Non-Elective Employer Contributions

[Guest Wislndixie]

An employer wants to go to a higher deductible health plan and make non-elective employer contributions on behalf of each FSA participant to offset the higher deductible for the employee. Contributions will all be the same for each employee, a specific dollar amount. Are there any regulations that prohibit this or any pitfalls to watch for?

Wisln

[GBurns]

This is quite popular in the govermental and public entity/non-profit world. The only problem in the initial years is employee communication, especially getting them to understand no-cash out and "use it or lose it".

Why not use a simpler and less expensive section 105 medical expense reimbursement plan? The employer only reimburses (up to the same amount for each employee) the eligible expenses incurred and the eligible expenses can be broader than in an FSA.

The basic difference between the 2 really is that the FSA would be fully funded with forfeitures possibly not reverting to the employer, whereas the MERP would only be funded as needed. If the FSA forfeitures could/would revert to the employer it would cost the employer the same.