Q&A: Administrators
Topic Index
Question and Answers
Administrative
- An employee's spouse is enrolled in FSAs where he works. Can this employee still participate in our FSA plan?
- Why does the participant's Direct Deposit signup form authorize both deposits and reversals?
- Why is a fee charged for Non-Participants in some 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
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
HSA
Insurance Premiums
- A recent law allows S-corp owners to deduct 100% of employer-paid health insurance premiums that were previously partially taxable. Does this same rule apply to sole proprietors? Can they now deduct individual insurance 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 a group health plan covering only the "management" class of employees still be eligible for a pre-tax Section 125 plan?
- Can an employee drop medical insurance in the middle of the pre-tax plan year?
- 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 group term life insurance be pre-taxed under a flexible benefit plan?
- Can individual health insurance policies be included in a Flexible Benefit Plan?
- Can participants make insurance coverage changes during the Flex Plan year, especially if insurance rates have increased significantly?
- Can we automatically enroll people in the pre-tax premium plan? I thought each person had to sign an annual election form.
- 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?
- If a large rate increase is passed through to employees on our April 1st renewal, can we allow them to drop dependent coverage if they choose? Ours is a calendar year flex plan.
- Joe Employee wants to drop his spouse from coverage and stop paying her pre-tax premiums thru flex. Can we allow this?
- Our company has always paid 50% of dependent health premiums. We are no longer going to pay any of the dependent cost. Can employees increase their pre-tax premiums to pay the full cost?
- Our insurance carrier gave us a rate increase. Can we adjust the pre-tax premium contributions accordingly?
- Should you ever consider paying pre-tax eligible insurance premiums on an after-tax basis?
- We are adding a new dental plan. Can our participants pre-tax their premiums?
- We are going to require employees to pay part of "Employee Only" medical coverage. Can this amount be pre-taxed? Can employees drop coverage if they wish?
- We have been offered free Section 125 plan administration. Should we accept this?
- What Insurance Products Can Be Pre-taxed?
- What options exist when a "significant cost change" in insurance premiums occurs during the plan year?
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
- Can vitamins be reimbursed by a 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?
- Is cosmetic or elective surgery reimbursable?
- What if an employee terminates, having received Medical FSA benefits in excess of deposits?
Plan Design
- Can an employer "match" deposits to an FSA? Subsidize an FSA?
- Can domestic partners be covered by a flex plan?
- Can Employer Credits in a Cafeteria Plan be based on a percentage of each employee's salary?
- Can we self-administer our FSA plan?
- Can we self-administer our POP plan?
- Want to enhance your flex plan for next year?
- Where is the Cash Option? (Code ยง 125 applies only if the plan offers a choice between cash and qualified benefits.)
- Who is a "Fiduciary" of a Flexible Benefit 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?
- Does a pay increase or decrease entitle employees to change their elections for the Medical FSA or Medical Insurance Benefits?
- 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?
- Our company has always paid 50% of dependent health premiums. We are no longer going to pay any of the dependent cost. Can employees increase their pre-tax premiums to pay the full cost?
Tax Treatment
- Our company sponsors a 401(k)/ profit sharing retirement plan under which we make the maximum 15% contribution allowed by law. Can our employees still participate in a flex plan?
- What are the tax consequences if an employee has a gain from the flex plan? In other words, one of our terminated employees got more from the Medical FSA than he contributed!
- What are the tax consequences if an employer has a gain from the flex plan?
Use It or Lose It
This publication is designed to provide accurate and authoritative information regarding the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.
Some portions of an answer may reflect the specific administrative practices of our firm, and may not be universally applicable to all flexible benefit plans.
If you have further questions, please email us.