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Jim Hayes

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IRS Increases FSA Limit to $2,600 in 2017

Posted by Jim Hayes on Tuesday, October 25, 2016 @ 09:26 PM

The IRS Increases Medical FSA Limit to $2,600:

The IRS announced today (10/25/2016) that the Medical FSA and Limited Purpose FSA cap will increase to $2,600 (an increase $50) for plan years beginning on or after January 1st, 2017. If your plan document was created by 24HourFlex the language will reference the maximum amount permitted, in which case no change is required.

Keep reading below for commonly asked questions related to this update.


Does This Change Require and Amendment to our Plan Document and Summary Plan Description (SPD)?

Usually, these documents do not need to be amended because the language in your plan document or Summary Plan Description does not specifically reference the $2,500 limit, or, it describes the limit as the "maximum amount permitted under code section 125(i)". Other descriptive marketing material created by you may reference a $2,550 limit and should be updated.

Employees have already enrolled for 2017 with the $2,550 limit, can we automatically change those elections to $2,600?

No, the Medical FSA election that your employees made is a specific election and can not be automatically increased. Most calendar-year plans are most likely still within the open-enrollment period. You could choose to notify your employees that the Medical FSA cap has increased to $2,600 and allow the participants to modify their 2017 election.

What Other Areas Could This New $2,600 Cap Impact?

If your payroll or enrollment system has a cap on the Medical FSA of $2,550 you would need to work with those vendors to update the cap to $2,600. You should also verify that information on local intranets, company websites, or other collateral created by you is updated.

Did the Dependent Care FSA Limit Change?

No, the Dependent Care FSA limit did not change. It is stil $5,000.


Tags: IRS, FSA

2016 FSA Limits

Posted by Jim Hayes on Tuesday, November 03, 2015 @ 03:23 PM

The IRS has announced the annual contribution limits for 2016 (IRS News Release IR-2015-119, Oct. 21, 2015).  Most benefit limits will remain unchanged for plan years starting on or after January 1st, 2016. Qualified parking is the only benefit with a change, increasing $5 per month from $250 to $255. 

The following limits are detailed in IRS Revenue Procedure 2015-53:

  • Qualified Parking: $255/month – increased from $250/month in 2015
  • Qualified Transportation: $130/month
  • Medical Flexible Spending: $2,550
  • Limited Purpose Flexible Spending: $2,550
  • Dependent Care Flexible Spending: $5,000

Also, if your plan offers a Health Savings Account (HSA), the annual contribution limits for 2016 are detailed in IRS Revenue Procedure 2015-30 as follows:

  • Individual Coverage: $3,350
  • Family Coverage: $6,750 – increased from $6,650 in 2015
  • Catch-up for age 55+: $1,000

Tags: IRS

Train Like an Olympian - Using Online FSA & COBRA Tools

Posted by Jim Hayes on Wednesday, February 05, 2014 @ 03:22 PM

FSA and COBRA Online TrainingThe Winter Olympics begin this week in Sochi and we are all excited to watch athletes from around the world compete. These athletes have trained four plus years for events spanning mere minutes. From eating well, getting plenty of sleep, strength training and conditioning they have prepared in every way imaginable. While most of us aren't competing for gold over the next month we can all train to do our jobs better which includes utilizing tools that can make our jobs easier.

All COBRA and FSA administrators should provide online accounts for their clients. This typically includes the ability to run reports, access individual account information, add/terminate employees and securely upload data. The beauty of online access is that it is available 24/7 and is not dependent on a person's availability or normal working hours. Our online systems provide employers with the following:

Online FSA System

  • Add / Terminate Employees

  • Change Employee Information / Elections

  • Reconcile Contributions with Payroll Data

  • Discrimination Testing

  • Securely upload sensitive employee information to 24HourFlex

Online COBRA System

  • Add Qualified Beneficiaries (QBs)

  • Add New Hires

  • See Copies of all Communication sent to QBs

  • Run detailed reporting

One of our goals in 2014 is to improve how we provide training for our online FSA and COBRA systems - allowing our clients to do their work easier and more efficiently. We now run weekly training sessions for FSA and COBRA systems. These training sessions are a great way to learn about our online tools, get a quick refresher if you've forgotten something, or to see a demo of how our systems work. To sign up for or watch one of our pre-recorded FSA or COBRA Training sessions click here.

Let us know if there are other areas you'd like to see training for as our goal is to help you do your job better. Just leave a comment below or send us an email at

Go team USA! Photo: Olymic Medal image from Andy Miah, creative commons license, May 30, 2013.

Tags: COBRA, COBRA Administration

Why the $500 FSA Carryover Provision is a Win for Everyone

Posted by Jim Hayes on Tuesday, November 12, 2013 @ 04:07 PM

500 FSA Carryover Provision is a Win for EveryoneMichael Scott, the lead character from NBC's hit show The Office, once said that the fifth style of conflict is a win win win scenario, where everyone wins. Companies and employees often feel the tension between the traditional win/lose mentality where benefit changes are good for one group and terrible for the other.

While the world's best boss may not get everything right, his "win win win" is a great way to describe the IRS's recent $500 Health FSA Carryover provision announcement. We discussed the carryover provision in detail in a previous post, and have an on line presentation you can view for more details. At a high level, employers who elect the carryover provision will allow their employees to carryover $500 in Medical FSA elections from one plan year to the next. This is great news for employees and employers!

Four Positives for Employees

1) Reduces Risk - Loss aversion is the term used to describe why losing $100 hurts more than gaining $100 feels good. Said another way, someone who loses $100 walking home will feel much more negative emotion than someone who finds $100 walking home will experience positive emotion. When choosing to make an FSA election employees must choose between the risk of forfeiting dollars vs the tax savings these types of accounts provide. When polled, more than half of employees who do not participate in an FSA indicate the risk of losing money is the main factor. By adding the $500 carryover, the IRS has made it possible for an employee to elect $500 with no risk of forfeiting thos dollars at the year end.

2) Budgeting Tool - FSAs provide a valuable mechanism for employees to budget for medical, dental, and vision expenses for themselves and their families. Taking time to look at prescriptions, doctor visits, glasses and dental work a family may need is in important part of the budgeting process and should occur each year when making an FSA election. Funds are withheld evenly over the entire plan year from the employee's paycheck and are available when needed.

3) Less Rush To Spend - The $500 carryover will decrease the amount of spending that typically occurs at the end of the year as employees rush to spend the remaining balance in their accounts. Now, employees can make purchases for items they need at the end of the year, like sunscreen, without needing to purchase large quantities of any items.

4) Tax Savings - Employees will also realize a tax savings between the high twenty to mid fourty percent range (Federal tax rate + State tax rate + FICA tax rate, currently 7.65%). An average employee electing just $500 will save approximately $150 in taxes and an employee electing $2,500 will save around $750. 

Four Positives for Employers

1) Happier and Healthier Employees - FSAs can help employees budget for health care expenses, making it easier to get the medical care employees need when they need it. Peace of mind from having funds available and from not worrying about losing funds will create happier and healthier employees. All of this creates more productive employees who can do their jobs better and help their companies grow.

2) Higher Enrollment - Employees who are not afraid of losing money will be more likely to sign up for an Medical FSA. Some forecasts predict that employee participation rates may double simply through the addition of the carryover provision.

3) Avoiding Forfeitures - By adopting the $500 carryover, employers will be taking another step towards helping their employees keep hard earned money. Data from 2011 and 2012 shows that 85% of employees who forfeited dollars had a remaining balance of $500 or less. Simply by adding the carryover provision, forfeitures could be reduced to about 3% or all FSA participants. No one wants employees to lose money at the year end!

4) Greater Tax Savings - Employers do not pay FICA taxes (currently, 7.65%) on dollars run through an FSA. An average election of $1,300 generates a tax savings of $100 for the employer. Encouraging more participation in Medical FSAs will increase the employer's tax savings - in many cases causing the FSA benefit to fully pay for itself and generate additional savings for the employer.

The $500 carryover provision does create the infamous win win win scenario for employers and their employees. There is planning and communication that must be considered, but if rolled out effectively, this new FSA provision will make everyone's day better. If you would like help adding the carryover provision to your FSA plan or are interested in working with 24HourFlex please click on the button below. Feel free to leave comments as well in the section below this post - we look forward to hearing from you!

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Tags: 500 Carryover, Flexible Spending Account Carryover, FSA Carryover, FSA Carryover Provision

3 Crucial Updates on the Affordable Healthcare Act

Posted by Jim Hayes on Wednesday, October 16, 2013 @ 04:46 PM

3 Crucial Affordable Care Act UpdatesThe Internal Revenue Service (IRS) and the Department of Labor (DOL) recently issued guidance for a few outstanding issues related to the Affordable Care Act (ACA) and its impact on certain employer sponsored benefit plans. Notice 2013-54 (IRS version, DOL version) outlined three key changes employers need to be aware of as 2014 quickly approaches that impact FSAs, HRAs, and individual insurance premium reimbursement accounts.

1) Employers cannot contribute more than $500, or match more than 100% of employee contributions, to employee Flexible Spending Accounts (FSAs) and must offer other group health insurance in order keep their FSA in 2014. The IRS and DOL stated that FSAs must meet the definition of an excepted benefit in order to avoid the ACA provisions , such as the annual limit prohibition, that would disqualify them. To be an excepted benefit, employers cannot contribute more than $500, or an 100% match of employee contributions, to each employee's FSA for the plan year.

Action Items

  • If your plan is currently contributing more than will be allowed in 2014 you can a) reduce the employer contribution to the lessor of $500 or an 100% match of what employees are contributing, or b) divert the employer contributions into an HRA, assuming the HRA meets the criteria to be considered integrated with a group health plan.

  • If your plan currently offers an FSA to employees who are not eligible for your other group health plan(s) (for example, part time employees), you will need to change the FSA eligibility to mimic the group health plan eligibility.

2) Health Reimbursement Accounts (HRAs) must be integrated with a group health plan but may have a different plan sponsor and/or plan document. Previous guidance was not clear if an HRA had to be integrated with a group health plan at the same employer. Some employers offered HRAs to employees who obtained group health coverage under another employer’s plan (spousal coverage). This latest guidance clarified that integration with a group health plan can occur even if one employer offers the HRA and another employer offers the group health plan. For example, Acme Company may offer an HRA to employees who maintain group health coverage at another employer (often times a spouse's plan).

Action Item

  • Review eligibility conditions of your HRA

3) Individual insurance premium reimbursement accounts are no longer allowed under a Section 125 Plan. Prior to the ACA, employers were allowed to offer a reimbursement account to employees where individual insurance premiums could be paid for with pre-tax dollars through a section 125 plan. The guidance issued by the IRS and DOL makes it clear that employers cannot reimburse employees on a pre-tax basis for individual policies purchased from a state marketplace, the national marketplace, or any private insurance marketplace. Employers are still allowed to run employer sponsored group health benefits through their Section 125 plans on a pre-tax basis.

Action Item

  • If you currently offer an outside individual insurance premium reimbursement account talk with your benefits advisor about removing this plan provision in 2014.

This post is not an exhaustive explanation of 2013-54 and only highlights a portion of the guidance issued. 24HourFlex will continue to keep you updated as new guidance is provided from the various government agencies about the effects of the ACA on your employee benefit plans. If you have specific questions feel free to ask questions in the comments below or contact us directly.

If you are an employer or HR representative and would like to attend our seminar covering DOMA, privacy and other health reform topics, click on the button below to register. 


DOMA-Privacy-Health Reform Seminar

Tags: Healthcare Reform, Health Insurance

Common Questions about the Windsor DOMA Ruling

Posted by Jim Hayes on Tuesday, September 17, 2013 @ 05:40 PM

On August 29th, 2013, the IRS and Treasury announced (IRS ruling, 2013-17) that all legal same-sex marriages will be recognized for federal tax purposes, even in states that do not recognize same-sex marriages. This means that a same-sex couple who has been legally describe the imagemarried in one of thirteen states (CA, CT, DE as of 7/1/2013, IA, MA, ME, MD, MN as of 8/1/2013, NH, NY, RI as of 8/1/2013) will be treated as being married for Federal tax law relating to employee benefits in any state, even those that do not recognize same-sex marriages.

This applies for Section 125 purposes, specifically for a Medical FSA, Dependent Care FSA, or Health Savings Account as well. For example, a same-sex couple who was married in California but lives in Colorado is eligible to cover each other under their employer's Medical FSA/HSA plan even though Colorado does not recognize same-sex marriages.

Some acronyms to know before reading further:

DOMA = Defense of Marriage Act, passed in 1996.

Windsor Ruling = The case the Supreme Court reviewed leading to the ruling that portions of DOMA were unconstitutional.

FSA - Flexible Spending Account

HSA - Health Savings Account

Here are some of the common questions employers and brokers have been asking regarding the Windsor ruling, DOMA, and their Section 125 Plans.

1) Did the Windsor/DOMA decision create a qualifying status change for a same sex domestic partner?

The IRS and Treasury have not explicitly issued guidance that the Windsor ruling created a new qualifying status change event. However, the addition of a spouse is a qualifying status change. It seams reasonable to assume that the recognition of a same-sex domestic partner as a spouse constitutes the addition of a spouse, which would allow an employee to increase their FSA election or make a new FSA election.

2) When should a same-sex spouse be allowed to be added to a plan?

The Windor ruling was issued on June 29th, 2013, so as of that date same-sex couples could make changes to their benefits. Since additional guidance was issued on August 29th it seems reasonable that same-sex couples should be given a window after August 29th in which to make changes to their plans.

3) Can an employee increase or decrease their FSA election based upon the Windsor ruling?

Yes, an employee who now has a same-sex spouse because they have been married in one of the thirteen states listed previously could increase their FSA/HSA election and/or make a new FSA election if they had previously declined to make an election.

4) Is a domestic partnership or civil union recognized as part of the Windsor ruling?

No, legal same-sex marriages in the thirteen states listed above are the only relationships that will now be given the tax treatment of a married couple.

Further guidance from the IRS and treasury should be released in the future further clarifying impacts the Windsor DOMA ruling has to Section 125 plans. If you have any specific questions not answered in this post please leave a comment with your question and we will answer it promptly. 


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California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington. - See more at:
California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington. - See more at:
California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington. - See more at:


Taming COBRA: 3 Steps to Surviving a COBRA Audit

Posted by Jim Hayes on Tuesday, August 27, 2013 @ 07:23 AM

Taming COBRA: How to prepare for a COBRA auditAudits of any kind are not pleasant, especially ones involving disgruntled former employees. Penalties for non-compliance include an IRS excise penalty of $100/$200 per day, an ERISA penalty of $110 per day per Qualified Beneficiary (QB), and legal fees, court costs and any medical claims not covered by insurance for the QB(s). Thankfully there are a few steps employers can take to prepare for a COBRA audit before one occurs. 

1) Have written business processes. Each step in your COBRA administration process should be documented and regularly checked to verify the process is being followed. This documentation should specify who will do each step, how often they should perform the tasks, and the exact work that must be done. Companies and some COBRA Third Party Administrators (TPAs) miss this step.  

2) Keep records of everything. You need to keep copies of each piece of communication you've mailed out including the name and address that was on each letter. In addition, you will need to show the dates each letter was mailed and that your documented business process was followed that day. It is also valuable to keep scanned copies of the envelope and its post mark date for any enrollment forms or payments you refuse because they were mailed after the applicable deadline. Doing so will provide proof you need if the QB takes you to court.

3) Follow the COBRA Time Lines. If you self administer COBRA you have 44 days to notify a terminated employee of their COBRA election rights and 90 days to notify a newly hired employee. Qualified Beneficiaries have 90 days in which they can send in their election form and an additional 45 days in which they can make their first payment. For all following payments Qualified Beneficiaries must make them within 30 days of the payment due date. There are other time lines and deadlines that must be followed for QBs with secondary qualifying events, QBs who are subject to the Social Security Disability Extension, and QBs who are reaching the end of their coverage. It is critical that you know all of the these time lines and have a system in place that can ensure they are followed for all of your QBs. 

Taming COBRA administration can be challenging, especially if you try to do it on your own. Many Human Resource and Benefit teams are already overloaded and struggling to keep up with all of the changes brought about by the Affordable Care Act. The majority of companies ultimately decide to outsource their COBRA administration and if you are interested in finding out how 24HourFlex could help you tackle COBRA let us send you a quote.

Request COBRA Quote

Tags: COBRA Administration, COBRA Audit, COBRA TPA

Should you outsource COBRA administration?

Posted by Jim Hayes on Thursday, May 23, 2013 @ 11:02 PM

COBRA AdministrationCOBRA is designed to provide health insurance for former employees and their families who don't have an alternative for other coverage. Employers with 20 or more employees must comply with COBRA rules and need to decide if they will handle COBRA internally or hire a third party administrator. Before you can make a decision for your company there are three key elements to consider.

1. Penalties for non-compliance
Small mistakes in COBRA administration lead to large penalties from two different federal agencies. The IRS can levy an excise tax of $100 per day and the Department of Labor (DOL) can levy civil penalties of $110 per day for non-compliance to COBRA rules. In addition to the IRS and DOL, a company also faces monetary judgements, attorney's fees and court costs related to COBRA noncompliance.
2. Critical COBRA Touchpoints
COBRA is complex and involves many moving parts and pieces. There are four key notices critical to COBRA administration. Each is important as failing to handle any one item correctly will expose your company to the penalties described above.
  1. COBRA General Notice - Describes the COBRA rights someone will have if they lose group health coverage. This notice must be sent to any new employee and their spouse who become enrolled in one of your group health plans. It is critical that you can prove this notice was provided because if you cannot, you will lose a court case even if you followed every other COBRA rule.
  2. COBRA Qualifying Event Notice and Election Notice - Outlines the qualifying event that occurred, provides time lines for election, and explains how continuation coverage through COBRA operates. You must be able to prove this notice was sent and track the day it was sent.
  3. COBRA Notice of Early Termination - If someone on COBRA terminates coverage prior to their 18, 29, or 36 months of maximum coverage this notice must be provided explaining why their coverage is terminating early and on what date it will terminate. 
  4. Open Enrollment - COBRA participants should go through open enrollment just like a regular employee at your company. They should be given the opportunity to change coverage, add/drop dependents, and make any other change allowable during open enrollment.
3 - Does it make financial sense to administer COBRA internally?
Administering COBRA internally requires following resources and expertise:
  • Staff to send notices, process payments, take calls, and audit 
  • Systems to track deadlines, notice dates, and interaction with COBRA members
  • Legal advice to review notices, handle complicate situations and monitor changes in COBRA law
  • Expertise in COBRA administration, knowing how to handle Social Security Disability Extensions, Medicare interaction with COBRA, as well as 
Outsourcing COBRA administration is a wise choice in terms of mitigating risk and allowing Human Resource teams to focus on other areas of the business that need attention. If you would like more information about outsourcing COBRA click on the button below.
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