Can an employer participate?
Self-employed individuals, including partners in a partnership and more-than-2% shareholders in an S corporation cannot participate on a tax-favored basis. Speak with your legal or tax advisor for further guidance.
Can an employee participate in more than one funding account at the same time?
An employee who is covered by an HRA may also participate in a health/ dependent care FSA.
An employee who is covered by a health/ dependent care FSA may also participate in an HRA.
A traditional, general-purpose health FSA or HRA will make an individual ineligible for an HSA.
Do non-discrimination rules apply?
Based on requirements set by the Internal Revenue Service (IRS), Section 125 Cafeteria/Flexible Spending Accounts cannot discriminate in favor of highly compensated or key employees. To ensure that employers are in compliance with these rules, non-discrimination testing is required annually. Non-discrimination testing collects demographic and earnings data for all employees within a company and analyzes it in the context of FSA plan eligibility, contributions, and benefits. The results are then documented for each Section 125 plan and subject to audit by the IRS. Speak with your legal or tax advisor for further guidance.
Is a domestic partner covered under an FSA?
Medical expenses of a domestic partner who is a tax dependent of the employee are eligible for tax-free reimbursement from the employee’s health FSA. Medical expenses for a domestic partner who is not the employee’s tax dependent are not eligible for tax-free reimbursement from the employee’s health FSA, even if the employer offers domestic partner health insurance benefits.
If the employer does not choose the carryover option, will they be taxed on unused funds that are forfeited from an employee’s FSA?
No, the employer is not taxed on unused funds.
What resources are available to help me manage my group’s FSA?
You will have access to monthly reports via your secure employer site at to assist you with managing your group’s FSA. Reports detailing membership enrollment, transaction history, enrollee account balances, total contributions, and summary statements are all designed to provide you with the information you need to effectively administer the FSA.