Lisa Hand

In response to the question, a change in cost or coverage is not a valid change of status event for changes to the Medical FSA. (Final Tres. Regs on Change of Status issued January 11, 2001)

Same response as the many other times that this topic has been raised, No double dipping under Section 106. We actually had the founder and director of Employee Benefits Institute of America respond to this issue the last time it was raised, offering a transcript of the August 1999 ECFC National COnference where Mr. Beker of the IRS addressed this very point and in no uncertain terms said it was not allowed.

Yes, both the move and the inability of the current no cost day care situation to continue qualify.

Children 12 and younger is the correct limitation for child care, however; remember that if the dependent is mentally or physically incapable of self care, there is no age limit.

Sounds like you need a TPA to take care of this and the eduation for you.

The $5,000 annual max on Dependent Care Assitance is per family, not individual. So both could participate but can not exceed $5,000 in total.

Your Plan document should detail what the close-out period is for your Section 125 Cafeteria Plan. If you did not receive one or have lost the copy you were originally given, the administrator will provide you with an additional copy.

What is the Plan Year?

Kip: I guess I've been doing this too long and got my semantics confused, at one point these "benefits boards" were called "work groups". There is a benefits board called "Health Plans" which obviously would be more helpful to Tara than the Section 125 Cafeteria Plans.

Kristina, the 25% rule being refered to is the one for Cafeteria Plans. The key employees can not account for more than 25% of the over all plan in a corporation (in any structure other than a corporation such as S corp, partnership, LLP, LLC ect greater than 2% shareholders/owners may not participate at all) Thus the defination of key employees and whether it includes family memebers is what is relevant.

Could you give us a bit more informaiton on your question?

Joe is absolutely correct on the premium portion. It is important to remember that a change in the medical plan cost or coverage does NOT open the door to make changes in the participant's election for their medical FSA. These rules apply to all 125 Plans.

Tara: To get more responses, you might want to post this question on the Health Plan work group.

http://www.benefitslink.com/taxregs/1.125-3.shtml This is the regulation issued on how FMLA works with Section 125 which should answer your questions as far as Section 125 and FMLA leave of absence.

Insurance premiums are not valid expenses for reimbursement through a Medical FSA.

Remember whether the LOA is an FMLA event or not impacts how you treat it. FMLA leaves give the participants additional options which should be communciated. There are specific regualtions on FMLA and its impact on Cafeteria Plans.

An independent TPA will also set up the plan for you without any requirement to market products to your employees. Some are listed in the BenefitsLink yellow pages. Working with a TPA would also assist with on-going compliance of your plan.

If your plan document does not specifically exclude such expenses, then you have firm grounds to appeal the denial which is your right.

If you are interested in out-sourcing, a number of TPAs provide these services, some of which are listed in the yellow pages on BenefitsLink

Kirk: The Employee Benefit Institute of America's legal guide was my source as well as the regulations which usually require the plan year to be 12 months. Plan years can be short, for example, in the case of a first plan year, or a merger or a termination of the plan or the addition of an entirely new benefit (which would result in a short plan year for that bebenfit) or a change to match all benefits to the same plan year. However, my caution was addressing the idea of changing the plan year mid-year simply to get around the requirement for the elections to be irrevocable and that that situation may be very hard to justify if audited.

The birth of the child is a valid change of status event to change the medical FSA. Expenses incurred while a participant in the plan are eligible as long as they are incurred during the plan year, up to the annual amount elected by the participant.

Be careful about changing the plan year. It needs to be reason other than trying to get around the irrevocabiltiy of the elections.

Robert: can you give us a bit more information. Are you refering to dependent health insurance coverage or employer contributions for dependent care assistance? Does the plan have a cash-out option?

It depends on how the plan document is written.

Marriage is a valid change of status.