FSA's...Looking for input

denisek · March 2004

We have an employee whose spouse would like to come on to our health plan due to a substantial increase in premiums through his employer. Upon checking with our FSA company we were told this was not an eligble reason to make a change under IRS guidelines. I have heard from another source that a substantial change in premium cost would be an eligible reason.

Here's another one..

Another employee would like to come on when his spouse goes part time with her employer. She would still have coverage available through her employer but our premium would be cheaper so they want to switch the whole family to our plan.

JM in ATL · March 2004

A substantial increase in premiums would be a reason for him to drop his insurance, however it is not a "life-status change" therefore it doesn't allow for the employee to come on your plan during a time that is NOT open enrollment. The spouse "chose" to lose coverage. You can only enroll, terminate at any time when it is a life status change (ie: marriage, divorce, birth, death, adoption, loss of job and insurance, loss of insurance through no fault of his own, etc.)

The employee's spouse will have to wait until open enrollment to join your plan.

The second situation would only be allowed if his wife lost her coverage due to the reduction in hours, which doesn't seem to be the case. Again, they will have to wait until open enrollment.

Hope this helps. Just remember, you can only make a change to your coverage (during a non-open enrollment period) when you incur a life status change. On your enrollment form for insurance, it should ask the reason why the ee is enrolling and they will list all senarios of life status change (usually).

JM

denisek · March 2004

Thanks for the information. Regarding open enrollment our health insurance plan allows additions and changes to the plan at any time, we have no restrictions in that sense. However, again the FSA has the restrictions and this is where I am becoming uncertain.

AJ SPHR · March 2004

Denise, if the employer had a significant cost increase and the employee was impacted, then there could be a medical plan change, but not FSA change (if med plan was pre-tax, which it sounds like yours is not).

Anyway, here is a site I found somehow that provides examples and legal mumbo-jumbo (no I'm not Aluminum Boy!) that may be helpful:
[url]http://www.irs.gov/pub/irs-utl/tres_reg-1125-4.pdf[/url]

denisek · March 2004

Our medical plan is pre-tax along with our health and dependent care under the FSA. Where the difference of opinion comes in is that our health plan agent handles only our health plan and says employees can enroll at any time.
Our FSA which is administered by another company says reason for change does not qualify under the FSA, being the employee's spouse did not lose coverage only is affected by a change in premium.

lnelson · March 2004

I would think that since your insurance carrier is considering it to be ok that the FSA would also allow this since it will change the premium the ee pays.

How else would you be able to do it?

Have the ee's portion be pre-tax and the dependants be after tax?

That doesn't make sense.
But then we are talking about the government.

Keep us posted.
Lisa

FSA's...Looking for input

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