exclusions from participation

[Guest aspring]

Can a plan exclude part-time employees from participation in an FSA, if so, what kind of limitation can they use. ex. all employees who work under 40 hours, or does it have to be a different hour amount? what would be the maximum?

any help would be greatly appreciated!

[Guest Mark Bongard]

There is no absolute prohibition on excluding part-time employees, but the definition of the eligible group will be driven by compliance with the eligibiltiy requirements for 125 cafeteria plans and self-insured medical reimbursement plans under 105(h). The rules overlap but are not the same, which makes design more challenging.

For example, both sets of rules allow the exclusion of emplolyees with less than three years of service. The 105(h) rules allow the exclulsion of part-time employees who customarily work fewer than 35 hours per week, if other employees perfoming similar worker have substantially more hours. This part-time exclusion does not apply in the context of the 125 rules.

I would recommend looking through the proposed 125 regs from 2007 and looking at Reg. sec. 1.105-11. I hope this is helpful.