Caf Plan & ERISA & 5500

[oriecat]

I am trying to get my brain around this, and hope I am getting this right. We have a 125 plan, it includes pre-tax premiums for our health plans, a health FSA, and a DCAP.

The DCAP is not an ERISA plan, so nothing required.

The pre-tax premiums are not ERISA regulated, but the health plans themselves, of course, would be.

The health FSA is an ERISA plan, and therefore a 5500 would be required, unless exempted. At the beginning of the 11/01 - 10/02 plan year, there were 47 participants in the health FSA, so it would be a small plan (unless bundled with other plans). The part that loses me is the funding. All monies are pre-tax employee contributions. They are sent to our TPA, who processes the claims. So does that make it a funded plan with plan assets, and a 5500 is required? Or because the contributions are paid through the 125 plan, then Technical Release 92-01 could apply, and it could be seen as unfunded and no 5500 needed?

Thanks.

[papogi]

When monies are sent to a TPA to send out FSA reimbursement checks, these funds are not necessarily going through a trust account. As long as the employer has not set aside these FSA funds in a separate account, and sends the TPA the money from an account in the name of the employer, these dollars are “employer” money. When they go to the TPA, they are still employer money, and no 5500 would be required.

[g8r]

You need to be careful on how you handle this one. I'm at home and don't have the cite handy, but there is an old DOL opinion letter stating that whether or not a plan is funded might depend on the perception that the plan participants have. Thus, if the participants receive reimbursements on a check that has the TPA's name on it, they might have the perception that the plan is funded (i.e., that benefits aren't being paid from the employer's general assets). Likewise, if the check is issued in the name of XYZ Employer Cafeteria Plan, there could be a perception that a separate fund has been established. However, if the employer creates a separate bank account but in no way identifies it as an account established specifically for the plan then I think you'd be safe.

Fortunately, I have not heard of the DOL actually attempting to apply this standard. But, the opinion letter is still valid and you're better off playing it safe if you can work it out with the TPA.