Employers Learning Center
Thank so much for visiting us, glad you’re curious. Select a plan type below to review frequently asked questions and answers.
Please contact us with additional questions, we’re here to help.
In addition to each employee completing an election enrollment form, the IRS requires your Company to have a Plan in writing and a Summary Plan Description. FlexBank will provide you with all the required materials you need to get started.
Generally no, unless you have 100 or more participants in the health care account at the beginning of the plan year. If you are required to file a Form 5500, FlexBank offers this service as well.
Starting in tax year 2012, the Affordable Care Act is requiring employers that file 250 or more Forms W-2 for the preceding calendar year to report the aggregate reportable cost of applicable employer-sponsored health insurance coverage provided on each employee’s annual Form W-2, in box 12, using code DD. Aggregate reportable cost does not include amounts contributed to a Health Savings Account (HSA), the amount of any salary reduction election to a health Flexible Spending Account (FSA), or the cost of coverage under a Health Reimbursement Arrangement (HRA). This reporting will be for informational purposes only and will not affect tax liability. Please note, there is already a separate W-2 reporting requirement for certain health savings account contributions.
Dependent care FSA contributions must be reported in Box 10.
The guidance currently gives transition relief for employers that file less than 250 Forms W-2.
Specifically noted in the legislation is the requirement that employer contributions to a health FSA (i.e. matching contributions and/or where the employer seeds the health FSA with funds) must also be reported in certain situations. The amount of a health FSA for a cafeteria plan year equals the amount of salary reduction elected by the employee for the plan year, plus the amount of any optional employer flex credits expressed as a fixed amount, or as a formula such as matching salary reduction, that the employee elects to apply to the health FSA. In determining the aggregate reportable cost, the amount of the health FSA is reduced (but not below zero) by the employee’s salary reduction election.
If the amount of salary reduction (for all qualified benefits) elected by an employee equals or exceeds the amount of the health FSA for the plan year, the employer does not include the amount of the health FSA for that employee in the aggregate reportable cost. However, if the amount of the health FSA for the plan year exceeds the salary reduction elected by the employee for the plan year, then the amount of that employee’s health FSA minus the employee’s salary reduction election for the health FSA must be included in the aggregate reportable cost and reported under 6051 (a) (14).
|Example||Total employee salary reduction contributions (including health FSA)||Employee salary reduction contributions to health FSA||Employer FSA contribution/flex credits(could be used for any qualified benefit)||Amount reported for health FSAon employee W-2|
|Rationale: There are no employer flex credits applied to the health FSA, so no amount is reported for the health FSA.|
|Rationale: The amount of employee’s salary reduction election ($2,000) for the plan year equals or exceeds the amount of the health FSA ($1,500) for the plan year, so no amount is reported for the health FSA. In this example, the $1,000 flex credit was not applied to the FSA, it was used for another qualified benefit.|
|3||$700||$700||$700 (applied to the FSA using a matching $1 for $1 approach)||$700|
|Rationale: The total amount of employee’s health FSA ($1,400) for the plan year exceeds the salary reduction election ($700) for the plan year. The employer must include $700 for the health FSA ($1,400 total health FSA amount minus $700 salary reduction) in the aggregate reportable cost on the W-2.|
Comprehensive guidance on the W-2 reporting requirement may be found at:
FlexBank does not normally charge a fee for pre-determining employee interest.
We utilize our normal employee presentation. The only exception is that we tell employees at the beginning of the meeting that we will proceed only if there are enough employees who are interested after hearing about the program. The Company is not obligated until employee interest and Plan costs are known.
You, the employer, establish a separate checking account for these monies. As the money is withheld each pay period, it is deposited into this reimbursement checking account. The account may be at the bank of your choice and any type of checking account that you desire. Monies deducted for group insurance premiums are not deposited to the reimbursement account. They are paid directly to the insurance company.
Yes, but the impact will be minimal.
An employer may choose to require all employees to participate in the group insurance premium part of a Flex Plan. This may be done as some payroll systems do not have the ability to allow for dual choice. Contributing to the Health Care Reimbursement Account or the Work-Related Dependent Care Reimbursement Account is annually at the option of each employee.
Yes, but under limited circumstances. Permissible mid-year changes are primarily due to changes in eligibility and must be on account of and consistent with the requested change. Some examples are:
- marriage or divorce
- death of a spouse or child
- birth or adoption of a child
- a change of employment status
Yes. This is the easiest type of plan to install. Although essentially the same paperwork is required, a POP has less administration to it. But installing just a POP needlessly keeps employees from benefiting from the other two tax advantages permitted by Section 125.
The employer must notify FlexBank promptly so that deposits will no longer be credited to the employee’s account and reimbursement requests will be limited to claims incurred prior to termination. If applicable, it is your responsibility to send a COBRA notice enabling the employee to continue his health FSA.
Please note: Health Care (medical, vision, dental) claims incurred prior to termination are reimbursable up to the full annual election, regardless of when the claim is received by our office.
The Uniform Coverage Rule causes a health FSA to operate like insurance, with the employer bearing risk as would an insurance company that provides coverage for a fixed monthly premium. Thus, an employer may experience a loss if a participant terminates employment after incurring YTD expenses exceeding year-to-date deposits.
A requirement that a participant repay any experience losses to the plan upon termination of employment would be a method of eliminating the employer’s risk of loss, and it therefore would be a direct violation of the uniform coverage rule and is not permitted.
No. Participants have up to 90 days after the end of the plan year to make requests for reimbursement.
Amounts not used during the plan year cannot be returned to an employee. These forfeitures go to the employer. Most employees individually do not leave much money in their accounts. There will, however, be amounts left which may be used by the employer to offset plan costs.
Throughout the year, employees may request reimbursements by completing a claim form and attaching appropriate receipts showing that eligible expenses have been incurred. These can be mailed, faxed, scanned/emailed to Claims@FlexBank.net or uploaded securely to the FlexBank mobile site. FlexBank reviews and pays claims daily. The employee may be reimbursed via check or direct deposit. Debit card reimbursement is also available if offered by the employer. Employees can also submit claims, check their account balance and reimbursement history via the FlexBank Mobile Site. To access the mobile site, go to flexbank.net/m on a mobile device with internet access, log in with the same participant username/password that would be used on the main FlexBank.net website. Works on all operating systems such as Blackberry, Apple, Microsoft, etc. NOTE: When trying to load site, do not use the search field. You must enter flexbank.net/m in the address bar.
Employers do NOT match Social Security, Medicare or pay Workers Compensation premiums (in Ohio) on contributions their employees make to the Plan. Tax savings to the employer will average 8% of contributions made. Employees do not pay Social Security, Medicare, Federal, State and Local (in Ohio) taxes.
IRS rules for a Health Care Reimbursement Account require that the employer make the full annual election available for reimbursement throughout the year regardless of how much an employee has contributed. This rule has caused some concern by employers offering Flex plans. The objection to this rule, however, has turned out to be more emotional than practical. Although collectively employees may contribute a considerable sum into their Health Care Accounts, most Health Care Accounts are for fairly small amounts. An employer’s exposure to loss is therefore relatively small. In addition, negative balances for terminating employees are offset by the payroll tax savings from the entire plan and any amounts participants forfeit at the end of the plan year. This rule is not an issue in Work-Related Dependent Care Accounts as reimbursements are only made as contributions are made.
Most HRAs self-fund all or part of a deductible. Claims are paid directly from Explanation of Benefit (EOB) reports provided to participants by insurance companies once a claim has been settled. FlexBank then reimburses the participant for eligible expenses per the HRA plan design.
Yes. However, the complexity of self-administering an HRA has increased due to CMS reporting requirements. Employers who sponsor an HRA must generally report, electronically, information on HRA participants and benefits to the Centers for Medicare and Medicaid on a quarterly basis. Failure to report may result in penalties of $1,000 per dependent per day.
Employers should call FlexBank for pricing on outsourcing the administration of the plan.
- Quarterly reporting to the Centers for Medicare and Medicaid (CMS) when required
- Reimbursements processed within 24 business hours
- Fax, mail, scan/email, upload via mobile site or walk into our office for reimbursement
- Receive, review, and process all HRA claims upon receipt
- Reimbursements made by check or direct deposit
- Provide employee 24 hour Web access to personal HRA Account information
- Provide employer with monthly and year-end Account Summary Statement
- Provide Enrollment materials. The package includes:
- Prototype Plans, SBC (Summary of Benefits Coverage) and SPD (Summary Plan Description) In Writing
- HRA Claim form
- HRA brochure detailing plan specifics
- FlexBank, Inc. Service Agreement.
No. The right to receive cash in lieu of an HRA deposit will disqualify the plan.
A 5500 is only required where the plan covers more than 100 participants.
If you have employees, or retired employees covered by the plan at the beginning of the plan year, who are eligible for Medicare Part D and who are enrolled in your group health plan and health reimbursement arrangement (HRA), the employer must provide them with a letter of creditable or non-creditable coverage. An employee is eligible for Medicare Part D if they are enrolled in Medicare Part A.
Yes, employers required to offer COBRA must include the HRA. The premium for the HRA component is calculated as the average benefit paid out in the last year plus cost of administration plus 2%.
An HRA may be established for any single employer or certain “related” employers. The employer installing an HRA may be of any ownership form (sole-proprietor, corporation, partnership, etc.). However, only owners of a “C” corporation may benefit directly from the plan. Certain individuals within the company, however, are prohibited from participating in the plan. Owners: Only owners who are also employees of a “C” corporation may participate in an HRA. Sole proprietors, partners within a partnership, owners of an LLC (filing as an S or a partnership), owners of an LLP and more than 2% owners of an S-Corporation are prohibited from participating. Owners’ Family Members: Rules of attribution apply to S corporations, thus more than 2% owner’s spouses, parents, children and grandchildren may not participate. Family members of C corporations, sole proprietors and partners in a partnership may participate in the plan.
No, you do not own your employees’ HSAs. The employee fully owns the contributions to the account as soon as they are deposited, just as with a personal checking or savings account to which you would deposit their compensation.
Employee contributions can be made to HSAs on either after-tax or pre-tax basis. If made on an after-tax basis they should be counted as an above-the-line deduction on their tax return. If they want to make the contribution pre-tax it can be done through a Section 125 via payroll deduction (also called a “salary reduction” or “cafeteria plan”).
As much or as little as you want (while staying below the legal limit as set by the IRS). Click here to view the current IRS Indexed Amounts
No, you can contribute in a lump sum or in any amounts or frequency you wish. However, keep in mind that the funds belong to the employee after they are deposited.
Employer contributions outside of a Section 125 plan must be “comparable”, that is they must be in the same dollar amount or same percentage of the employee’s deductible for all employees in the same “class”. You can vary the level of contributions for “full-time” vs. “part-time” employees, and employees with “self-only” coverage vs. “family coverage”. You do not need to consider employees who do not have HDHP coverage as they are not eligible for HSA contributions.
Section 125 plans (also known as “salary reduction” or “cafeteria” plans) must meet a different set of rules. Under these plans, contributions (both from employer and/or employee) must meet “non-discrimination” rules. These rules require the employer to ensure that contributions do not favor higher compensated employees.
Yes, but your company can only offer “matching” contributions through a Section 125 plan. Remember that the non-discrimination rules still apply.
Your company can make tax free contributions to your employees’ HSAs as long as you do so for all eligible employees. If you do not have a Section 125 plan, the comparability rules apply. If you have a Section 125 plan, then the non-discrimination rules apply.
More than 2% owners of a Subchapter S corporation cannot make pre-tax contributions to their HSAs through the company by salary reduction. In addition, any contributions made to their HSAs by the corporation are taxable as income. However, they can make their own personal contributions to their HSAs and take the “above-the-line” deduction on their personal income taxes.
Rules of attribution apply to more than 2% owners of an S corporation, therefore the more than 2% owner’s spouse, parents, children and grandchildren may not contribute to an HSA on a pre-tax basis. However, they may contribute on a post-tax basis and deduct the contribution at the end of the year on their personal tax return.
Partners in a partnership or LLC cannot make pre-tax contributions to their HSAs through the partnership by salary reduction. However, they can make their own personal contributions to their HSAs and take the “above-the-line” deduction on their personal income taxes.
No. Self-employed persons may not contribute to an HSA on a pre-tax basis. However, they may contribute to an HSA with after-tax dollars and take the “above-the-line” deduction.
You may help your employees establish a FlexBank HSA at the same time, or shortly after they become covered by an HSA-eligible high deductible health plan (HDHP). You should provide each interested employee with a FlexBank HSA Sign Up Kit. At the same time, we strongly urge you to encourage employees to read and fully understand all IRS rules and regulations concerning HSAs as the HSA owner is personally responsible for knowing and abiding by these rules and any adverse tax consequences resulting from misuse of the account.
FlexBank can assist you in initially establishing the account. FlexBank has provided this web site as a central means of knowing the rules along with links to various other web sites where information is available. FlexBank also has a toll-free customer service call center (1-888-677-8373) that you and your employees may call with any questions concerning HSAs.
No, they must establish their HSA with an approved institution.
“Joint” HSA accounts are not permitted. Each spouse should consider establishing an account in their own name. This allows you to both make catch-up contributions when each spouse is 55 or older.
If both husband and wife are eligible to contribute to an HSA, they are both eligible to establish separate HSAs. However, if both spouses want to make “catch-up” contributions when they are age 55 or older, they must establish separate accounts.
Your account can be established as early as the effective date of your HDHP coverage. However, if your coverage begins on any day other than the first day of the month, you cannot establish your HSA until the first day of the following month.
You can complete all the paperwork prior to the effective date of your HDHP coverage. However, your account is not officially “established” until your HDHP coverage begins and a deposit is made into the account.
It is generally the goal to have funds in the HSA on the day that the HDHP is effective. This can be a challenge if January 1 is a weekend/bank holiday. If the HDHP is effective January 1, you are not permitted to make an HSA deposit in the prior calendar year. Here’s why. The custodial bank generates IRS reporting based on a calendar year. A deposit made in the prior calendar year will generate a Form 5498-SA showing that deposits had been made attributable to that calendar year. The issue is that the individual was not technically HSA-eligible until the next calendar year. This may cause a red flag with the IRS. We want to avoid that; therefore if your HDHP is effective January 1, the first date available for a deposit into the health savings accounts will be no earlier than January 2nd. Please contact FlexBank’s HSA team to discuss the timing when using our online HSA depositing system.
Section 125 is the part of the Internal Revenue Code that allows employees to pay for certain group benefits with pre-tax dollars. The plan does not provide any benefits, but rather permits employees to pay for the coverage on a pre-tax basis through salary reduction.
These plans are commonly called premium only plans (POP) or Section 125 plans.
A Section 125 Plan may be established for any single employer or certain “related” employers. The employer installing the plan may be of any ownership form (sole-proprietor, corporation, partnership, etc.).
- Group health insurance
- Dental and vision insurance
- Disability – If contributions are made pre-tax, the benefit paid is taxable.
- Group term life (max $50,000)
- Voluntary benefits – (i.e. cancer policies) If contributions are made pre-tax, the benefit paid is taxable. In addition, many employers only permit post-tax payment for these premiums post-tax due to the “qualifying event” restrictions of a 125 plan. See the last question on this page.
Please note, individual insurance premiums may not be paid on a pre-tax basis through this plan.
Yes. A contribution to a health savings account (HSA) is not an insurance premium. It is a deposit to a savings account. Section 125 plans traditionally only contain language for group insurance premiums. In order to permit employees to contribute pre-tax to an HSA, the plan must be updated to include the required language. FlexBank’s document package comes standard with the proper HSA contribution language.
Starting in tax year 2012, the Affordable Care Act requires employers filing 250+ Forms W-2 for the preceding calendar year to report the aggregate reportable cost of applicable employer-sponsored health insurance coverage provided on each employee’s W-2 in box 12 using code DD. Aggregate reportable cost for this reporting requirement does not include amounts contributed to HSAs, the amount of any salary reduction election to a health Flexible Spending Account (FSA), or the cost of coverage under a Health Reimbursement Arrangement (HRA).
You should check with your tax advisor and/or payroll service as to if the transition relief still applies and if you must report this information.
Employers may start the plan at any time during the year. The plan must be in writing and adopted prior to the effective date.
The plan year is the 12-month period of time governing the plan’s operation.
The plan’s eligibility requirements should be the same as your group insurance plan(s). Employees will become eligible for the Section 125 plan on the same date as they are eligible for the group insurance plan.
While FlexBank’s documents include language automatically enrolling employees in this pre-tax program when they sign up for the group insurance, many employers obtain a signed and dated enrollment form before an employee’s first pre-tax payroll deduction. FlexBank will provide you with an enrollment form along with your document package.
Any employee meeting the eligibility requirements can participate in a Section 125 plan. However…
Owners: Only owners of a “C” corporation may participate in a Section 125 plan. Sole proprietors, partners within a partnership, owners of an LLC (filing as an S or a partnership), owners of an LLP and more than 2% owners of an S-Corporation are prohibited from participating.
Owners’ Family Members: Rules of attribution apply to S corporations, thus more than 2% owner’s spouses, parents, children and grandchildren may not participate. Family members of C corporations, sole proprietors and partners in a partnership may participate in the plan.
The IRS extends a safe harbor for certain premium only plans where only pre-tax salary contributions for premiums (no HSA contributions) are provided. However, the ownership rules discussed above are still applicable as well as the eligibility rules (all eligible employees can participate and can elect the same salary reductions for the same benefits regardless of their position within the company). If you do not meet the safe harbor, a series of mathematical tests must be completed.
FlexBank can help. We will test your plan, offer solutions if your plan does not pass, and provide written results. Contact our Compliance Department via phone 88.677.8373 or email Compliance@FlexBank.net for more information.
This depends on plan design. Some employers may choose to make participation in this pre-tax benefit mandatory. Others may make it voluntary. Another variation is to make participation automatic unless the employee opts out in writing.
Employee elections must be made prior to their eligibility effective date or at the beginning of any plan year. Employee elections are binding for the plan year unless the employee has a qualifying or life event (i.e. marriage, divorce, birth, etc.) or a significant increase in cost or modification of coverage under an insurance benefit.
Contact FlexBank. We can assist you with any questions you may have. 888.677.8373 ~ Compliance@FlexBank.net