Only DCFSA's could pose a problem. Since you only have access to what has been put into the account, there will be a bunch of DC claims during that span that will be waiting for these big payroll deductions.

The post is not specifically about FSA's, but that statement is true. If the cost decreases significantly, the employee may begin participating in the 125 plan. If the cost increases significantly, the employee may only drop coverage or change coverage to a similar plan. This means that significant cost increases do not allow employees to begin participation in the 125 plan. In that case, they would have to wait until June 1.

In vitro (outside the body) fertilization has been specifically addressed by the IRS and is reimbursable.

Based on the regs, my thinking on this is that an employer could do this, but they would have to do it for everyone who is retiring. For instance, if they give the retiree a choice between the taxable payout of sick time and money going into an HRA, you create a situation where the HRA is being funded indirectly through salary reduction. As long as the retiree is not given that choice, then there is no salary reduction. Retirees must be required to take the HRA.

Even if no claims are paid during the LOA, it becomes more complicated in the sense that the employer has very little it can do to recoup the money (advanced FSA contributions). The employer may have unpaid wages, vacation pay, or profit sharing benefits from which the FSA deductions can be taken. This recoupment must not violate any state wage payment laws. The employer can certainly ask for the money, but they may not have much luck. If claims are paid during a time later determined to be a period of time with no coverage, the IRS has indicated that a check from the former employee is the only way to correct the improperly paid FSA claim. A 1099 issued to the former employee is not acceptable.

HIPAA only requires that a plan allow an employee on outside of open enrollment if they have exhausted their COBRA rights, or, if the coverage is not COBRA, if the individual becomes ineligible for coverage or the spouse's employer ceases contributing to the plan. The employee dropping coverage voluntarily at the spouse's open enrollment is not a HIPAA event. HIPAA gives the bare minimum. The plan may be written such that a drop at open enrollment is a loss of coverage, but the bare HIPAA rules won't help. As an aside, keep in mind that the 125 rules (if this is a 125 plan, as well) allowing election changes when one spouse's open enrollment period is different than the other spouse's will not help. They only say that pre-tax 125 elections may change under these circumstances. They do not override the provisions of the underlying health plan.

Yes. The test basically looks at all dollars being sent though the 125 plan. Those dollars include pre-tax payroll deductions and any flex credits (even those provided by the employer) for which there was a cash option.

The company car is a fringe benefit. Fringe benefits are to be included as taxable compensation by your employer on your W-2 unless the employee pays fair market value for the benefit. I'm thinking the employer never added the FMV of the personal use portion to each employee's paycheck in the past. One way around this is if the employer begins making the employees pay the employer for the personal use of the vehicles. That's probably where the $45 is going.

If the 25% Key Employee test is failed, then all key employees must be taxed on all amounts which were otherwise available as cash. That includes FSA and DCAP amounts, as well as other pre-taxed amounts which could have been taken as cash. That test applies only to key employees. HCE's and NHCE's really don't enter into this. Those definitions are used for the eligibility and benefits test, not the 25% key employee test.

The IRS allows changes to an election when someone comes off of government coverage, but I see nothing that allows a change when acquiring government coverage.

If one taxpayer is eligible to claim another as a dependent, that dependent is not allowed to claim him/herself, even if the other taxpayer does not actually claim the dependent. They can't both file single and claim personal exemptions in this case. If one individual is truly another's dependent under 152, then the one taxpayer must report the other as a dependent unless they both decide that neither one wants the exemption (that should never happen).

Since the IRS does not recognize same sex unions as marriages, they cannot file jointly. One individual will file single, and claim the other as a dependent (under Section 152), for a total of two exemptions. The other individual will file single, but since someone else can claim him/her as a dependent on their taxes, he/she will not be able to claim himself/herself. You just need a copy of the taxes filed by the person who claims the other as a dependent. Their domestic partner will be on line 6©.

I would think you have an argument as long as you don't exceed the amount on the original election form. The only problem you might have is a situation where an HCE elects a low amount one year because of his/her past experience having to reduce the election mid-year, only to find out that he/she didn't need to artificially lower the original election this year and wanting to raise the election. In that case, they shouldn't be allowed to increase.

One would think that salary decreases should count as cost increases (since the benefit percentage of their pay is going up when their pay decreases), but the IRS doesn't see it that way. Even if they did, cost and coverage change rules don't apply to health care FSA's anyway.

Check out this thread, and read it in its entirety: http://benefitslink.com/boards/index.php?showtopic=16301

If the HCFSA plan has more than 100 participants (I'm assuming yours does, since you said "big"), and is not a gov't or church plan, then you will have to file 5500 under ERISA since the FSA is considered a health/welfare plan. If FSA checks are paid out of an account in the sponsoring employer's name, you will not need Schedule H.

According to Harry Beker, employers have some room to interpret the regs with regard to ortho to allow up front reimbursement, or to require a schedule from the orthodontist so that you can more easily match actual services with FSA reimbursements. Personally, I would request further info from the employee and orthodontist so that you can have a more conservative interpretation of the regs. I would make every attempt to make sure that only the 2002 expenses are reimbursed from the 2002 FSA, and the 2003 expenses from that account. You have every right to require further documentation in a gray area such as this. If the employee doesn't like it, he/she can try the Schedule A route for this medical expense (with the well documented limitations). Again, it seems you don't have to do this, however.

Check out: http://benefitslink.com/boards/index.php?showtopic=15858 And: http://benefitslink.com/boards/index.php?showtopic=16033

No. 2002-45 states that an HRA may be considered an FSA. A health FSA is defined in 106©(2) and 1.125-2, Q&A-7© as a "benefit program that provides employees with coverage under which specified, incurred expenses may be reimbursed (subject to reimbursement maximums and other reasonable conditions) and under which the maximum amount of reimbursement that is reasonably available to a participant for a period of coverage is less than 500 percent of the value of such coverage." Under this definition most HRA's would be considered FSA's, and thus not capable of reimbursing LTC premiums.