Can administrative cost be offset to the participants?

[Guest sphile]

We have a client that is interested in the Cafeteria Plan. Part of our administration cost if $6.50 per participant. The client would like to have the participants pay this fee instead of the employer paying it. Is this allowed & if so can the participants have the $6.50 deducted from their pay pre-tax?

Thanks!

[GBurns]

Yes. In fact almost every FSA and DCAP that I see has the employees paying the admin fee on a pre-tax basis. I do not remember seeing fees on POP even in small plans.

However, your post raises questions. If you are offering your client a cafeteria Plan and have to ask this question, it appears that your knowledge of, and experience with, Cafeteria Plans is very limted. Why would you have to even ask this question and what have you been doing about this admin fee with your other clients?

[oriecat]

I don't understand why an employer would want to pass the fee along to the employees. Seems a bit petty to me. The FICA savings we get from the pre-tax contributions easily covers the administration fee we pay.

[Guest sphile]

Thank you for your responses.

GBurns - I do have knowledge & experience with Cafeteria Plans. Normally, the clients that we deal with pay the administration fees & do not pass the cost on to the participants to pay.

[Guest AHayhow]

Yes. In fact almost every FSA and DCAP that I see has the employees paying the admin fee on a pre-tax basis. I do not remember seeing fees on POP even in small plans.

However, your post raises questions. If you are offering your client a cafeteria Plan and have to ask this question, it appears that your knowledge of, and experience with, Cafeteria Plans is very limted. Why would you have to even ask this question and what have you been doing about this admin fee with your other clients?

Where in the regs or 502 publication does it indicate that admin fees are an allowable expense?

[GBurns]

I don't know why 502 would be relevant but look at the new Proposed Treas Regs 1.125-1® which is similar to the old regs.