Different dollar limits

[Guest aearle]

Can a cafeteria plan designate different health care FSA limits for different groups of employees? For instance, could the plan state that those with less than 1 year of service have a $1000 limit, those with 1 to less than 5 years of service have a $2000 limit, and those with 5+ years of service have a $5,000 limit? If not, is there any situation where different groups of employees could have different limits? Finally, if this is or is not allowed, can you point me to documentation??

Thanks!!!!!!

[Guest b2kates]

There is no restriction by IRC, but the plan must satisfy the non-discrimination standards of 105(h) and 125.

[Kirk Maldonado]

aearle:

One issue that you need to address is what happens to the limit if the person switches job classifications during the year.

[david rigby]

if the person switches job classifications during the year.

when, not if

[GBurns]

What allows employees to be classified by length of service rather than a job related classification?

[g8r]

I agree - you need to be careful where someone changes classifications (but that could be handled in the drafting of the plan).

And, to expand on GBurns comment, you should avoid basing it on age or service. The following is from the nondiscrimination section of reg. 1.105-11 which deals with nondiscrimination as to benefits under a self-funded health plan (which would include a health FSA).

While this regulation is arguably old and outdated (and doesn't adequately deal with techniques such as creating separate plans), I'd try to find some classification that is nondiscriminatory and is not based on age and/or service.

_____________________

However, any

maximum limit attributable to employer

contributions must be uniform

for all participants and for all dependents

of employees who are participants

and may not be modified by reason of a

participant’s age or years of service.