Employer contributions

[Guest afreeling]

If an employer decides mid year that they want to offer an employer contribution to their Health FSA plan, how can they do this at this point. If employees were eligible during open enrollment (calander year basis), and elected, lets say $1500.00, can the employer add $500 to each participant at this point and make their new annual election $2000.00? What about the employees that were eligible during open enrollment and declined enrollment at that point, shouldn't they be able to receive the ER Contribution? Does this have to be prospective? Is this a qualifying event to enroll?

[leevena]

Nothing is impossible, but the solution may be expensive, time consuming, and cause some confusion. I do not know the specifics about your group, the carrier contracts, or the laws that you operate within, but let me make some comments that might help. The first is that I am assuming that you have a Cafeteria Plan, since this is in the Cafeteria Plan section of the board. The second is I doubt that the carrier would allow enrollment changes after 2 months. Third is what would you do if a current HSA enrollee had decided to contribute the full amount towards the HSA and now has a $500 contribution from the employer available.

One sure way to do this is to cancel everything (Health carrier, section 125 plan) you have and re-start. You might be able to make the change without this drastic remedy, but I do not know enough to advise you.

So I would ask the employer why after less than 2 months into the plan year he/she is considering a change like this.

Hope this helps.

[papogi]

The employer can begin to offer $500 mid-year. They can send out a form for employees to fill out saying how much, if any, they want added to the FSA. Employees who think that adding $500 to their FSA will create a balance bigger than they can get out by the end of the year can simply then take the $500 as additional taxable compensation. If the employer wants to do this without a cash option, I think they will need to wait until the next open enrollment to do this cleanly. Those people who already elected what they think they will have as expenses over the year will have little benefit (they will forfeit at the end of the year), and they could feel that they were treated unfairly. They will say, I would have saved $500 of my own dollars if I knew the company would begin putting in their own $500. Waiting to do this at open enrollment will make it only a positive for everyone.

[leevena]

Oops. I need to amend my earlier answer and apologize. I read the original question as asking about a Health Savings Account, not a FSA.

Sorry.

[QDROphile]

I disagree with papogi.

The employer can give everyone a $500 FSA credit for the year (whether or not they can really use it), but I don't see how participant can be given an election to take any portion in cash instead of FSA credit. It would be the same as the employer giving everyone a $500 raise and allowing employees to elect how much of the $500 would go to FSA credit. That cannot be done mid-year.

[GBurns]

QDROphile

Are you saying that it could be done at open enrollment but just not mid-year?

[Guest afreeling]

Oops. I need to amend my earlier answer and apologize. I read the original question as asking about a Health Savings Account, not a FSA.

Sorry.

That's ok. It seems that now a days, HSA's is mostly what people are speaking about. Thanks anyways.

[QDROphile]

QDROphile

Are you saying that it could be done at open enrollment but just not mid-year?

Yes.

[Guest afreeling]

Thank you everyone. I appreciate your assistance. Have a great day!

[papogi]

Good point, QDROphile. Viewed as a salary increase, that would not be a status change to allow a change to the FSA election, to allow some or all of that $500 to go into the FSA. I didn't think it through well enough from that perspective.