Frequently Asked Questions

The Department of Labor (DOL) uses the filing signer’s e-mail address to communicate rejection filing problems. This may pose problems if the filing signer does not monitor their e-mail regularly or did not use a regular e-mail address to obtain filing signer credentials. Plan sponsors should make certain the e-mail account of the filing signer is one that is monitored regularly by an individual connected to the plan filing. Plan sponsors and 5500 preparers should regularly check the e-mail account for DOL correspondence because often the DOL only provides a short time period in which to respond. If a plan sponsor does not respond to the e-mail letter, the DOL will follow up with a notice by regular mail before it commences more serious action (e.g., penalties). Nevertheless, plan sponsors do not want to rely on the good graces of the DOL.

A Cafeteria Plan is not currently required to file a Form 5500, but ERISA benefit plans that are funded through the Cafeteria Plan may still have to file Form 5500.

The requirement for Cafeteria Plans to file Form 5500 arose from Code Section 6039D, but the filing requirements under that provision were suspended by the IRS since 2002. The Form 5500 requirement continues to apply, however, to many employee welfare benefit plans that are governed by ERISA; the Code Section 6039D suspension does not affect ERISA’s Form 5500 filing requirements. This means that component plans, under your Cafeteria Plan, that are ERISA defined plans (including, for example, Health Care Flexible Spending Accounts (HCFSA), group major medical plans, group life or disability etc.) may still need to file a Form 5500 unless an exception applies. Remember that even though a Cafeteria Plan and the benefit plans that it funds are closely associated, they are legally separate.

We mentioned that there are exceptions. Under ERISA, certain plans are not required to file Form 5500. For example, plans maintained by church or governmental employers (e.g. school district plans) are exempt from ERISA and do not need to file a Form 5500. DOL regulations currently exempt plans with fewer than 100 covered participants from the Form 5500 requirement if the plans are unfunded or if they pay benefits through insurance. Please note that this is being reviewed by DOL and may be subject to change.

Your employee cannot change his HCFSA election under the circumstances you describe.  Under the Cafeteria Plan rules, an employee’s election is generally irrevocable for the plan year; mid-year changes are not permitted unless an election change event occurs that fits within one of the exceptions available under applicable IRS rules.  A change in an employee’s financial condition by itself is not a permitted election change event, even if it affects his or her anticipated medical expenses.  For example, a change in financial condition is not a “change in status” that might otherwise allow an employee to change his or her election.  Furthermore, having less money to pay for benefits is not a “cost increase” because, under IRS rules, a cost increase only occurs when there’s been a change in the amount that an employee is charged for benefits, which hasn’t occurred here.  (Notably, the IRS rules that allow Cafeteria Plan election changes in the event of certain cost changes do not apply to HCFSAs, but we mention them as clarification.)  Nor do the circumstances you describe qualify as an employee “mistake” that might otherwise allow an election change.  Your employee will have to wait until the next open enrollment period to change his HCFSA election.

The IRS does restrict the locations where HCFSA debit cards can be used.  First, cards can be used at medical care providers (e.g., physicians, dentists, vision-care offices and hospitals), as identified by their merchant category code (MCC).  When cards are used at these health care-related merchants, some categories of expenses will qualify for automatic substantiation, and after-the-fact substantiation will be required for all other expenses.  Second, cards can be used at merchants (including merchants that are not medical care providers as identified by MCC) that have, in place, an inventory information approval system (IIAS) to ensure that cards are used only for eligible medical care expenses (e.g. pharmacies or medical supply stores).

According to the regulations from the IRS, OTC drugs and medications cannot be reimbursed from a HCFSA unless they are accompanied by a doctor’s note.

Items that can be ingested, injected or rubbed on can no longer be reimbursed unless there is a doctor’s note submitted along with the reimbursement request.  The doctor’s note must state the specific medical condition that the OTC drug is treating as well as the duration of the prescription and must be dated prior to the purchase of the OTC items.  OTC items such as insulin, diabetic strips, and glucose monitors are still eligible without a doctor’s note.

Items used to promote the general good health of an individual or that are not medicines or drugs are not reimbursable.  This includes, but is not limited to, dietary supplements, vitamins, toiletries, (e.g. toothpaste), cosmetics and sundry items.

No. Under the Cafeteria Plan rules, a HCFSA participant who terminates employment without electing COBRA is entitled to reimbursement of medical expenses only for claims incurred prior to his or her termination date. Furthermore, any unused account balances are subject to the “use-it-or-lose-it” rule. And, under another rule applicable to HCFSAs, the uniform overage rule, HCFSA coverage (like insurance coverage) must stop if the participant stops making contributions. As stated in the preamble to the IRS permitted election change regulations, “a Cafeteria Plan could not permit individuals terminating employment to change their HCFSA elections to match the amount of premiums paid prior to termination (i.e., stop paying premiums) and continue to receive HCFSA reimbursements with respect to the remainder of the period of coverage.” A Plan amendment, such as the one that you suggest, would not be allowed because it would have the effect of avoiding these rules.

Regardless of whether COBRA is elected, remember that the HCFSA may reimburse expenses incurred before the date when HCFSA coverage ends, so long as claims are made within the applicable “run-out period” specified in your plan (typically a 30, 60 or 90 day period that starts either after employment ends or after the end of the plan year).

To be reimbursable under these tax-favored vehicles, the expense must be for medical care as defined in Code Section 213(d). Even though a drug may be lawfully obtained in a local jurisdiction, it will not be considered “legally procured” if it is obtained in violation of U.S. federal law. You cannot include in your medical expenses the cost of a prescribed drug brought in (or ordered shipped) from another country, because you can only include the cost of a drug that was imported legally. There are two exceptions from the general prohibition: (1) prescribed drugs that the Food and Drug Administration (FDA) announces can be legally imported by individuals; and (2) prescribed drugs purchased and consumed in another country, if the drugs are legal in both the U.S. and the other country. Consequently, whether a HCFSA, HRA, or HSA can reimburse claims for prescription drugs imported from Canada generally will depend upon whether the FDA has declared importation of that particular drug to be legal.

Generally, no, these fees cannot be reimbursed by a HCFSA because they are like insurance and are payable whether or not medical care is provided. In order for expenses to be reimbursable under a HCFSA, they must be for medical care.  However, there could be concierge arrangements under which some services might be reimbursable, depending upon how the program is structured.

No, if the employee is participating in a traditional, general-purpose HCFSA, then her husband would be ineligible to contribute to a HSA. This is because one of the requirements for HSA eligibility is that an individual not be covered by any non-HDHP health coverage. Since a general-purpose HCFSA is a type of non-deductible health coverage, and the employee’s husband is covered under the HCFSA (his medical expenses are eligible for reimbursement), he is ineligible to contribute to a HSA.

It depends upon what the charge is for. It could be for a “late pickup fee” — that is, an extra charge to continue taking care of a child who was not picked up from the daycare center on time. On the other hand, it may be for a fee that was charged because the participant was late in paying the daycare center’s bill. Because there is no formal guidance regarding whether either of these charges is reimbursable, we need to apply some general rules.

In order to qualify for reimbursement from a DCFSA, an expense generally must be for the care of one or more qualifying individuals–the primary purpose of the expense must be to ensure the individual’s well-being and protection. Accordingly, if the charge is a late pickup fee, we think that the fee can be reimbursed under your DCFSA, so long as it is for taking care of the child and satisfies the other criteria for reimbursement under your plan and the Code. If the charge is for late payment of the bill, it probably would not qualify for reimbursement from a DCFSA. This is because a fee of this type is likely to be a penalty to discourage any future late payments and would not relate directly to custodial care of the child.

An employer, that amends its Cafeteria Plan to provide a grace period for a DCFSA, may continue to rely on Notice 89-111 by reporting in Box 10 of Form W-2 the salary reduction amount elected by the employee for the year (plus any employer matching contributions attributable thereto).

For example, suppose there is a grace period that runs until March 15 of the subsequent Plan Year. An employee elects a salary reduction of $5,000 for his DCFSA for the 2015 calendar year. For the 2016 calendar year the employee then elects an additional $5,000. At the end of the 2015 Plan Year the employee has $500 of un-reimbursed contributions that are available to him for dependent care expenses incurred during the grace period.

For the 2015 calendar year, the employer may report in Box 10 of Form W-2 the $5,000 salary reduction amount elected by the employee for his DCFSA in 2015. Similarly, for the 2016 calendar year, the employer may report in Box 10 of Form W-2 the $5,000 salary reduction amount elected by the employee for dependent care assistance in 2016.

An HRA program can help you:

1. Reduce your employee benefit costs or replace other benefit programs
2. Customize your benefits to meet the individual needs of your employee group
3. Encourage employees to choose high deductible insurance plans

An HRA is an employer-funded benefit with very flexible benefit design options that allow you to design a benefit plan that meets your benefit and budget goals.

According to the Department of Labor (DOL), an SPD must be automatically furnished to such an individual if he or she ceased to be a “participant covered under the plan” (as defined in DOL regulations), during the period between their termination of employment and rehire. The DOL gave as an example a health plan that extends coverage until the end of the month in which the employee terminates employment. The DOL stated that in this case, if the employee is rehired before the end of the month, an SPD does not have to be automatically issued. Another example indicates that a rehired 401(k) plan participant, who did not take a complete distribution during the period between termination and rehire, would not have to be automatically furnished with an SPD upon reemployment.

• Newly covered participants must be furnished with an SPD within 90 days after they first become covered under the plan.
• New Plans must furnish an SPD to covered participants within 120 days after the plan first becomes subject to ERISA.

Summary of Material Modifications (SMMs) are required anytime there is a “material modification” in the terms of the plan or any change in the information required to be in the SPD. SMMs are treated as part of the SPD and; therefore, must be distributed as part of the SPD.

• SMMs must be furnished within 210 days after the end of the plan year in which a modification or change is adopted. However, some ERISA plans include reasonable notice provisions that may require notice of a plan amendment earlier than the statutory deadline.

Under DOL (Department of Labor) regulations, the Plan Administrator of a welfare benefit plan is required to furnish SPDs (and SMMs) only to participants covered under the Plan and not to beneficiaries. There are different rules for retirement plans. An SPD is not technically required to be furnished until an employee is covered by a Plan, however, some employers provide SPDs to eligible employees when enrollment is necessary.

The term “participant” means an employee or former employee of any employer who is or may become eligible for benefits under an ERISA plan or whose beneficiaries are or may be eligible for benefits. This can include COBRA qualified beneficiaries, covered retirees, and other former employees who may remain eligible under a Plan.

An alternate recipient under a qualified medical child support order (QMCSO) is treated as a plan participant for ERISA disclosure purposes. Generally, the SPD and SMMs should be furnished to the custodial parent or guardian of a minor child.

Plan Administrators should adopt a practice of furnishing SPDs and SMMs to spouses or other dependents of a deceased participant who continue to receive benefits after the participant’s death.

SPDs and SMMs should be sent to a representative or guardian when the plan is on notice that the participant or other person entitled to an SPD is incapacitated.

ERISA plan records may be maintained electronically so long as you comply with applicable rules to ensure that the records are as secure, accessible, legible, and usable as paper ones.

ERISA, the Code, and other laws require your company to maintain numerous records. ERISA Section 107 requires records necessary to substantiate information required by Form 5500, and ERISA Section 209, applicable to pension plans, requires records sufficient to determine pension benefits due to employees; the Code imposes various recordkeeping requirements; and the HIPAA privacy and security rules impose their own record retention rules for health plans.

You are permitted to retain most records electronically due to (1) the Electronic Signatures in Global and National Commerce Act (E-SIGN), which provides federal standards for the use of electronic records in a broad array of transactions; and (2) specific DOL and IRS guidance relating to benefit plan recordkeeping. Requirements imposed by the DOL for the use of electronic records under ERISA Sections 107 and 209 include the following:

• The electronic recordkeeping system must have reasonable controls to ensure the integrity, accuracy, authenticity, and reliability of the electronic records.
• Adequate records of the management practices for the electronic system must be established and implemented.
• The DOL regulation provides that paper records may be destroyed at any time after they are transferred to an electronic recordkeeping system that complies with the requirements of the regulation. However, privacy and confidentiality concerns may require particular destruction methods.

The booklet is probably not compliant.  ERISA requires that SPDs include certain specific information and it is unlikely that the insurer-provided booklet contains all of the necessary details.

Your employees who have HSAs must file IRS Form 8889 as an attachment to Form 1040, for any year in which they make or receive HSA contributions (including employer contributions) or for any year in which they take an HSA distribution. Married individuals filing jointly must attach a Form 8889 for each spouse who has an HSA.

As an employer, you are responsible for reporting the HSA contributions that you make to employees’ HSAs in Box 12 of Form W-2 (using Code W). In addition to the Form W-2, your employees with HSAs should have received a Form 5498-SA from their HSA trustee or custodian that reports the total contributions made to their HSAs during the year and the fair market value of their HSAs at year-end. If they have taken any distributions, they should also have received a Form 1099-SA on which their HSA trustee or custodian has reported the total amount of distributions made during the year.

Unless you have an IRS defined change in status, HCFSA yearly amounts can only be changed during open enrollment periods for the following Plan Year. A change in status is what the IRS considers to be life changing events that can affect your out-of-pocket expenses. Changes in status are the birth of a child, marriage, divorce, death, adoption and employment changes.

Receipts must contain the date of service, (the day you physically saw the doctor or bought something), provider information, (doctor’s name or store name of where item was purchased), the address of the provider, and a brief description of the service provided, (office visit, physical, dental cleaning, surgery, etc.)

First check your on-line account. Click on the “Claims & Payments” menu link to View Claim Activity. Go to the specific claim in question where you will be able to see if a claim was accepted, paid or denied. Claims are listed by Service Date not the day you submitted the claim.

If after you review the information you are unable to determine why a claim was not paid or partially rejected, you can either use the “Contact Us” menu link to send us an e-mail or phone us at the number listed.

Check the Resources link on this site. You will see a link to the Health Care FSA Eligible Expense List for the current year. If the expense is not listed, please contact us at (802)-865-0239 and we will be happy to discuss whether or not the expense is eligible under your plan.

You can only be reimbursed for services that have actually occurred. If you pay for daycare at the beginning of the week or the month, you can only be reimbursed for those services after they have happened. In other words you would not be paid until the end of the week or the end of the month.

If you pre-paid for a medical service (such as a surgical procedure), then you can only be reimbursed once the surgery has taken place. This includes pre-paying for hospital services for the birth of a child. You may not be reimbursed until the birth. Please note that if the pre-payment and the birth cross Plan Years, it is the birth of child that is the date of service.

Log into your on-line account and click on the “Settings” menu link. There you can change your e-mail address, user name and password or your personal information (name, address and phone number). Once you update your information there, we will be notified of the changes.

If you forget your password, please log into the MyFlexOnline website through the Employee Login button on this site. Click on the Password Reset and User Name Retrieval link. This will have you enter pertinent demographic information associated with your account and will allow you to enter a new password. If you are not able to access your account from there, please call us at (802)-865-0239.

No. Insurance premiums related to Domestic Partners are not eligible for pre-tax benefits under the federal rules.

No. The federal rules prohibit payment from these accounts for the expenses of anyone other than yourself, your spouse or your IRS eligible dependent. In some cases, such as legal adoption, your Domestic Partner’s child may qualify as your dependent under federal law, but this is unrelated to the rules governing Domestic Partners.

The IRS notes that “normal education” is not medical care. Consequently, a physician or other qualified professional must diagnose a medical condition requiring special education to correct it in order for the education to be medical care. The IRS also notes that a school “need not employ physicians to provide that special education, but must have professional staff competent to design and supervise a curriculum providing medical care.” Overcoming the learning disabilities must be the principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Also noted is that whether tuition is deductible as a medical care expense in any particular case will depend on exactly what the school provides to the individual, because a school could have a normal education program for most students and a special education program for those who need it. The IRS goes on to conclude that the children’s tuition is deductible as a medical care expense for the years in which they are diagnosed with a medical condition that handicapped their ability to learn.

The IRS has released Form 2441 for taxpayers to file with Form 1040. This form determines the amount of the Dependent Care Tax Credit (DCTC), and establishes that the amounts in Box 10 of Form W-2 are not taxable. The form and instructions allow the participant to claim the amount that they did not receive during the year, but was “permitted by the employer to carry forward and use in the following year during a grace period.”  DCFSA participants are directed to subtract these grace period amounts (as well as any forfeited amounts) from the total amount of dependent care benefits received from the employer when claiming the tax exclusion.

Many, but not all expenses for summer camp are reimbursable under the tax rules that apply to DCFSAs. Your DCFSA cannot reimburse expenses for care at a camp that includes overnight stay. This is because expenses must be “employment-related expenses” in order to be eligible. The primary purpose of the camp must be to ensure the child’s well-being and protection, and must be incurred so the employee and spouse can be gainfully employed.

Yes, even small employers must comply with non-discrimination testing requirements under the Code, which are generally intended to prevent plans from discriminating in favor of Highly Compensated Employees (HCEs) and Key Employees. There are three non-discrimination tests that apply to your company’s Cafeteria Plan: (1) an Eligibility Test (a Cafeteria Plan cannot discriminate in favor of HCEs as to eligibility to participate); (2) a Contributions and Benefits Tests (a Cafeteria Plan cannot discriminate in favor of HCEs as to contributions and benefits); and (3) a Key Employee Concentration Test (nontaxable benefits provided to Key Employees under a Cafeteria Plan cannot exceed 25% of the nontaxable benefits provided for all employees under the plan). There are two additional tests that apply to a Health Care Flexible Spending Account, an Eligibility Test and a Benefits Test.  For a Dependent Care Flexible Spending Account, there are four additional tests required; Eligibility, Contributions and Benefits, More-Than-5% Owners Concentration, and 55% Average Benefits Test.

Your company’s obligation to maintain the health insurance coverage of an employee on FMLA leave ceases if the employee’s premium payment is more than 30 days late, so long as you do not have an established policy providing a longer grace period. However, in order to drop coverage for an employee whose premium is late, you must provide written notice that payment has not been received. The notice must be mailed to your employee at least 15 days before coverage is to cease and must advise that coverage will be dropped on a specified date (which is at least 15 days after the date of the letter) unless payment has been received by that specified date.