Very Basic Questions

[Guest Noidy]

For an employer to offer a pre-tax dependent care plan and a pre-tax plan for employee parking costs, are formal plans required?

Also, are annual 5500 forms required, and should the employer hire an administrator to handle all of this? Thank you for any insight you can provide on these subjects.

[Sandra Pearce]

The dependent care spending account would be a Section 125 Plan and would require a plan document, an SPD and a 5500. The parking reimbursement would be a Section 132 plan and would not require a plan document, an SPD or a 5500.

[Guest mdrucker]

I concur with Sandra, she summarized it very nicely.

Should the employer hire an administrator to handle the program or not?

This leads to the question to outsource or not to outsource. It is not a clear yes or no answer, it depends on many factors and your specific company. Company size, single location vs multiple locations, do you have the expertise to handle it yourself, how much time will it take away from your core business / other responsibilities, etc. Outsourcing can be very cost effective.

Mike

[Guest pineapple]

Sandra is correct. However, with regard to the pre-tax transportation plan, I would like to point out that although not legally required, you should definitely adopt a formal plan document. Otherwise, you could wind up in some messy situations with no clear answers (i.e., how much can I defer, is there a deadline to request reimbursement, what is reimburseable, what happens if I quit, can I carry my balance over from one year to the next, etc.)

Something off the shelf should suffice. EBIA (Employee Benefits Institute of America) has a sample transportation plan document in their cafeteria plan manual.