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 | Oct 24, 2024 | Blog
The IRS announced the 2025 contribution limits for all Flexible Spending Account (FSA) plans. Below is an overview of the limit increases across all the types of FSAs except for Dependent Care FSAs, which remain the same at $5,000 per year.
Health Flexible Spending Account
The Health FSA, which provides employees the ability to set aside money on a pre-tax basis to pay for eligible medical, dental, and vision expenses will have an increase to its contribution maximum from $3,200 to $3,300 for 2025. The new contribution limit will also apply to the Limited Purpose FSA which reimburses eligible dental and vision expenses. Limited Purpose FSA limits will also increase from $3,200 to $3,300 for 2025.
Carryover Limit
The FSA Carryover limit provides employers the option to transfer a maximum amount of remaining FSA balances at a plan year’s end to carryover for use during the next plan year. This is available with Healthcare and Limited Purpose FSAs only. The carryover limits for this account will increase from $640 to $660 for 2025.
Commuter Benefits
Commuter Benefits help employees pay for certain parking, mass transit, and/or vanpooling expenses with pre-tax dollars. The contribution limits for this account will increase from $315 to $325 for 2025.
Adoption Assistance
The Adoption Assistance FSA helps employees pay eligible adoption expenses such as agency fees and court costs by contributing to the account with pre-tax money from their paycheck. The contribution limits for this account will increase from $16,810 to $17,280 for 2025.
For more information about this major change, read our latest handout.
by admin | Aug 1, 2024 | Blog
As the back-to-school season approaches, parents and students are preparing for the new academic year. Beyond the usual school supplies, there are many health-related items eligible for purchase using your Flexible Spending Account (FSA) or Health Savings Account (HSA). These tax-advantaged accounts can help you save money on essential health products that support your child’s well-being throughout the school year.
1. First Aid Supplies
Accidents happen, especially on the playground or during sports activities. Stock up on first aid essentials like bandages, antiseptic wipes, and cold packs. These items are crucial for handling minor injuries promptly.
2. Contact Solution
If your child uses contact lenses, ensuring they have the right contact solution is essential for maintaining eye health and comfort. Both prescription glasses and contact lenses are eligible expenses, so make sure they have a clear view of the blackboard and their textbooks.
3. Over-the-Counter Medicines
Having a stock of over-the-counter (OTC) medicines can be a lifesaver for managing common ailments like colds, allergies, and headaches.
4. Acne Treatment
Managing acne is crucial for your child’s confidence and skin health. Various acne treatments, including creams, gels, and cleansers, are eligible for purchase with your FSA or HSA.
5. Sunscreen
Protecting your child’s skin from harmful UV rays is important year-round. Ensure you have an adequate supply of sunscreen, particularly if your child spends a lot of time outdoors.
Leveraging your FSA or HSA for back-to-school shopping not only ensures your child is well-prepared but also helps you save on essential health-related products. By planning ahead and purchasing these eligible items, you can take advantage of the tax benefits these accounts offer.
For a complete list of eligible FSA and HSA back-to-school items click here.
For more information on all FSA and HSA eligible items, visit the FSA Store.
by Lexi Garcia | Jul 18, 2024 | Blog
In the complex world of healthcare benefits, understanding the requirements for Medicare Part D disclosure notices can be a challenge, especially for start-ups venturing into offering health plans. This article aims to shed light on the requirements for Health Reimbursement Arrangements (HRAs) and Health Flexible Spending Accounts (Health FSAs).
Medicare Part D and Creditable Coverage
Medicare Part D is a federal program that provides prescription drug coverage to individuals who are eligible for Medicare. Plan sponsors that offer prescription drug coverage must disclose to covered Part D-eligible individuals and to the Centers for Medicare & Medicaid Services (CMS) whether their drug coverage is “creditable.” Coverage is considered creditable if its actuarial value equals or exceeds that of defined standard Part D coverage.
HRAs and Medicare Part D Disclosure Notices
The term “group health plan” for disclosure purposes includes “account-based medical plans” such as HRAs. Therefore, sponsors of HRAs that offer prescription drug coverage must provide disclosure notices to Part D-eligible individuals, advising whether the HRA’s prescription drug coverage is creditable. CMS officials have informally stated that a single, combined disclosure notice covering both an HRA and another group health plan offered by the same employer is permitted. Thus, if all of the HRA participants are also participants in your company’s major medical plan, you could avoid separate notices for your HRA entirely.
Health FSAs and Medicare Part D Disclosure Notices
On the other hand, sponsors of health FSAs are not required to provide disclosure notices to Part D-eligible individuals. This is due to a specific exception in CMS guidance, which states that health FSAs are not taken into account when determining whether employer-provided prescription drug coverage is creditable.
Conclusion
Understanding the requirements for Medicare Part D disclosure notices is crucial for companies planning to offer health benefits. While HRAs generally require these notices, health FSAs do not. As always, it’s essential to stay informed and consult with a benefits advisor to ensure compliance with all regulations.
Source: Thomson Reuters
by Lexi Garcia | Jun 27, 2024 | Blog
As a plan sponsor of a self-insured health plan, it’s crucial to maintain accurate records and ensure that all enrolled employees meet the eligibility criteria. However, situations can arise where outdated information leads to ineligible employees being enrolled in the health plan. If you’ve discovered that employees working 25 hours per week have been enrolled based on old handbook information, while your plan documents and Summary Plan Description (SPD) correctly state a 30-hour threshold, swift and strategic action is required.
Immediate Steps for Plan Sponsors
Upon discovering such errors, you must act promptly to minimize complications and potential liabilities. Here are two primary options to consider:
Allow Ineligible Employees to Remain Enrolled:
- Fairness Consideration: Allowing employees to remain in the plan for the rest of the plan year can be seen as fair, especially if they relied on the outdated handbook information. This approach reduces the risk of employees seeking equitable relief due to miscommunication.
- Stop-Loss Insurance Risk: Check with your stop-loss insurer before proceeding. Stop-loss coverage typically adheres to the terms in the plan document, not ancillary documents like handbooks. Without insurer approval, claims from these employees might not be covered under your stop-loss policy.
Remove Ineligible Employees from the Plan:
- Consistency with Plan Terms: Removing these employees aligns with the plan document and SPD, mitigating the risk of significant uncovered claims under your stop-loss policy.
- Prospective Removal: Ensure the removal is prospective, not retroactive, to avoid the impermissible “rescission” of coverage. Retroactive removal could lead to significant legal and ethical issues.
- Equitable Relief Risk: Be aware of the potential for employees to claim equitable relief for lost benefits due to reliance on the outdated handbook.
Ensuring Compliance and Fair Treatment
Consistency is key in handling such situations. Treat all similarly situated employees alike to avoid claims of discrimination under various laws. Disparate treatment can lead to claims of discrimination based on sex, race, age, or health status. Additionally, adhere to the nondiscrimination rules under Code § 105(h) for self-insured health plans.
Discovering ineligible employees enrolled in your health plan requires careful consideration and prompt action. Whether you decide to keep the employees enrolled for the remainder of the plan year or remove them, ensure that your actions are consistent with plan terms and fair to all employees. By addressing the issue swiftly and consulting with your stop-loss insurer, you can mitigate potential risks and maintain the integrity of your health plan.
Source: Thomson Reuters
