FSA adoption provisions

[Guest Steve Cox]

I'm looking for information on adoption provisions under a flexible spending account. Any surveys out there or anything else where I can compare provisions and look at the administration process.

[Joe Priselac]

Are you refering to a spending account for the reimbursement

of adoption expenses or are you asking about the adoption of a flexible spending account plan?

[Guest Steve Cox]

I am refering to a spending account for the reimbursement

of adoption expenses......sorry I didn't make that clear!

[Joe Priselac]

Steve,

I don't have survey results, but since we have made the account part of our administrative package about 70 our employer groups have added the benefit. Not many employees in each company use the account,but the ones that do really benefit from the tax savings. IRC Section 137 allows up $5,000($6,000, in the case of a child with special needs) per adoption. In operation it works like any other spending account. The difference from an employer's point of view is that the reductions are still subject to FICA tax and in that sense it has a tax impact similar to a 401(k) plan. The rules become somewhat convoluted for foreign adoptions. We have also found that several people who wanted to use the account were prevented from doing so because of the income limitations in the Code. The benefit begins to phase out if your adjusted gross income is above $75,000 per year. Also any direct employer contributions toward adoption expenses reduce the amount that an employee can put into his spending account.I hope this brief description helps. I almost forgot.This program expires December 31, 2001 unless Congress extends it.