Definition of reimbursement account vs. FSA

[Ken Davis]

Is a reimbursement account type of cafeteria plan the same as a Flexible Spending Arrangement (as defined under Prop. Regs. 1.125-2 Q&A-7©)?

Thanks,

Ken Davis

Univ. of South Alabama

[GBurns]

Would you care to expand on what you mean by "a reimbursement account type of cafeteria plan "?

The reimbursement plans in a Cafeteria Plan is either an FSA for medical expense or for Dependent Care expenses.

However, you could mean something else.

[Kirk Maldonado]

Ken:

Yes, those terms are synonymous.

To restate the point that Gburns made in a slightly different manner, a cafeteria plan may offer:

1. health care reimbursement accounts (which could also be called health care flexible spending accounts);

2. dependent care reimbursement accounts (which could also be called dependent care flexible spending accounts); or

3. both of those features.

In addition, a cafeteria plan may allow employees to pay the premiums for their medical, dental, and vision coverage with pre-tax dollars. (It can also be used to pay disability insurance premiums, but that is a questionable plan design feature in my opinion.) Where this is the only feature of a cafeteria plan, it is often called a "Premium Only Plan."

Thus, a cafeteria may have any one or more of the following features:

1. health care reimbursement accounts;

2. dependent care reimbursement accounts; and/or

3. the ability to pay certain insurance premiums on a pre-tax basis.