Compliance Watch

Dependent care FSA funds can be used to cover a variety of child and adult care services.  Dependents who are eligible include natural, adopted, and foster children who have not reached age 13 and family members who cannot care for themselves. All dependents must live with the FSA account holder for more than half the year and be claimed on their federal tax return.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that applies to various organizations, including:

You may know that Form 5500 filing is required for your 401(k) plan or your medical insurance, but were you aware that it must be done for other employee benefit plans as well?

Individuals enjoy a favorable tax advantage when their benefits are part of a cafeteria plan. As a result, nondiscrimination testing rules were created by the IRS to prevent plans from discriminating in favor of individuals who are either highly compensated or otherwise key to the business (referred to as a "Prohibited Group").

Every January, employees receive W-2 forms from their employers and collect other information necessary to file their yearly income taxes.

On October 18, 2022, the IRS issued Revenue Procedure 2022-38, which address annual inflation adjustments for more than 60 tax provisions. Included are new limits for Flexible Spending Accounts, Commuter Benefits and various other code provisions, as follows:

On November 14, 2022, the IRS has Notice 2022-59, announcing the adjusted applicable dollar amount for determining the Patient-Centered Outcomes Research Trust Fund (PCORTF) fee for policy years and plan years ending on or after October 1, 2022, and before October 1, 2023.

Background

The Health Opportunity Patient Empowerment Act, passed in 2006, included a provision which allows the owner of an Individual Retirement Account (IRA) to make a one-time, tax-free transfer into a Health Savings Account (HSA). This type of transfer is officially referred to as a qualified HSA funding distribution (QHFD) and gives HSA owners an additional way to fund their accounts and save on taxes while planning to cover future qualified medical expenses. Through this transfer, IRA assets are moved directly from the IRA trustee to the HSA trustee as a regular contribution. The election to make a qualified HSA funding distribution is irrevocable.

The short answer is yes. If you are not currently conducting ongoing verification audits or requiring employees to provide documentation when they enroll in benefits, then you should audit your plan.

In recent years, the Federal Government has passed several pieces of legislation to offer relief and much-needed flexibility to employers that offer dependent care assistance programs (DCAPs). But many employers are struggling to make these benefits attractive to all levels of their workforce who may not see the value in putting away pre-tax dollars for care of children. However, DCAP assistance and the expanded Dependent care tax credit is a benefit many should reconsider.