Wednesday, April 23, 2014

Alphabet Soup News

From our friends at FlexBank:

■ "The IRS announced [last October] the ability to permit employees to carryover up to $500 of an unused health FSA balance. IRS Notice 2013-71 now offers an employer the option to amend their Section 125 plan to allow up to $500 of unused funds remaining at the end of a plan year to be carried forward into the following plan year."

This is significant because these plans have traditionally been "use it or lost it," and now participants may have the opportunity to roll-over unused dollars.

 "The IRS released a memorandum on March 28, 2014 that confirms that employees participating in a general purpose health FSA, and who have carryover from a prior year, cannot contribute to an HSA for the entire following year."

General Purpose Flex Spending Accounts are those which cover any so-called 213(d) expenses (a laundry list of eligible expenses) as opposed to a Limited Purpose FSA which covers only those specifically stated in the plan document. This is significant because it may severely limit one's participation in a Health Savings Account.

 "Section 125 Plans (also known as a Cafeteria Plan or Premium Only Plan (POP), must follow the general principle that employees' pre-tax elections are irrevocable for the plan year, except under certain conditions"

Generally speaking, you only get to change your "cafeteria plan" choices once a year - at Open Enrollment. But there are exceptions to these rules, although they're quite limited. These would include a "Change in Status" (eg marriage, adoption, etc), as well as a few others. The fine folks at FlexBank offer you this link for an overview of the permitted election changes.
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