tax-treatment of employees paying for entire cost of fsa

[Zorro1k]

A state wants to provide a health FSA for employees. State law requires that the state cannot pay for it and that all admin fees must be passed on to employees. What is the tax-treatment of the costs that are passed onto the employees?

[Joe Priselac]

Proposed IRS regulations state that administrative fees can be paid on a pre-tax basis through salary reduction.

It could be argued that the FICA tax savings that the employer would get could more than offset the administrative cost without having to make the individual participants pay.

[GBurns]

Zorro1k.

You must be kidding. There is no state that does not already have and pay for a section 125 plan. Since they do pay those fees, it stands to reason that there would be no law against paying for an FSA to be included, if not already built in but just not used.

I also cannot think of any state that does not have an FSA..