Medical Flexible Spending Account Max

#7 12-31-2003, 10:34 PM

"Kathi in Huntsville" <katelyn[at]hiwaay.net> wrote:
- quote -

> > Kathi in Huntsville wrote:

> > > Our company currently offers a medical flexible spending
> > > account. The plan document currently specifies the maximum
> > > contribution as $2400 per year. My boss has asked me to
> > > find out if we can raise the maximum contribution allowed.
> > > (I understand that our plan document would have to be
> > > amended.)
> > > > > Is it true that this limit is set entirely at the company's
> > > discretion?
> > > > > In addition, I have explained to my boss the 2 major caveats
> > > that I am aware of... 1) employees must 'use it or lose it'
> > > and 2) that there is a possible risk that an employee could
> > > be reimbursed for a large medical expense early in the year
> > > and then leave the company before the entire amount is
> > > recovered by their withholdings.

> Harlan Lunsford <hlunsfordns[at]bellsouth.net> wrote:

> > Kathi, you need to get a copy of IRS publication 969 which
> > tells all. In short, though, the max is a percentage of the
> > annual deductible under the employee's health coverage. And
> > it's not a "use it or lose it" proposition either, since the
> > account is contributed by the employee and owned by the
> > employee. One example even shows a max of 4000$!
> > > So , get hold of that pub poste haste.

> Thanks for the info. I apologize that I didn't properly
> describe our situation as we are not offering a medical
> savings account. We have a cafeteria plan where employees
> can choose to shelter their health insurance premiums,
> dependent care reimbursement, and medical expense
> reimbursement. I have seen info from other plans online -
> primarily universities where they have set the limit for
> medical reimbursement at $5000.

I'm pretty sure it's $5000 because I know we put a little
more than $4000 into ours this year. Used it all up by end
of July, wished we'd maxed it out.

When planning for next year's allowance, remember that OTC
drugs are now allowed for reimbursement under flex spending
accounts.

Leigh in raLeigh

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#6 12-17-2003, 09:24 AM

Arthur L. Rubin wrote:
- quote -

> Harlan Lunsford wrote:

> > Kathi, you need to get a copy of IRS publication 969 which
> > tells all. In short, though, the max is a percentage of the
> > annual deductible under the employee's health coverage.

> I think you may be confusing (medical) Flexible Spending
> Accounts (which Kathi appears to be referring to) with
> Medical Savings Accounts.

Indeed I was. Must have been the Usque-beatha speaking.

Christmas Cheer$,
Harlan Lunsford, EA n LA

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#5 12-17-2003, 08:26 AM

- quote -

> Kathi in Huntsville wrote:

> > Our company currently offers a medical flexible spending
> > account. The plan document currently specifies the maximum
> > contribution as $2400 per year. My boss has asked me to
> > find out if we can raise the maximum contribution allowed.
> > (I understand that our plan document would have to be
> > amended.)
> > > Is it true that this limit is set entirely at the company's
> > discretion?
> > > In addition, I have explained to my boss the 2 major caveats
> > that I am aware of... 1) employees must 'use it or lose it'
> > and 2) that there is a possible risk that an employee could
> > be reimbursed for a large medical expense early in the year
> > and then leave the company before the entire amount is
> > recovered by their withholdings.

Harlan Lunsford <hlunsfordns[at]bellsouth.net> wrote:

- quote -

> Kathi, you need to get a copy of IRS publication 969 which
> tells all. In short, though, the max is a percentage of the
> annual deductible under the employee's health coverage. And
> it's not a "use it or lose it" proposition either, since the
> account is contributed by the employee and owned by the
> employee. One example even shows a max of 4000$!
> So , get hold of that pub poste haste.

Hi Harlan in LA

Thanks for the info. I apologize that I didn't properly
describe our situation as we are not offering a medical
savings account. We have a cafeteria plan where employees
can choose to shelter their health insurance premiums,
dependent care reimbursement, and medical expense
reimbursement. I have seen info from other plans online -
primarily universities where they have set the limit for
medical reimbursement at $5000.

Happy holidays!
Kathi Manley

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#4 12-15-2003, 03:01 PM

Harlan Lunsford wrote:

- quote -

> Kathi, you need to get a copy of IRS publication 969 which
> tells all. In short, though, the max is a percentage of the
> annual deductible under the employee's health coverage.

I think you may be confusing (medical) Flexible Spending
Accounts (which Kathi appears to be referring to) with
Medical Savings Accounts.

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#3 12-15-2003, 03:01 PM

Harlan Lunsford <hlunsfordns[at]bellsouth.net> wrote:
- quote -

> Kathi in Huntsville wrote:

> > Our company currently offers a medical flexible spending
> > account. The plan document currently specifies the maximum
> > contribution as $2400 per year. My boss has asked me to
> > find out if we can raise the maximum contribution allowed.
> > (I understand that our plan document would have to be
> > amended.)
> > > Is it true that this limit is set entirely at the company's
> > discretion?
> > > In addition, I have explained to my boss the 2 major caveats
> > that I am aware of... 1) employees must 'use it or lose it'
> > and 2) that there is a possible risk that an employee could
> > be reimbursed for a large medical expense early in the year
> > and then leave the company before the entire amount is
> > recovered by their withholdings.

> Kathi, you need to get a copy of IRS publication 969 which
> tells all. In short, though, the max is a percentage of the
> annual deductible under the employee's health coverage. And
> it's not a "use it or lose it" proposition either, since the
> account is contributed by the employee and owned by the
> employee. One example even shows a max of 4000$!
> So , get hold of that pub poste haste.

The publication you referred to was for Archer MSA's, one
type of pre-tax spending account. Don't you still forfeit
any balance remaing in a section 125 (medical flexible
spending) account that isn't used in a timely fashion?

As I understand it section 125 plans are available for
employees, but not sole proprietors, and partners (except S
corps).

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#2 12-15-2003, 02:23 PM

Harlan Lunsford wrote:
- quote -

> Kathi in Huntsville wrote:

> > Our company currently offers a medical flexible spending
> > account. The plan document currently specifies the maximum
> > contribution as $2400 per year. My boss has asked me to
> > find out if we can raise the maximum contribution allowed.
> > (I understand that our plan document would have to be
> > amended.)
> > > Is it true that this limit is set entirely at the company's
> > discretion?
> > > In addition, I have explained to my boss the 2 major caveats
> > that I am aware of... 1) employees must 'use it or lose it'
> > and 2) that there is a possible risk that an employee could
> > be reimbursed for a large medical expense early in the year
> > and then leave the company before the entire amount is
> > recovered by their withholdings.

> Kathi, you need to get a copy of IRS publication 969 which
> tells all. In short, though, the max is a percentage of the
> annual deductible under the employee's health coverage. And
> it's not a "use it or lose it" proposition either, since the
> account is contributed by the employee and owned by the
> employee. One example even shows a max of 4000$!
> So , get hold of that pub poste haste.
> Christmas Cheer$,
> Harlan Lunsford, EA n LA, just south of UA where you are.
> (the hiwaay gave you away. lol)

Pub 969 relates to MSAs, not flexible spending accounts. I
don't believe there is anything in tax law that sets a cap.
Your second point is a limiting factor. There are rules
regarding discrimination in favor of highly compensated
employees as well as key employees that probably is also a
limiting factor.

--

Alan
http://taxtopics.net

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#1 12-15-2003, 01:44 PM

"Kathi in Huntsville" <katelyn[at]hiwaay.net> wrote:

- quote -

> Our company currently offers a medical flexible spending
> account. The plan document currently specifies the maximum
> contribution as $2400 per year. My boss has asked me to
> find out if we can raise the maximum contribution allowed.
> (I understand that our plan document would have to be
> amended.)
> Is it true that this limit is set entirely at the company's
> discretion?
> In addition, I have explained to my boss the 2 major caveats
> that I am aware of... 1) employees must 'use it or lose it'
> and 2) that there is a possible risk that an employee could
> be reimbursed for a large medical expense early in the year
> and then leave the company before the entire amount is
> recovered by their withholdings.

I am not aware of the IRC code/regs having a maximum amount
for medical flex account unlike a dependent care flex
account, which has a $5000 max. However, many plan documents
do limit the amount for medical flex accounts for the reason
#2 stated in your note.

Clint Wasser, CPA

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12-14-2003, 07:58 AM

Kathi in Huntsville wrote:

- quote -

> Our company currently offers a medical flexible spending
> account. The plan document currently specifies the maximum
> contribution as $2400 per year. My boss has asked me to
> find out if we can raise the maximum contribution allowed.
> (I understand that our plan document would have to be
> amended.)
> Is it true that this limit is set entirely at the company's
> discretion?
> In addition, I have explained to my boss the 2 major caveats
> that I am aware of... 1) employees must 'use it or lose it'
> and 2) that there is a possible risk that an employee could
> be reimbursed for a large medical expense early in the year
> and then leave the company before the entire amount is
> recovered by their withholdings.

Kathi, you need to get a copy of IRS publication 969 which
tells all. In short, though, the max is a percentage of the
annual deductible under the employee's health coverage. And
it's not a "use it or lose it" proposition either, since the
account is contributed by the employee and owned by the
employee. One example even shows a max of 4000$!

So , get hold of that pub poste haste.

Christmas Cheer$,
Harlan Lunsford, EA n LA, just south of UA where you are.
(the hiwaay gave you away. lol)

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#-1 12-12-2003, 04:25 AM

Our company currently offers a medical flexible spending
account. The plan document currently specifies the maximum
contribution as $2400 per year. My boss has asked me to
find out if we can raise the maximum contribution allowed.
(I understand that our plan document would have to be
amended.)

Is it true that this limit is set entirely at the company's
discretion?

In addition, I have explained to my boss the 2 major caveats
that I am aware of... 1) employees must 'use it or lose it'
and 2) that there is a possible risk that an employee could
be reimbursed for a large medical expense early in the year
and then leave the company before the entire amount is
recovered by their withholdings.

TIA,
Kathi Manley

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

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