Lisa Hand

Prop. Treas. Reg 1.125-2 Q/A- 7(a) details that health FSAs must "exhibit the risk-shifting and risk-distribution characteristics of insurance." The final sentence reads: "A health FSA will not qualify for the tax-favored treatment under section 105 and 106 of the Code if the effect of the reimbursement arrangement eliminates all, or substantially all, risk of loss to the employer maintaining the plan..." Section (b) details Uniform coveage and states "The maximum amount of reimbursement under a health FSA must be available at all times during the period of coverage." and states "...the payment schedule for required premiums for coverage under a health FSA may not be based on the rate or amount of covered claims incurred during the coverage period." Hope that helps.

Please remember the Message Boards are not for direct advertising of products by vendors. Thanks Lisa Hand

SLuskin, you are correct. S corp, partnership ect, Section 318 attribution applies. The only structure with an exception is the spouse of a sole proprietor who is a bonified employee and the IRS looks at those real closely.

A good way to avoid confusion on the FSA COBRA options is to have a separate COBRA notice for specifically the FSA, that way employees can not say they thought it was part of the health insurance COBRA and declined by mistake.

The $5,000 is for married, filing jointly and head of household $2,500 is the maximum is married, filing jointly If the spouse is a full time student, then a calculation needs to be done to determine their maximum permited

2003 medical mileage per mile is 12 cents 2004 has been revised to 14 cents

Just a reminder, advertising is for the Yellow Pages, this forum is for questions and answers and general information. Questions about software, recommendations ect are fine, direct advertising of specific products is not.

Since this is federal code governed by IRS, we have always followed the IRS's procedure on this, taxes and submissions like Form 5500s met deadlines if postmarked by deadline and if the deadline is on a Sunday, the next business day after the deadline. That said, if the plan documents and communications materials (educational materials, SPD, Plan Information Summary, status letters ect) clearly say it is 90 days and must be recieved in the office by that date, then that is the rule for that plan. But this needs to be in writing and should have been clear communicated to the participants. If that is the case, then a denial letter with a copy of the previously provided materials would be the response to the appeal.

Section 213(d)(1) defines "medical care" to include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. Feminine products are considered personal use items because they are not treating anything, but rather used for a normal body function. They do not affect that function.

jashendo - On what do you base your conclusion that the birth of a child (addition of a dependent) does not meet the consistency rule to permit an increase for the medical FSA?

Don't you have participants sign a claim which includes a statement verifying the expenses are for themselves or their dependents (along with other appropriate legalize) and documentation verifying the expense?

The plan sponsor has the flexiblity to define their plan and its benefits as long as they are not trying to make the definitions less restrictive than federal code. Making it more restrictive is fine, it just needs to be clearly defined in the plan document, SPD and edcuational materials. For example, some plan sponsors do not permit all of the allowed change of status events, which is perfectly acceptable. They can not, on the other hand, permit changes that are clearly defined as not permited under the regulations.

I would agree with MSMA that since the clip ons are used only with the prescription glasses, they would meet the "but for" requirement of an item not being personal use since it would not be used but for the specific medical condition, in this case prescription glasses. This seems to be similar to the discussion we had recently on remote control devices for hearing aids. It has no other purpose but to work with a prescription device. Also there could be cases where regular sunglasses could be medically necessary and prescribed by a practioner, such as after eye surgury or injury. Those cases would require proper documentation from the provider.

Per the IRS Informational letter on Kindergarten dated Sept. 7, 2000, "Section 1.44A-1©(6) provides that if a portion of an expense is for the care of a qualifying individual and a portion is for other purposes, a reasonable allocation must be made, and only the portion of the expense attributable to care is an employment-related expense. However, no allocation is required if the portion of the expense for the non-care purpose is minimal or insignificant. Accordingly, whether or not an expense qualifies for the dependent care credit depends on the nature and primary purpose of the services provided and is primarily a question of fact. In order for an expense to qualify in full for the dependent care credit, any portion of the expense for purposes other than care must be minimal or insignificant and inseparable from the portion of the expense for care." So the provider has answered the question for you by allocating the expense to something other than care. If it is allocated to a purpose other than care, it is not inseparable and is not custodial care, therefore not reimburseable.

Regardelss of where it is provided, at a chiro's office, physical therapy facility or directly to the massage therapist (LMT), a licensed practioner should veryify that it is medically necessary for it to be reimbursed through a 125 Plan. Note practioner, not MD, so, of coure, the practioner (LMT) providing the treatment can verify it is medically necessary.