FSA Plan minimum elgibility

[Guest BruceC]

It is my understanding that an ER may make ineligible certain EE's from the company's QRP based on certain statatory limits relating to age (<21), length of service (<1yr), coverage under collective bargaining or foreign EE's when the company is located off-shore. The ER does not have to include these ineligible EE's in the plan's annual non-discrimination testing. In addition, the QRP document may exclude certain groups from plan participation, based on some job related criteria such as geographic location, hourly vs. salaried, job description, etc., but all of these EE's, excluded and non-excluded, are used in annual non-discrimination testing.

If my above assumptions are correct, may the ER also use these criteria in the FSA plan, whether day care, medical or adoption? Of course, the actual non-discrimination tests are entirely different...but I'm really more concerned here with who the FSA plan may consider ineligible, who may be excluded and who must be used in 'the denominator' in plan non-discrimination testing.

Thanks for any enlightenment :-)

BruceM

[J Simmons]

For health flex accounts, you can exclude from the 105h testing to the extent the plan excludes those who do not have 3 years of service, are younger than age 25, work less than 25 hours per week, and those that work less than 7 months per year. The 25 hours per week is a safe harbor; if you are ready to prove that a higher level (up to 35 hours per week) is yet considered 'part time' in your industry and locale if challenged by the IRS, then you can use the higher hours per week level. Similarly, the 7 months per year is a safe harbor; you can go as high as 9 months per year if you could establish that in your industry/locale the higher level is yet considered 'seasonal'.

For day care flex accounts, you disregard in testing those employees that do not meet the 21/1 requirements you noted apply to QRPs. You also disregard those CBA'd employees.

[Guest BruceC]

Thank you

BruceM