Multiple FSA Enrollment Periods and HSA issue

[Guest Dick Boever]

A TPA, who will remain nameless, is setting up FSA plans with multiple enrollment periods. It is their opinion that nothing in the code or regulations prevents more than one enrollment period per 12 month year, and that employees can make elections during the "normal enrollment periods." Thus, employees don't need to have a qualifying event, they just need multiple enrollment periods.

I don't need opinions, I need a site that limits plans to one enrollment period per year.

This same TPA believes you can have an employee participating in an HSA, who is eligible for and participating in a Limited Scope FSA and that you can cover his spouse and dependents in a full scope FSA. This one is a little more problematic, because it might be possible to word your document in such a way as to sufficiently limit what can be paid and to whom. Any thoughts?

Thanks

[papogi]

I can think of no cite that outright says that an employer can only have one enrollment period. I can direct you to 1.125-2 Q-7(3) where the IRS says that a plan year must be 12 months long. In addition, 1.125-1 Q-8 says that you can’t revoke an election after the period of coverage has begun. Those two things together say to me that your TPA’s interpretation is incorrect. In any event, tell them you don’t want to use their procedure of allowing multiple enrollment periods. You have just one, and you follow IRS rules regarding mid-year entry, changes and terminations. Section 125 is a set of “upper limitations”. As plan sponsor, you can be less generous if you wish, and you should be able to dictate the provisions of your plan to the TPA (even though I don’t think you are being less generous, and actually feel that your TPA has adopted a far too liberal interpretation of the regs, and are not doing their job to ensure Section 125 compliance for their clients).

[QDROphile]

I second papogi, including conclusions from the authority cited. I will go one further. I think the TPA is so wrong headed that I would not want the TPA working for me because of fear of the TPA's position on other matters. I would reconsider if the TPA's postion started with an explanation like "this is really out there, but you might think about ... ."

Also, I don't see why names should be withheld, as long as you are absolutely sure about what you attribute, and describe accurately. Public exposure can help drive out knaves and incompetents. The knaves of deferred compensation got us all a new section 409(A).

[JDuns]

I assume the TPAs argument is that the company may set up more than one FSA plan with staggered plan years and an employee was stuck with their elected contribution level for the full plan year. So long as each FSA plan met the coverage rules, I suppose it might be technically compliant. However, it doesn't pass my smell test and I would not want to adopt such a program.

With regard to the TPAs second idea, I have no problem with a FSA that is structured as a limited scope FSA for the employee and a full scope FSA for the employee's spouse and dependents. My only concern about this design would be the administration issues where expenses are reimbursed differently based on the the employee/dependent status.

HSA eligibility itself is determined on an individual level. If a spouse has a plan that covers 100% of the medical expenses for her with no deductible, and the employee purchases a HDHP that covers the whole family, he could make HSA contribution for the whole deductible (up to the federal family coverage limit).