Q&A: Administrators

Question and Answers

Administrative

• An employee's spouse is enrolled in FSAs where he works. Can this employee still participate in our FSA plan?
• We have been offered free flex plan administration. What do we need to know about it?
• Why does the participant's Direct Deposit signup form authorize both deposits and reversals?
• Why is a fee charged for Non-Participants in some small FSA Plans?

Compliance

• Are flex plans affected by COBRA rules?
• Are flex plans affected by FMLA (Family Medical Leave Act) rules or others types of leaves?
• Can an employee pre-tax the COBRA premium for a child who ceases to be a dependent?
• How do HIPAA Privacy standards affect Flexible Benefit Plans?
• How does COBRA affect the Medical FSA when employees terminate?
• What continuation options can or must be offered to terminating employees with positive FSA balances?
• What IRS rules apply to debit or credit cards used within a flex plan?
• What rules govern the electronic distribution of the Summary Plan Description?
• Why did we receive "Schedule A" for Form 5500 from our insurance company?
• Why would a participant in the Medical FSA want to continue their coverage under COBRA?

Customer Service

• How does "FSA Inquiry" work on the internet web site?

Dependent Care FSA

• An employee shares custody of his child with a former spouse. The child alternates living with each parent during the year, and the parents alternate claiming the child as a tax dependent every other year. Can the employee participate in the Dependent Care FSA?
• Can a non-custodial parent submit FSA claims for a child?
• Can the Dependent Care FSA election amount be changed anytime there is a change in provider or cost?
• Do Camp Expenses Qualify for Dependent Care Reimbursement?
• Do Dependent Care FSA participants have any special tax reporting requirements?
• Does the "Annualization Rule" apply to the Dependent Care FSA?
• Does the employer have any special tax reporting requirements for Dependent Care FSA participants?
• How May Experience Gains Arising from Participant Forfeitures be Used?
• What types of arrangements are NOT reimbursable under the Dependent Care FSA?

Discrimination Rules

• Are participants in an ESOP considered "stockholders" for flex discrimination testing purposes?
• Can the owners of our business participate in the flex plan?
• Can the spouses and other family members of the owners of our business participate in the flex plan?
• I am the sole owner of an S-corporation. I understand that I am not eligible to participate in my company's flex plan. Can I nevertheless participate through my spouse, who is a bona fide employee of our company?

Election Changes

• A Participant who is currently enrolled for health insurance and in the Medical FSA has just become eligible for Medicare. Can he change his flex election mid-year?
• Can participants make insurance coverage changes during the Flex Plan year, especially if insurance rates have increased significantly?
• If employees make an honest mistake on a flex plan election form, can they change their election?
• We are changing our medical insurance plan, raising co-pays and deductibles. Can employees increase their Medical FSA election to cover this increased exposure?
• What medical FSA maximums apply after a Change in Status?

Employer Issues

• Can Members of an LLC participate in a flex plan or in an HRA?
• Can owners of "S-Corporations" participate in a flex plan?
• Can pre-tax flex contributions be taken from severance pay?
• How do I advise ProBenefits of new employee hires and premium information?
• How does flex affect IRS Form W-2?
• If an employee is rehired within 30 days of termination, is he treated as a new employee or does he step back into his original election?
• Our company is declaring bankruptcy and closing its doors. Can I still get my flex reimbursements?
• Self-employed individuals cannot participate in a flex plan. Can their spouse participate if employed by the company?
• What is the "Annualization Rule" for Medical FSA? How Does it Work?

HRA

• What is a Health Reimbursement Account (HRA)?

HSA

• Why should an Employer offer a Flexible Spending Account if they are offering an HSA option for Employees?

Leaves of Absence

• Are flex plans affected by FMLA (Family Medical Leave Act) rules or others types of leaves?
• How are plan benefits affected if an employee is called to active duty military service?
• How is flex participation affected during a leave of absence? (Pre-Tax Premiums & FSAs)

Medical FSA

• How may experience gains arising from participant forfeitures be used?
• If an employee terminates with a negative Medical FSA account balance, must the employer send the employee an amended W2?
• If planned medical expenses do not occur, can participants reduce their FSA election?
• What if an employee terminates, having received Medical FSA benefits in excess of deposits?

Plan Design

• Can an employee pre-tax premiums or submit FSA expenses for a domestic partners?
• Can our company contribute to employees' FSA accounts?
• Can we self-administer our FSA plan?
• Can we self-administer our POP plan?
• Who is the "fiduciary" of a flex plan?

Pre-Tax Premiums

• An employee's spouse signed up for medical coverage under her employer's group plan. Can our employee now drop her from dependent medical coverage?
• Can cancer insurance be offered pre-tax under a flex plan?
• Can employees pre-tax the premium for coverage under their spouse's employer plan?
• Can individual health insurance policies be included in a Flexible Benefit Plan?
• Can our company use automatic enrollment for pre-tax premiums, rather than salary reduction forms?
• Do pre-tax flex contributions reduce disability benefits under our Long Term Disability insurance, since these are based on salary?
• How much can we discriminate in the portion of health insurance premiums paid for different classes of employees?
• Should you ever consider paying pre-tax eligible insurance premiums on an after-tax basis?
• What benefits can be pre-taxed under a flex plan?

Status Changes

• An employee got divorced during the plan year. Though he "lost" a dependent, he wants to add coverage by enrolling in the Medical FSA for the first time. Is this permitted?
• Can an employee drop medical coverage in the middle of the flex plan year?
• Can our company change its contribution strategy mid-year?
• Does a salary decrease or increase constitute a qualifying event that would allow a mid-year election change for Health FSA or premiums?
• If a participant terminates the Medical FSA due to a Change in Status, can the remaining FSA balance be used anytime during the remainder of the year?
• What options exist when a "significant cost change" in insurance premiums occurs during the plan year?

Tax Treatment

• Are there tax consequences for an employee who terminates with a negative Health FSA balance?
• If our company sponsors a retirement plan and makes maximum contributions, can our employees still participate in a flex plan?
• What are the tax consequences if an employer has a gain from the flex plan?

Use It or Lose It

• What happens to FSA funds forfeited under the Use-or-Lose rule?