by Lexi Garcia | Nov 14, 2024 | Blog
When managing employee benefits, grasping the intricacies of Health Flexible Spending Accounts (FSAs) is essential, especially if your company is considering adding employer contributions like matching or seed contributions. You may be curious about how these contributions impact the IRS contribution limits.
Contribution Limits Overview
For plan years starting in 2024, the IRS sets the limit for health FSA salary reduction contributions at $3,200, which will increase to $3,300 in 2025. It’s important to note that this limit applies solely to contributions made through employee salary reductions.
Do Employer Contributions Count?
The good news is that nonelective employer contributions, such as matching or seed contributions, typically do not count toward this limit. However, there’s an important caveat: if employees can choose to receive these contributions in cash or as a taxable benefit, they will be considered salary reductions and will count toward the limit if contributed to the health FSA.
Compliance Considerations
Introducing employer contributions can also bring additional compliance challenges. For example, if contribution amounts differ among employees, your plan might violate the nondiscrimination rules outlined in the Internal Revenue Code.
Additionally, to qualify as an excepted benefit, the maximum benefit payable for the year must not exceed either twice the employee’s health FSA salary reduction election or the salary reduction election plus $500, whichever is greater. If employer contributions are included, it’s crucial to ensure they don’t push the health FSA beyond this maximum benefit threshold.
While employer contributions can enhance your benefits package, they require careful planning to maintain compliance with IRS regulations. By understanding how these contributions interact with the limits and other compliance issues, you can make informed decisions that benefit both your employees and your organization.
If you have any further questions or need assistance with your cafeteria plan, feel free to reach out!
Source: Thomson Reuters
by admin | Sep 19, 2024 | Blog
When companies contribute to the cost of health club memberships or provide on-site fitness centers, questions often arise about whether these benefits fall under the Employee Retirement Income Security Act (ERISA). Understanding the nuances of ERISA and how it applies to health-related benefits is crucial for employers.
What is ERISA?
ERISA is a federal law that sets standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. For a benefit program to qualify as an ERISA plan, it must provide one or more of the benefits listed in the ERISA definition, such as medical, sickness, or disability benefits.
Health Club Memberships and ERISA
Generally, paying for employees’ health club memberships does not constitute an ERISA plan. Health and fitness clubs promote general good health but are typically made available without regard to sickness or disability. They do not diagnose or treat specific medical conditions, so they usually do not provide medical care or any other ERISA benefit. Therefore, a policy or program of paying for health club memberships would not be considered an ERISA plan.
On-Site Fitness Centers and ERISA
Similarly, providing an on-site fitness center for employees does not typically make the program subject to ERISA. On-site fitness centers, like health clubs, promote general wellness but do not provide medical care or benefits in the event of sickness. Thus, they do not meet the criteria for an ERISA plan.
Exceptions: Disease-Management Programs
In rare cases, health club memberships or access to on-site fitness centers may be part of a disease-management program that includes diagnostic, therapeutic, or preventive care. These programs might offer “coaching” for specific health conditions or risks. Such arrangements could be viewed as providing a medical benefit, potentially making them subject to ERISA and applicable group health plan rules. The complexity and fact-specific nature of these programs mean that legal counsel should be consulted to determine ERISA applicability.
Tax Considerations
Whether a benefit is subject to ERISA does not affect whether it produces taxable income for participants or beneficiaries. However, an employer’s payment or reimbursement of health club dues or provision of an on-site fitness center may raise tax issues, which should also be reviewed with legal counsel.
Conclusion
While health club memberships and on-site fitness centers generally do not fall under ERISA, exceptions exist, particularly when these benefits are part of a broader health management program. Employers should carefully evaluate their programs and consult with legal counsel to ensure compliance with ERISA and tax regulations.
Source: Thomson Reuters
