HSAs. Distributions from an HSA may be used to pay eligible long-term care insurance premiums or to pay for qualified long-term care services.
For plan years beginning in 2022, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,850.
A cafeteria plan that doesn’t limit health FSA contributions to the dollar limit isn’t a cafeteria plan and all benefits offered under the plan are includible in the employee’s gross income.
. See section 214 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 for information about temporary COVID-19 relief for health and dependent care FSAs. This legislation allows plans to be amended to provide the following relief to participants. .
Allow a 12-month grace period for unused benefits or contributions in health and dependent care FSAs for plan years ending in 2020 or 2021.
Allow post-termination reimbursements from health FSAs from unused benefits or contributions for calendar year 2020 or 2021 through the end of the plan year in which an employee ceases participation in the plan.
Extend the maximum age of eligible dependents from 12 to 13 for dependent care FSAs for the 2020 plan year and unused amounts from the 2020 plan year carried over into the 2021 plan year, or, for plans for which the end of the last regular enrollment period that occurred on or before plan year and unused amounts from the 2019 plan year carried over into the 2020 plan year.
Allow a change in the election amounts up to the maximum allowable amount for the year for health and dependent care FSAs for plan years ending in 2021.
Instead of a grace period, you end your cafeteria plan to allow an employee’s unused contributions to carry over to the immediately following plan year
A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control.
Don’t treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation’s stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but don’t treat the benefit as a reduction in distributions to the 2% shareholder. For more information, see Revenue Ruling 91-26, 1991-1 C.B. 184.
If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. A plan you maintain under a collective bargaining agreement doesn’t favor highly compensated employees.
A shareholder who owns more than kinkyads online 5% of the voting power or value of all classes of the employer’s stock.
If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. However, a plan you maintain under a collective bargaining agreement doesn’t favor key employees.
Simple Cafeteria Plans for Small Businesses
Eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. Simple cafeteria plans are treated as meeting the nondiscrimination requirements of a cafeteria plan and certain benefits under a cafeteria plan.
