Christine Oliver

Wondering if anyone has thoughts on my April 29th post?

We are a university with a 401(k) Plan. Adjuncts are excluded, however, their hours worked matter for vesting purposes should they become eligible to participate in the plan (Adjunct to full-time faculty or staff). My understanding is that the 401(k) regulations do not expressly allow you to use the ACA calculation for purposes of a 401(k). Is that accurate, and if so, it seems there are no options aside from crediting them with a full equivalency, which is not reasonable. Am I missing something?

If you typically don't have a lot of full-time to part-time status changes, you can also choose not to continue coverage and count them against the 95% coverage threshold, correct? I understand that doing so could cause you to incur an affordability penalty.

Thank you, Brian. This is a brand, new vision plan (never had one before) so we are not offering to current COBRA participants.

Do employers have to offer a new vision plan (effective 1/1/25) to all current COBRA participants or only to those who become COBRA participants following the implementation of this new plan offering?

Thank you, Brian.

Thanks, Chaz, for clarifying my question better than I did!

Thanks, Brian, but just to be clear, I understand that dependents have independent election rights, but I'm asking if they can drop COBRA coverage once elected, mid-year, for any reason.

Can a COBRA participant discontinue coverage for a dependent beneficiary mid-year without a qualifying event and continue their coverage and other dependent beneficiaries. If no, is this specified in the COBRA regulations?

Follow up question. The TPA is reimbursing the plan sponsor for the eligible reimbursement made on the day after the participant's date of employment separation. Based on my review of the IRS guidance, do I understand correctly that this is a sufficient "correction" and we do not have to apply the amount to the participant's taxable wages?

Yeah, not sure about taking that risk. What strikes me is that I can't imagine this is not a problem for plan sponsors and TPAs (i.e., eligible claims reimbursed between separation date and status update in TPA system). I suppose it may go unnoticed. I also can't think of a way to completely prevent it from happening. Thank you for your prompt responses.

Thanks, Brian. I follow and read your excellent compliance articles/blogs, including this particular one, which prompted my concern about the TPA's responses! So, do I understand correctly that unless the cafeteria plan specifically allows for eligible expenses incurred through the end of the month in which the employment separation occurs, these situations are impermissible, and we must include improper reimbursements in the employee's taxable income as doing otherwise could risk IRS disqualification.

Plan sponsor inquiry: Scenario 1: We learned of a qualified FSA expense incurred and made to a participant after date of employment separation due to lag time between the weekly file feed to FSA TPA with employment status changes and TPA updating their records. While we may sometimes know in advance of upcoming employment separations, that is not always the case. Our TPA is telling us that this is not necessarily a violation of FSA regulations and is comparing it to situations where participants use all their FSA funds prior to separation of employment and complete funding of their election. That doesn't sound right to me. Assuming it's not right, are we required to include the improper payment in the former employee's taxable income subject to withholding and payroll taxes in these scenarios? If yes, how is this done when there are no additional wages to take the withholding/payroll taxes from? Scenario 2: FSA TPA fails to terminate FSA account upon receipt of file feed with separation date (error is caught several weeks later). TPA will refund us for any improper reimbursements, and is advising that because it is their error, we have no obligation to include improper reimbursements in the former employee's taxable income. Given our understanding that the plan sponsor has ultimate fiduciary responsibility for proper FSA administration, including monitoring the TPA, this, too, doesn't sound right to me.

Does your answer change if this was an employer approved non-FMLA leave, and the plan document states that employees remain eligible for benefits while on an employer approved leave of absence? I don't think it does, but I want to be sure that there are HCFSA regulations that supersede the plan document language?

Thank you!

An employee goes on a leave of absence and chooses to continue having their HCFSA deduction taken from paid portion of leave but does not return to work. Does the HCFSA eligibility end as of the last day worked prior to the leave, or does it tie to the health insurance plan end date, which is last day of the month in which the employee notified us that they would not be returning to work? If eligibility ends as of the last day worked prior to the leave, how do you handle HCFSA reimbursements made while on leave?

An employee goes on a leave of absence and chooses to continue having their HCFSA deduction taken from paid portion of leave but does not return to work. Does the HCFSA eligibility end as of the last day worked prior to the leave, or does it tie to the health insurance plan end date, which is last day of the month in which the employee notified us that they would not be returning to work? If eligibility ends as of the last day worked prior to the leave, how do you handle HCFSA reimbursements made while on leave?

Thanks everyone!

Hi, Peter - Yes, I am referring to a Dependent Care Flex Spending account, 129 plan. I understand that the mid-year changes are rather flexible under this plan, and allow mid-year changes for changes in cost of daycare, but my concern with this particular requested change is does the fact that the participant knew that her child would be entering kindergarten this fall when she made her initial election prevent this from being an acceptable change?

Hello - I have a DCFSA participant requesting to reduce her annual election mid-year due to the fact that her child will be starting kindergarten this Fall. Since the participant knew that the child would be starting kindergarten this year, it doesn't seem like this would be an acceptable qualfiying event. Thoughts?

Thank you, Brian.

I am seeking clarification/regulatory guidance on the following scenario: DCFSA plan has a run-out, grace period, and spend down provision allowing reimbursement of any remaining balance upon separation of employment for eligible expenses through the run-out period (March 31st) following the end of the plan (calendar year). While we understand that leave is a qualifying event allowing participants to choose to discontinue DCFSA contributions during the leave period, allowing them to pay the contributions on a post-tax basis for that period is of no benefit to them. Given our plan provisions, once a DCFSA participant goes on an unpaid period of leave (FMLA or otherwise), shouldn't the employer automatically terminate the DCFSA for the period of unpaid leave since there are no eligible expenses during the period of leave. Given the plan provisions (and confirmation from our TPA), even though the account would be "terminated", the participant will still be able to submit reimbursement (based on available balance prior to leave period) for eligible expenses incurred prior to the leave period. So, no adverse impact for the participant and this prevents the possibility of ineligible expenses (leave period) being reimbursed. Is this position reasonable and/or do regulations speak to this?

Thanks so much Brian. Your knowledge and materials are excellent!

If an employee chooses to catch-up on their medical FSA contributions upon their return from leave and they do not have enough pays to complete the catch-up contributions prior to year end, can the employer post the remaining contributions due as post-tax contributions and take the remaining amount due in the following calendar year?

And if those without work-related computer access don't give their electronic disclosure consent, you have to mail it to home addresses, correct?