Lisa Hand

I think you have a valid concern about the "but, for" rule. Unlike a wheelchair where you do not purchase it unless it is required for a specific medical condition, how is the participant going to verify they would not purchase the computer, but for this condition and that no other member of the household will use it (which would take it into the personal use category). A query to the IRS might be one way to clarify the question. You can email the question from their web page and they email a response.

Please note SEC. 204, © of the EGTRRA states, "Effective Date. - The amendments made by this seciton shall apply to taxable years beginning after December 31, 2002."

That should be defined in your plan document.

Lindy: For more responses, you might want to post this and your other questions on one of the other benefit boards, Misc. Benefits or maybe Voluntary Employee Benefits, especially since they are dealing with disablity insurance and benefits.

Gary: Are you talking about the funds in a Medical Flexible Spending Account (FSA) in a Cafeteria Plan? A Medical Savings Account (MSA) is a different type of benefit.

Katherine: You might want to post this question on the Health Plan benefit board.

Are employees eligible for benefits as of date of hire? There is no waiting period?

If the deadline is in the plan documents, it is likely also in your enrollment packet, on the enrollment form for the benefit, as well as in the information distributed on the benefit. While many of the items handed out for benefits are not considered the most interesting reading, they do provide the details, rules and responsibilities. Some plans also send out reminders during the plan year and the close-out period to prevent surprises; however, it is not required. If you missed the deadline, the funds are forfieted. It is a "Use it or Lose it" benefit. You are permitted to appeal plan decisions in writing; however, unless there are other factors you have not detailed, like the submission on 4/17/2001 was a follow up to an earlier denied claim from before the deadline, the appeal is not likely to be successful since the plan administrator must comply with the plan documents.

For a procedure to be reimbursed under a Medical FSA, it needs to be medically necessary. For procedures usually considered cosmetic to be medically necessary, they must impact the function of the body, not simply the appearance. While bleaching is always considered cosmetic since it has no impact on the function of the teeth, some of the other items you listed could be restorative or part of the treatment of a condition. On any procedure in question, documentation that the it is medically necessary and not cosmetic should be requested from the provider. If the documentation can not be provided, then it isn't eligible.

Trisha: Give us some more specifics on the expense in question. Is it one that would not be permitted without the requested documentation as defined in Publication 502 such as weight loss, which is permitted if to treat an existing disease such as heart disease, but not permitted simply to maintain general health? The regulations for Section 125 require independent third-party verification of expenses, what has the participant provided at this point? Kip is correct that it must be medically necessary, otherwise it is not permitted. Irrate or not, those are the rules and to be in compliance and not be discriminatory, the Plan must apply them to everyone. As Kip said, it does raise the question, why is the participant so reluctant to provide valid documentation, if the expense is valid. That in itself should be a red flag.

While the company's medical plan insurance provider and SPD might be helpful, this issue normally arises in cases where the service is not covered by insurance but is still eligible to be processed through the Medical FSA, if properly documented as medically necessary. The SPD for the Section 125 should give general guidelines and refer to the specific section of the IRC which govern medical expenses. Trisha, you could be a bit more specific on the type of expense in question?

Actually to get a clear and complete picture of 125 plans you would need to review Section 125 and all the governing regulations as well as have at least one legal guide, which most people asking general questions on this benefit board do not have, which is why they are asking the questions here.

The client might want to consider have an independent TPA handle the service for them. A TPA would provide all necessary forms and documentation and eliminate the liability issues of the employer processing claims in-house.

Medical monitoring and testing devices are ususally eligible as long as they are medically necessary.

Section 213 of the IRC would be a good direction to point her in as well as Publication 502 which specifically states many procedures are not eligible unless they are medically necessary.

Was it an Medical FSA account which was "overpaid"?

The change event is a "significant cost or coverage change" which is detailed in Treas. Reg. 1.125-4(f). 1.125-4(f)(1) states "In general. Paragraphs (f)(2) through (5) of this section set forth the rules for election changes as a result of changes in cost or coverage. This paragraph(f) does not apply to an election change with respect to a health FSA (or on account of a change in cost or coverage under a health FSA)." A health FSA is the same as a medical flexible spending account (FSA).

Thanks, for posting the clarification from the publication.

Jeanine's post specifically asks about opening the enrollment for their flex option "which covers co-pays, co-insurance, ect" which would be their medical FSA as a result of increased dental benefit, which would not be allowed.

A change in cost or coverage is NOT a valid change of status event to adjust the medical FSA. Treas. Reg. 1.125-4(f)(1) fianl regualtions issued Mar. 23, 2000.

Prop. Treas. Reg. 1.125-1, Q/A-17, states that ".. expenses that are reimbursed under an accident or health plan must have been incurred during the period for which the participant is actually covered by the accident or health plan....However, the actual reimbursement of the covered medical care expense may be made after the applicable period of coverage." The length of the close-out period is not set by the IRC or regulations, but rather the plan sponsor/administrator and should be communicated at a minimum in the Plan documents. Most plans also detail it on the enrollment form as well as confirmation letters.

It certainly doesn't seem to satisfy the "but, for" rule. You would not have the item but for the specific medical condition.

The time period to submit valid change of status requests is normally set in the plan documents.

When the merger occured, was anything communicated to you about the old plan or the "new" plan. Were you given new forms to sign?

It's all about being compassionate, remembering that none of us know how long we will be here, so every moment is too precious not to remember to smile and be kind or to waste being nasty or petty. That is my policy in my office. We often have calls where someone will need to talk through their questions and concerns several times or simply need to talk. While larger companies may not permit their employees to take that time, we do. We have often had people tell us we were the nicest people they spoke with all day, which is a sad comment on their other interactions but a great illustration of my employees caring attitude which does a lot more than help our business.