FSA Plan Year Not Matching ERISA Plan Year

[5500Nerd]

I have a client that has a non-calendar year ERISA Plan (7/1 -6/30) that is a Mega-Wrap Plan (all benefits bundled under one Plan). One of the benefits is the healthcare FSA. It is on a calendar year. I was told that the FSA Plan is not deemed as a policy and cannot be bundled with an ERISA Plan if the Plan Years don't match. I could not find any written provisions to back this up. Any feedback would be greatly appreciated. Many Thanks!

[QDROphile]

Perhaps this is just being picky; it does not address the crux of your question.

The following does not make sense: "the FSA Plan is not deemed as a policy".

The following indicates a  conceptual error: "the FSA ... cannot be bundled with an ERISA Plan".  A healthcare FSA is an ERISA plan (subject to things like the employer not being subject to ERISA.  This may be more just loose composition than a misconception that is causing confusion.

If your Mega Wrap Plan is being treated as a single ERISA plan, what would you state as the plan year if one component (healthcare FSA) does not have the same plan year?  Does that touch on your question?

[Flyboyjohn]

The wrap plan document and SPD describe/disclose  the ERISA welfare benefit plans maintained by the employer.

The section 125 cafeteria plan (including the premium conversion feature, the FSA, and possibly a dependent care reimbursement arrangement) is a creature of tax law and in our experience is reflected in a separate plan document and SPD.

To make the "premium conversion" feature work smoothly it's important to have it operate on the same year as the insurance policies but there's no reason the FSA needs to operate on the same year as the insured benefits.

 

[QDROphile]

A healthcare FSA is a health plan that is subject to ERISA notwithstanding that is is mostly a tax trick.  Neither A dependent care FSA nor a "premium conversion" plan are subject to ERISA. They are tax tricks like a healthcare FSA, so they are often documented together.  The healthcare plan that is funded through the premium conversion plan is subject to ERISA. The healthcare plan is usually documented separately from the premium conversion plan. What constitutes a "plan" or a "plan document" for ERISA purposes is rather fluid and does not depend on pieces of paper in a single stack or avoidance of pairing with terms of an arrangement that is not an ERISA plan with the documentation of the ERISA plan.  A healthcare FSA and a core healthcare plan can be separate plans or can be components of a single ERISA plan and the single ERISA plan can be composed of two or more documents or a singe document  However, the terms of each written component of an ERISA plan should state what the component is and what plan it is an element of.  Some document (usually the wrap document) should identify all the components of the ERISA plan that make up the single ERISA plan.  Any plan should stat the plan year.  I think the original post is asking if a component of the MEGA ERISA plan can have a different plan year than the other component(s).  I think the answer is affirmative, but I am not certain enough to simply assert that conclusion. 

[Flyboyjohn]

Respectfully disagree that a flexible spending arrangement is a Welfare Benefit Plan under ERISA. There is no "benefit" being provided by the employer to the employees other than a tax gimmick. As additional support I would cite the fact that there is no 5500 reporting of the FSA which of course would be required if it was an employee benefit plan covering more than 100 participants.

[jpod]

A medical flexible spending arrangement is absolutely an ERISA welfare plan.  Show us the authority upon which you rely for saying it is not.

[Flyboyjohn]

Unfortunately I can't prove a negative but perhaps an example will help.

We probably agree that an unfunded employee welfare benefit plan paid from employer general assets that covers more than 100 participants is required to file a 5500.

Assume you have a company that offers an FSA as its only medical related "benefit" (no group health/medical plan) that covers 150 employees. They of course are not using a trust to hold and disburse the contributions.

Would you file a 5500 for this "plan"? I wouldn't because I don't think it's a "benefit plan" and view it as more like a payroll practice and tax gimmick.

 

 

 

[jpod]

I would advise a client that it MUST file a 5500 for the plan you describe.  I think you are way off the reservation here.