FSA Eligibility

[buckyks]

Employer A requires 30 hours eligibility for health insurance, and offers FSA. Employee of A works 20 hour weeks for Emp A, but is covered under Spouse's Employer Health Plan. Can Employer A allow 20 hour Employee to participate in A's FSA?

[Lou S.]

I don't work with FSA plans but what does the FSA document and summary plan description say about eligibility?

[lvena]

Lou S is correct, what is the eligibility definition in the SPD? Usually the definition is 30+ hours. If so, and if the employer would like to allow for 20+, the plan sponsor will need to amend the SPD.

[GMK]

Lou S is correct, what is the eligibility definition in the SPD? Usually the definition is 30+ hours. If so, and if the employer would like to allow for 20+, the plan sponsor will need to amend the SPD.

Isn't it the FSA Plan Doc that needs amending (with a revision of the SPD)?

Sometimes, the Plan Doc is also the SPD, so maybe I'm stuck in semantics.

[buckyks]

Thank you all. I understand the eligibility is based on the Plan Doc. Employer A used to allow 20+ hourly requirement, but was told they had to use 30 hour. I was wondering if there was some law change associated with ACA that made that a requirement. Sounds like it is still up to the Employer to define eligibility, and it is not associated with that Employer's healthcare eligibility. That is, they do not have to match. Correct?

[leevena]

Lou S is correct, what is the eligibility definition in the SPD? Usually the definition is 30+ hours. If so, and if the employer would like to allow for 20+, the plan sponsor will need to amend the SPD.

Isn't it the FSA Plan Doc that needs amending (with a revision of the SPD)?

Sometimes, the Plan Doc is also the SPD, so maybe I'm stuck in semantics.

You may. The spd is the key plan document. Anything else produced, such as schedules, etc. are plan documents too. But spd is always the key one.

[Chaz]

Thank you all. I understand the eligibility is based on the Plan Doc. Employer A used to allow 20+ hourly requirement, but was told they had to use 30 hour. I was wondering if there was some law change associated with ACA that made that a requirement. Sounds like it is still up to the Employer to define eligibility, and it is not associated with that Employer's healthcare eligibility. That is, they do not have to match. Correct?

Employer A was misinformed. There is no requirement under the ACA regarding eligibility for FSAs. In fact, not permitting these part-timers to participate may implicate the Section 125 nondiscrimination tests depending on the demographics of the employee population.

[buckyks]

The so-called authority on this in our office states the following...

"An employee must be eligible for the Medical plan in order to participate in a HCSA. So somehow PS needs to look at the medical eligibility before offering an HCSA."

Any reason she would say this?

[lvena]

The so-called authority on this in our office states the following...

"An employee must be eligible for the Medical plan in order to participate in a HCSA. So somehow PS needs to look at the medical eligibility before offering an HCSA."

Any reason she would say this?

Yes. To me she is saying that the medical eligibility and the fsa eligibility are the same, which is usual.

[jsb]

With the initials "HCSA" now in play (Health Care Savings Account?) it brings to mind an HSA tied to a high deductible health plan (so health plan eligibility would be a prerequisite), as opposed to the more standard "Flexible Spending Account" (FSA) arrangement.

[JCJD]

If an employee is not eligible for an employer-provided ACA compliant group health plan, the FSA becomes subject to the ACA market reforms.

[KJohnson]

Agree. The ACA market reforms require no life time or annual limits that an FSA would never be able to meet. So, you need to keep the health FSA an excepted benefit. There are two conditions to keep it an excepted benefit: a maximum benefit condition and an availability condition. If someone is eligible for the FSA but not eligible for the group medical plan then you have not met the availability condition and are potentially subject to a $100 per day per employee ($36,500 per year per employee) excise tax under 4980D for each employee in the FSA.

[buckyks]

Yes, the Availability Condition answered the question. If a person is "eligible" for Employer A's medical plan, whether they enroll or not, allows them to enroll in Employer A's FSA. That clarified it.

[My 2 cents]

With the initials "HCSA" now in play (Health Care Savings Account?) it brings to mind an HSA tied to a high deductible health plan (so health plan eligibility would be a prerequisite), as opposed to the more standard "Flexible Spending Account" (FSA) arrangement.

My understanding (imperfect as it may be) would be that the Health Care Spending Account can be used for any eligible expenses, including those excluded by the employee's health insurance and any coinsurance or deductible amounts (just not for payment of coverage premiums). If one is covered by a high deductible health plan, there would be an expectation of higher uncovered expenses, making a HCSA more relevant, but I don't think that there is any necessary connection between being covered by an employer health insurance plan and being able to make salary reduction contributions to an HCSA that can be used to reimburse the employee for non-covered medical expenditures. Consider the situation where the employee is covered under the employee's spouse's plan but maintains an HCSA at work. No issue, right? I am entirely ignorant, however, as to what ACA has to say on the subject.