FSA (Health) calendar year plan, prorate for new hires?

[TPApril]

Can an ongoing FSA prorate new employees to the maximum allowable FSA for the year?

Ie new employee is eligible 3/1, so their limit is 10/12*Full limit?

Am currently waiting for copy of the SPD/Employee Benefit Guide.

[Brian Gilmore]

Yeah I think they could in theory, but why would they want to?  

The health FSA salary reduction contribution limit only needs to be prorated for a short plan year (i.e., not an employee entering mid-year into a health FSA full plan year).  The more the employee elects, the more the employer saves in FICA contributions.  And I don't see any heightened risk of experience losses with a mid-year entry if that's the motivation.  Plus, as long as they aren't coming from a related employer, the employee has a fresh $3.050 limit available to them even if they had a health FSA with the prior employer.

For the dependent care FSA, it's a simple $5k calendar year limit across-the-board that will be the employee's responsibility to stay within.  Again, the more the employee elects, the more the employer saves on the payroll tax side.

[casey72]

Agree with Brian. And such a good point about FICA savings!