by admin | Feb 20, 2025 | Blog
Administering a Health Flexible Spending Account (FSA) can be challenging, especially when employees request midyear changes to their elections due to unforeseen medical circumstances. This blog post aims to clarify the rules surrounding midyear election changes and provide practical tips for employers to manage these situations effectively.
Can Employees Change Health FSA Elections Midyear?
Question: Can employees reduce their Health FSA contributions if they are prevented from receiving anticipated medical care after enrollment?
Answer: No, employees cannot change their Health FSA elections under these circumstances. According to IRS regulations, an employee’s Health FSA election is irrevocable during a plan year unless an event occurs that fits within one of the exceptions available under IRS regulations or other guidance. Changes in medical condition or a provider’s recommendation do not qualify as changes in status and do not fall within the other exceptions applicable to Health FSAs.
Examples of Non-Qualifying Situations
- Pregnancy and Laser Eye Surgery: If a doctor refuses to perform laser eye surgery on an employee who is pregnant, the employee cannot change their Health FSA election.
- Dental Work Changes: If an employee’s spouse does not undergo planned dental work because the dentist’s recommendation changed, the employee cannot adjust their Health FSA contributions.
These situations do not qualify as “mistakes” that would allow an election change. The IRS’s 2007 proposed cafeteria plan regulations include an example where an employee elects Health FSA salary reductions for the next plan year in anticipation of eye surgery. If the surgery cannot be performed after the plan year starts, the employee must forfeit the remaining balance under the use-or-lose rule if their other eligible medical expenses are less than the amount contributed.
Minimizing Employee Relations Issues
While election changes are not allowed under these circumstances, employers can take steps to minimize employee relations issues:
- Clear Communication: Ensure that enrollment and other materials clearly explain the limited reasons for midyear election changes. Including real-life examples can be helpful.
- Remind Employees of Eligible Expenses: Employees may still use the funds by submitting other eligible expenses for reimbursement.
- Plan Amendments: Consider amending your plan to allow Health FSA carryovers of up to $660 to the next plan year. The maximum carryover amount is indexed, so stay updated on the latest limits.
- Grace Period: Adopt a grace period to give employees extra time to use up remaining funds.
By proactively addressing these issues, employers can help employees better understand their Health FSA options and reduce frustration related to midyear election changes.
Source: Thomson Reuters
by Lexi Garcia | Jan 23, 2025 | Blog
In today’s competitive job market, offering attractive employee benefits is crucial for retaining top talent. One effective way to enhance your benefits package is by implementing matching Health Savings Account (HSA) contributions through your company’s cafeteria plan. This blog post will guide you through the process, ensuring compliance with relevant regulations and maximizing the benefits for your employees.
Understanding HSA Contributions and Cafeteria Plans
Health Savings Accounts (HSAs) are tax-advantaged accounts that allow employees to save for medical expenses. Contributions to HSAs can be made by both employees and employers. A cafeteria plan, also known as a Section 125 plan, allows employees to make pre-tax salary reduction contributions to various benefits, including HSAs.
Can Employers Make Matching HSA Contributions?
Yes, employers can make matching contributions to employees’ HSAs through a cafeteria plan. However, it’s essential to understand the regulatory requirements to avoid potential pitfalls.
Comparability Requirements vs. Nondiscrimination Rules
Employers’ HSA contributions are generally subject to comparability requirements, which mandate that contributions must be the same dollar amount or the same percentage of the high-deductible health plan (HDHP) deductible for all eligible employees. This standard effectively prohibits matching contributions, as they would trigger a 35% excise tax on the employer.
However, these comparability requirements do not apply to employer HSA contributions made through a cafeteria plan. Instead, such contributions are subject to the Code § 125 nondiscrimination requirements, which include the eligibility, contributions and benefits, and key employee concentration tests. These tests provide more flexibility for employers to vary HSA contributions on a nondiscriminatory basis.
Designing a Compliant Matching Contribution Plan
To ensure compliance with nondiscrimination rules, carefully design your matching contribution plan. Consider the following:
- Eligibility: Ensure that all eligible employees have the opportunity to participate in the HSA matching program.
- Contribution Limits: Be mindful of the annual dollar limitations for HSA contributions. All contributions made to an employee’s HSA, whether by the employee, employer, or another entity, must be aggregated for these limits.
- Nonforfeitable Contributions: Once made, matching HSA contributions are nonforfeitable. They cannot be subject to a vesting schedule or be returned to the employer if the employee terminates employment midyear.
Communicating the Plan to Employees
Effective communication is key to the success of your HSA matching program. Ensure that the details of the matching contributions are clearly outlined in the cafeteria plan document, summary plan description, and other employee communications, such as open enrollment materials.
Implementing matching HSA contributions through your company’s cafeteria plan can significantly enhance your employee benefits package. By understanding and complying with the relevant regulations, you can offer a valuable benefit that helps attract and retain top talent while providing employees with a tax-advantaged way to save for medical expenses.
For more information on setting up a compliant HSA matching program, reach out to Sales@NueSynergy.com.
Source: Thomson Reuters
by admin | Dec 12, 2024 | Blog
Employee benefits often include a lot of acronyms. What do these and other acronyms mean? They are primarily used in Cafeteria Plans, Consumer-Driven Health Care, ERISA Compliance, COBRA, HIPAA, and Group Health Plan Mandates manuals. The list below provides a comprehensive collection of all the acronyms used.
AD&D Plan – Accidental Death and Dismemberment Plan
ADA – Americans with Disabilities Act
ASG – Affiliated Service Group
ASO – Administrative-Services-Only
ATIN – Adoption Taxpayer Identification Number
CE – Covered Entity
CMS – Center for Medicare and Medicaid Services
COB – Coordination of Benefits
COBRA – Consolidated Omnibus Budget Reconciliation Act
COLA – Cost-of-Living Adjustment
CONUS – Continental United States
DCAP – Dependent Care Assistance Program
DCTC – Dependent Care Tax Credit
DFVC Program – Delinquent Filer Voluntary Compliance Program
DOL – Department of Labor
EAP – Employee Assistance Plan
EBHRA – Excepted Benefit HRA
EBSA – Employee Benefits Security Administration
EDI – Electronic Data Interchange
EFAST2 – ERISA Filing Acceptance System II (electronic submission of Form 5500s)
EIN – Employer Identification Number
EOB – Explanation of Benefits
EOI – Evidence of Insurability
EPP – Employer Payment Plan
ERISA – Employee Retirement Income Security Act
ePHI – Electronic Protected Health Information
FAVR – Fixed and Variable Rate
FICA – Federal Insurance Contributions Act
FITW – Federal Income Tax Withholding
FLSA – Fair Labor Standards Act
FMLA – Family and Medical Leave Act
FSA – Flexible Spending Arrangement
FUTA – Federal Unemployment Tax Act
GCPCA – Gag Clause Prohibition Compliance Attestation
GHP – Group Health Plan
GTL Insurance – Group Term Life Insurance
HCE – Highly Compensated Employee
Source: Thomson Reuters
HCI – Highly Compensated Individual
HCP – Highly Compensated Participant
HDHP – High-Deductible Health Plan
Health FSA – Health Flexible Spending Arrangement
HHS – Department of Health and Human Services
HIPAA – Health Insurance Portability and Accountability Act
HMO – Health Maintenance Organization
HRA – Health Reimbursement Arrangement
HSA – Health Savings Account
ICHRA – Individual Coverage HRA
IIAS – Inventory Information Approval System
LTCI – Long-Term Care Insurance
LTD Plan – Long-Term Disability Plan
MACRS – Modified Accelerated Cost Recovery System
MCC – Merchant Category Code
MEWA – Multiple Employer Welfare Arrangement
OCR – Office for Civil Rights
PBM – Pharmacy Benefit Manager
PCORI – Patient-Centered Outcomes Research Institute
PEO – Professional Employer Organization
PHI – Protected Health Information
POP – Premium-Only Plan
PPO Plan – Preferred Provider Organization Plan
PTO – Paid Time Off
QB – Qualified Beneficiary
QE – Qualified Event
R&C – Reasonable and Customary
RRTA – Railroad Retirement Tax Act
SAR – Summary Annual Report
SBC – Summary of Benefits and Coverage
SIFL – Standard Industry Fare Level
SIHP – Self-Insured Health Plan
SMM – Summary of Material Modification
SPD – Summary Plan Description
STLDI – Short-Term, Limited-Duration Insurance
TPA – Third-Party Administrator
UCR Rate – Usual, Customary, and Reasonable Rate
VEBA – Voluntary Employees’ Beneficiary Association
by admin | Nov 21, 2024 | Blog
The holiday season is a time for celebration, but it can also bring its share of stress—especially when it comes to travel. To help you stay healthy and prepared, here are the top five FSA (Flexible Spending Account) and HSA (Health Savings Account) eligible items you should pack for your holiday adventures.
A well-stocked first aid kit is essential for any traveler. Look for kits that include band-aids, antiseptic wipes, and other basic supplies. Many first aid kits are FSA/HSA eligible, ensuring you’re ready for minor injuries or ailments while on the road.
Protecting your skin is crucial, even in winter. Sunscreen is often FSA/HSA eligible and perfect for those sunny holiday destinations. Choose a broad-spectrum SPF to shield your skin from harmful UV rays, whether you’re skiing or lounging by the beach.
Over-the-counter pain relievers like ibuprofen or acetaminophen are must-haves for any trip. These items are typically FSA/HSA eligible and can help you manage headaches, muscle aches, or any discomfort that might arise during your travels, ensuring you can enjoy your holiday without interruptions.
A digital thermometer is a handy tool to have, especially during flu season. Keeping track of your health is easier with this essential item. Many thermometers qualify for FSA/HSA reimbursement, making it a smart addition to your travel kit.
If you suffer from allergies, packing your allergy medications is essential. Antihistamines and nasal sprays are often FSA/HSA eligible and can help you manage symptoms while traveling. Whether it’s pollen, pet dander, or dust, having your allergy meds on hand will keep you comfortable and ready to enjoy the festivities.
Traveling during the holiday season doesn’t have to be stressful, especially when you’re prepared. By packing these five FSA/HSA eligible items, you can ensure a healthier, more enjoyable trip. Remember, taking care of your health is the best gift you can give yourself this holiday season. Safe travels!
For a full list of FSA/HSA eligible items, click here.
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
