Gina, I have a two-part question regarding FSAs, can you tell me 1) What are the participation restrictions for owners of a corporation, and 2) Does an FSA have to run on a calendar year? – Jason M., a Broker from Shoreline Washington
Thanks for your questions Jason! Here are your answers:
A1: It depends on the ownership structure. C Corp owners can participate in an FSA, but their contributions must be 25% or less of the total dollars run through the FSA (Premium, Healthcare and Dependent Care accounts). Sub-Chapter S Corp owners with 2% or less ownership can participate. All other owners cannot participate.
A2: No, if the medical plan renews on a month other than January, then the FSA plan year should align with the medical renewal. Health FSA elections can then be based on changes in out-of-pocket copays, deductibles and coinsurance. It also makes it nice, if you move the group to an HSA platform, because the FSA participants do not have to wait until January 1st (if a calendar year FSA) to open an HSA account. Participating in an FSA plan renders an employee ineligible for HSA contributions.-
– Gina