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Flexible Spending Accounts (FSA)
Flexible Spending Accounts (FSA)
A Cafeteria Plan is a reimbursement plan governed by IRS Section 125 which allows employees to contribute a certain amount of their gross income to a designated account or accounts before taxes are calculated.
Health savings accounts are tax favored accounts that can be contributed to by or on behalf of “eligible individuals” covered by certain high deductible health plans (HDHPs) to pay for certain medical expenses of eligible individuals and their spouses and/or tax dependents.
An HRA is a type of Medical Reimbursement Plan (MRP) that allows the employer to contribute tax-free dollars to a designated employee account or accounts. These accounts are for employee reimbursement of out-of-pocket medical expenses (including some insurance premiums and deductibles).
A Qualified Transportation Plan (QTP) is a reimbursement plan governed by IRS Section 132 that allows employees to contribute a certain amount of their gross income to a designated account or accounts before taxes are calculated. These accounts are for specified transportation and parking expenses for commuters. Only employees (not owners) are eligible to participate in a QTP.
A medical reimbursement plan or MRP is an employer-funded health plan that reimburses employees, their spouses, and dependents for certain medical care expenses not covered through any other health plan. An MRP is very similar to an HRA. However, unlike the HRA, an MRP does not establish employee accounts and therefore does not allow participants to carry over unused benefits to subsequent plan years.
Who can sponsor or participate in myCafeteriaPlan?
Virtually any company can sponsor a cafeteria plan for its employees, regardless of size. Eligible companies include:.
“S” or “C” Corporations
Limited Liability Companies (LLC)
Limited Partnerships (LLP)
There are some IRS restrictions on who is eligible to participate in the plan. Only employees of the plan sponsor (company) can participate. Non-eligible individuals include:
A “More-Than-2%” Shareholder in an “S” Corporation
Owners of “C” Corporations, unless they elect no more than 25% of total plan contributions
Members of an LLC
When can I start a reimbursement plan for my company?
As a plan sponsor, you can choose to begin your reimbursement plan at any time. You can also establish any 12-month period you choose as the plan year. For example, you could maintain a calendar-year (January – December) plan year, or align the plan with the school year (September – August).
Since it is most often preferable to start the reimbursement plan as quickly as possible, there is also an option called a “short” plan year. This allows your company to start a plan “mid-year” and end at whatever date will subsequently begin the 12-month year that you choose. In other words, if your company makes the decision in May to implement a new reimbursement plan and chooses to follow the calendar year, you can begin with a short plan year of June – December, with subsequent plan years following the calendar year.
Start a plan mid year and end at whatever date will subsequently begin the annual plan.
Establish any 12 month period (ex. Jan – Dec or Sept – Aug) to begin your reimbursement plan.
Required Plan Documents
myCafeteriaPlan provides the following new plan documents for companies implementing a reimbursement plan:
Corporate Resolution – a written document that describes an action taken by the board of directors of a corporation. This document generally will authorize an individual to act on behalf of the corporation.
Plan Document – contains all the legal requirements and controlling provisions of the plan.
Summary Plan Description (SPD) – condensed from the plan document; details for participation in the plan.
Enrollment – for participation
Claims – for claim submission
Worksheets – for calculation of annual election/salary reduction
Attorney Review & Opinion Letter (Cafeteria Plan only) at client’s request – a legal review by a benefits attorney and a letter indicating that the Plan Document complies with all necessary regulations.
Please note – that the IRS requires that SPDs be distributed to all plan participants within 90 days of enrollment. For your convenience, myCafeteriaPlan provides an online copy of your company’s SPD on your employee and administrative account pages.
myCafeteriaPlan provides documents updates and amendments for plans based on when the documents were originally created, as well as any new regulations.
Options for Document-Only Clients
Occasionally a company will choose to administer their reimbursement plan “in-house” and request only the plan documents from myCafeteriaPlan. The following services are available to make in-house administration easier for your company:
Plan Documents, Forms, & Worksheets – all the documents and forms necessary to establish and maintain a reimbursement plan (see New Plans)
Non-Discrimination Testing Information – for the company to determine compliance with IRS requirements
Telephone Support – myCafeteriaPlan offers toll-free support for a specified period to assist your company with questions and concerns regarding your new plan.
We have many different plan and service options. Find a solution that's right for your team.