Restrictions on the use of nonelective employer contributions?

[Guest cstrong]

Can an employer make nonelective employer contributions to employees' medical FSA accounts that are contingent on the use of the contributions? For example, the contributions may only be used for certain benefits (e.g., may be used only for local providers but not out-of-state providers), and if an employee elects to use only out-of-state providers, s/he won't get the nonelective employer contribution? We want to encourage our employees to use certain providers over others.

[leevena]

Don't think so. It sounds like the employer will decide what amount goes into the FSA, as opposed to the employee electing an amount. Additionally, you will be limiting the eligible expenses, which you cannot do either. There are other ways you can achieve your goal of going to in-network providers, but I would not suggest this way.

[QDROphile]

An employer can determine an amount that will be available under an FSA. The matter of amounts elected by employees is a separate matter. FSAs are not limited to cafeterial plans.

The employer can design the plan to provide certain benefits and not others. Limitation of benefits is a good idea because of the difficulty of deciding the eligibility of some types of benefits.

A typical way to influence choice of providers is to reimburse at a different rates for preferred providers. Providers can be limited. For example, it is possible to exclude entirely certain types of treatment such as accupuncture.