Husband and wife employed by same company

[bcspace]

I realize that a husband and wife who both have day care accounts, whether from the same company or different companies, can only have $5000 in total elections and the rest would have to be treated as taxable income. However, is there anything preventing a case where husband and wife both work for the same company and each elect the max for their individual medical FSA's? The only thing I can see at the moment is that the plan administrator would have to ensure that there is no double-dipping of claims.

[Guest Sieve]

They could each defer the max. into a cafe plan, but, the aggregate amount they used above $5,000 would be considered income (see Prop.--still, I think--Treas. Reg. Section 1.125-1(j) and, of course, IRC Section 129(a)(2)).

And, if not used from the cafe plan by year-end, the unused portion would be LOST--so they'd have to use it to keep from losing it, and then include it in income. So, I'm not so sure that the administrator should prevent them from using the full $10,000 for DECAP purposes. In fact, if you prevent them from doing so, they'd lose $5,000.

[Bill Presson]

They could each defer the max. into a cafe plan, but, the aggregate amount they used above $5,000 would be considered income (see Prop.--still, I think--Treas. Reg. Section 1.125-1(j) and, of course, IRC Section 129(a)(2)).

And, if not used from the cafe plan by year-end, the unused portion would be LOST--so they'd have to use it to keep from losing it, and then include it in income. So, I'm not so sure that the administrator should prevent them from using the full $10,000 for DECAP purposes. In fact, if you prevent them from doing so, they'd lose $5,000.

Larry, I think you missed the question. The question was about the medical FSA.

There is no problem with both husband and wife electing the full $5,000 each for their medical FSA's.

[GBurns]

As far as I recall, the limit for a medical FSA is set by each plan and not by the Treas Regs.

[Guest Sieve]

Bill --

I certainly did misread the question. I agree with your conclusion.

As to George's comment, I've heard that there may well be a medical FSA limitation in the new health care legislation--something like $2,500.

[Chaz]

Bill --

I certainly did misread the question. I agree with your conclusion.

As to George's comment, I've heard that there may well be a medical FSA limitation in the new health care legislation--something like $2,500.

Ha! What new health care legislation?