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  1. This statement was recently made by a TPA. related to PCORI fees in 2022: Generally, health care Flexible Spending Accounts (FSAs) are not required to file a Form 720 unless the employer (and not just the employee) makes contributions to it that exceed the lesser of $500 annually or a dollar-for-dollar match of the employee's contribution. I did look as the IRS Chart chart summary. and FAQs Related Item: Patient-Centered Outcomes Research Trust Fund Fee: Questions and Answer and the final regulations , but do not see the above exception. Does anyone have insight to the above bold exception?? I did see the follow exceptions for FSAs: Special rule for coverage under multiple applicable self-insured health plans: Generally, separate fees apply for lives covered by each specified health insurance policy or applicable self-insured health plan. However, two or more applicable self-insured health plans may be combined and treated as a single applicable self-insured health plan for purposes of calculating the PCORI fee but only if the plans have: The same plan sponsor; and The same plan year. Special counting rule for HRAs and FSAs: Plan sponsors are permitted to assume one covered life for each employee with an HRA. Plan sponsors are permitted to assume one covered life for each employee with an FSA. Q5. Which individuals are taken into account for determining the lives covered under a specified health insurance policy or applicable self-insured health plan? A5. Generally, all individuals who are covered during the policy year or plan year must be counted in computing the average number of lives covered for that year. Thus, for example, an applicable self-insured health plan must count an employee and his dependent child as two separate covered lives unless the plan is a health reimbursement arrangement (HRA) or flexible spending arrangement (FSA). Thanks for you review and reply in advance!
  2. Wondering if others have dealt with this idea or can anticipate any hurdles -- Say a company had a standard dependent care FSA program, no pre-tax employer contributions to the employee accounts. Company now wants to establish a fund for employer contributions but subject to taxes, for participating DC FSA employees but not directly to their DC FSA accounts (so to avoid any pre-tax issues plus to avoid being considered towards the employees' $5k/$2.5k contributions limit). Fund would be fixed per year at $xx total (decided at the beginning of the year or end of prior year), and then allocated between participants based on the # of participants in the prior plan year (as if it's a pool to be divvied up based on prior year participation). Eligible participants include anyone who participated in the prior plan year and is still employed at the beginning of the applicable year. Anyone seen this before, or something similar? So long as it's post-tax and not directly to their accounts, any hurdles?
  3. Hey, everyone - First time caller! I have a client with a Standard Health FSA. It operates on a calendar year basis. However, the employer's payroll processes two weeks in arrears. Tax question as to whether the employer can deduct the final payroll from 2020 when the final payroll for 2020 is actually not paid out until the first payroll period in 2021. In other words, the work performed between December 15 and December 31 is paid on the January 15 payroll. That first payroll for 2021 is included as income for the 2021 W-2s - not 2020. Has anyone dealt with this? The plan language is vague as to "compensation". Trying to determine whether there are different deductibility rules for cash basis versus accrual basis accounting. Thanks!
  4. While reviewing my tax form before filing, I realized the amount that was used to pay the 2019 service will be taxable (Box 29 of Form 2441). I never had this experience before since I always used up the $5000 DCFSA annual limit. Scenario: *All amounts are not true amount. DCFSA Plan Year 2020 - covers Sep 2019 to Dec 2020 (incl. grace period) Contribution for Calendar Year 2020 - $3000 as shown on Box 10 of W2 (The other $2000 was contributed from Sep to Dec 2019 that paid CY 2019 service.) Total Paid for Calendar Year 2020 Service - $2000 based on the statement by the daycare each yearend (My kid stopped going to daycare last March 2020 because of Covid.) Year 2020 - Form 2441 - Box 29 - The $1000 is showing as taxable. This $1000 contributed in 2020 was actually reimbursed for 2019 Service Paid. Please note that in Year 2019 - Form 2441, I declared $9000 as qualified expenses based on the statement by the daycare for that year. Part of that $9000 is the $1000 that is showing as taxable in my Year 2020 Form 2441. I did not get any credits as it was already over the $5000 DCFSA annual limit. Question: Can I claim the $1000 as 2019 service paid in 2020 even though I declared it as qualified expense (part of the $9000) in Year 2019)? Thank you and appreciate any insights.
  5. Hi, My spouse covers me and my son under his employer's insurance. We did not enroll in flex spending, either medical or dependent care with either of our employers for 2019. My spouse is quitting his job and we will lose coverage as of 8/31. My employer is allowing us to enroll in all plans we lost under my husband's plan (medical, dental, vision) but has told us we are unable to elect medical or dependent flexible spending. Is this correct? They sent me the SPD(?) and I read through it but couldn't find anything saying I could or couldn't enroll. I'm in NJ, if that matters. Thanks!
  6. The IRS sets FSA and HSA limits based on calendar year. Our benefit year is 10/1 to 9/30. Can we setup our plans so the limits follow the benefit year rather than the calendar year? I've not seen this done but have been told that our legal department has approved this process so long as we stay consistent.
  7. Hi All, This forum seems by far the most well educated on the subject of cafeteria plans. Would you read my letter to my employer and suggest changes or point out discrepancies? Right now my employer pays all health employee health insurance premiums, 50% of spouse and dependents, and remaining premium is paid after tax as a payroll deduction by the employee. I happen to live in the state with the highest premiums in the US, so these are significant costs for us. Why it’s in Company X's best interest to use a section 125 SIMPLE cafeteria plan to compete with benefits offered by larger organizations and optimize company cashflow. Section 125 of IRS code establishes an employer plan document which allows non-owner level employees earning less than 120,000 / year (special rules for those over that threshold) to pay for employer sponsored benefits in a way that is excluded from their gross income. Qualified benefits already being offered by Company X which would qualify for the cafeteria plan include: Employee paid group health insurance premiums Employee paid group term life insurance premiums (excluding coverage for spouse and dependents) AD&D employee paid insurance premiums (excluding coverage for spouse and dependents) It is highly desirable for employees to pay for these benefits on a pre-tax (or excludable) basis as it can reduce their costs by for example 32.65% (25% marginal income tax rate plus 7.65% payroll tax). It is also highly desirable for an employer to enact such a benefit plan as these are before payroll tax, and a 7.65% savings can be realized as well. Being able to offer these benefits on a pre-tax (or excludable) basis can also be used to increase participation and lower rates. Minimum employer contributions to the SIMPLE cafeteria plan are 2% of an employee’s compensation, which the employee can elect to either convert to cash or use towards employer sponsored benefits. Other qualified benefits which can be included in such a plan include: Healthcare Flexible Spending Account ($2600/year) Dependent Care Flexible Spending Account ($5000/year) Employer Sponsored 401(k) For example: Company X establishes a section 125 SIMPLE cafeteria plan paying 5% of an employee’s compensation. 25 employees at Company X qualify and are able to utilize 80% of the benefits offered, the average employee compensation is 70,000/year (66,500 pay, $3,500 cafeteria benefits/cash). This equals $70,000 in employee paid benefits. The employees would save $914.20 each and Company X will save $5,355 per year in payroll tax. I acknowledge this is a small sum, but if there’s room to grow the benefits utilized by Company X employees, at our current scale of employment I estimate Company X would save $1,000 per percentage point of benefit utilization (this can be either employee or employer contributions). Personally, I utilize 12% of my gross income towards employee paid health insurance premiums, so I could elect to contribute 10% towards these premiums and utilize 2% of employer contributions to save $3,183 per year in taxes on premiums while saving Company X $746 in payroll taxes. If 25 employees were to follow this same strategy at the 12% level, it would save Company X $18,650 in payroll taxes. Thank you!
  8. I have a client with a Group Health Plan that has experienced excessive utilization with their Drug Card program. A solution being considered is to offer a Base Plan with Generic only, and let those who desire it Buy Up to the plan with Broader Drug Card Coverage. The company funds a $1000.00/year Health Reimbursement Plan that allows the assets to accumulate in each participants account. I am seeking a solution that would allow the $1000.00 being contributed currently, to a plan that will allow the employees to allocate that towards their portion of their employee premium if they choose. It that possible?
  9. I am a payroll manager for a company that is part of a bigger company. We have separate EIN numbers but are part of the bigger companies benefit plans. Recently HR came to me and stated that I needed to refund $200 to an employee due to the FSA funds not being sent to the TPA. Per HR, the TPA is refusing to accept the funds due to it being from 2016 and it now being 2017. This was found out when the employee went to make a claim and was told there were no funds. This is clearly an admin error, and now I need to know if I have to go back and do amendments for each quarter this affects for 2016, or can I refund the money to the employee this year and tax accordingly? I realize there are more issues associated with this, and am following HR's request, but on the payroll side, I just want to do my due diligence and have clean hands if there is ever an audit. Thanks for any insight.
  10. I got married recently on the 25th of February, 2017. My wife has a non-limited FSA with her employer. I have an HSA/HDHP with my employer. I'm looking to move her over to my employer's health plan. Her employer is willing to retroactively cancel her health insurance and FSA on the 28th of February. I can enroll her on my company's plan which is effective immediately. She wouldn't have any overlap in FSA/HSA contributions. Would this be fine? Also, if we went forward with this plan would we be constrained in terms of our HSA contributions?
  11. An employee, who was in our Dependent Care FSA plan that ended 6/30/2016, did not make an election for the plan year beginning 7/1/2016. The deduction was not removed from payroll and continued to be deducted from the employees pay. This administrative error did not come to our attention until calendar year 2016 was over. What is the proper procedure to correct this error including filing corrected returns?
  12. A state wants to provide a health FSA for employees. State law requires that the state cannot pay for it and that all admin fees must be passed on to employees. What is the tax-treatment of the costs that are passed onto the employees?
  13. My employer is merging with another company and our benefits are to be terminated soon and then picked up by the different benefit providers by the new company. I currently have an FSA and the other employer's most attractive medical plan is the HDHP with the HSA. I believe my FSA at my current company is subject to use it or lose it when my job officially terminates. I won't have enough medical expenses to use up hardly any of my FSA at the moment since this is occurring in January, but I'd like to contribute to a pre-tax health savings account this year, as I'll need it eventually. When my FSA terminates, I'm assuming I'll forego any funds that are left in the balance of my FSA, but am I able to enroll in the HDHP with the new company and begin contributing to an HSA?
  14. If an employee is on a leave of absence (medical or personal) during the Open Enrollment period, is there an IRS regulation that says that they cannot enroll in HCFSA and/or DCFSA for the upcoming benefit plan year until they return from leave?
  15. My mind is going blank on this, as i thought i knew this. 1. When an employee has an FSA and is on Leave of absence without pay, are they required to make their FSA contributions to keep "current"? Can they if they choose? 2. When the employee returns from unpaid leave, is the employer permitted to "catch-up" the amounts the employee missed? 3. If an employee is going on a leave at the beginning of the month, is the employer permitted to double up the contributions on the employee's pay in order to get the current month's complete deduction? Thank you,
  16. May an employer impose a minimum balance requirement on the amount that an employee/participant may carryover from year to year in an FSA? For example, can an employer require that to carryover a remaining balance at the end of year 1 into year 2 the employee must have a minimum carryover balance of $10? I have reviewed Notice 2013-71 and other guidance- there appears not to be a direct answer on this. Any thoughts would be appreciated.
  17. We are a TPA firm that administers Cafeteria Plans for public employees that are exempt from ERISA requirements. Currently, our clients hold their own checking accounts with which the funds are held. We are looking to offer a funding method where we, as the TPA, have a checking account that the client's funds are held in. What are our funding options that will keep us compliant with IRC and California banking laws? Because our clients are exempt from ERISA, but our TPA firm isn't, do we have to comply with ERISA requirements if we decide to hold the funds for them? We are considering opening one business checking account to hold all of our client's funds with the idea that we would not dip into one client's funds if another falls short, but I am concerned with the commingling of funds and think it would be cleaner (and maybe the only compliant option) if we held separate checking accounts for each client. If we were to open a Trust, could we commingle different Plan assets then? Any help would be very much appreciated.
  18. Hi. Employer has a Dependent Care FSA. Employee signed up in 2014, thinking that this was for a dependent's medical expenses. Thus, no child care was used and Employee does not have any dependents at an eligible age for dependent care FSA dollars. Is there any way to refund the 2014 dollars to Employee and tax them? Or is Employee out of the luck and the money is forfeited to Employer just like any unused portions would be? Thanks.
  19. The LLC is being taxed as a partnership. The majority owner's son is also an employee. Is the son allowed to participate in the cafeteria plan? From what I have read the LLC would need to be taxed as a C-Corp in order for owners to participate. Since this one is being taxed as a partnership the owner cannot participate. But do the code 318 owner attribution rules apply in this case and disallow the son from participating? Or would the son be allowed to participate and just be counted as a key employee?
  20. Hello, What constitutes 'primary care' of a child? Most older children (9-12) are not placed in day care facilities; they go to some sort of camp. I've seen claims denied because soccer camp isn't 'primary care.' Does that definition turn on the mission of the organization hosting the camp? Or the parent's intention in placing them there? What does the IRS use to determine eligibility? Pub. 503 says: The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. What is the qualifying test behind the words 'may be'? One benefits administrator requires parents to submit a statement saying the camp is for the child's care and well-being. Thanks, PL
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