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If your company wants to continue the use of the full Social Security Numbers on forms and reports from Shaffer Insurance Services, Inc. Benefits Division please contact us by email, or Fax to tell us that you want to continue to use the full Social Security Information.
As many of you know, the IRS recently released Notice 2005-42, allowing Employers to reimburse Employees for claims incurred up to 2½ months after the end of the plan year. This change allows the Claims Submission Grace Period to begin at the end of the Plan year and terminate March 15 of the next plan year. Participants can submit eligible expenses incurred during the Claims Submission Grace Period to be paid or reimbursed from unused amounts remaining at the end of the immediately preceding plan year "as if the expenses had been incurred in the immediately preceding plan year." Effectively, participants can now be given up to 14 months and 15 days to use the benefits or contributions for a plan year before unused amounts are forfeited under the use-it-or-lose-it rule. Unused funds in an account cannot be carried over to the next year. In addition you cannot use the monies from one benefit to pay for expenses in another benefit. Generally, the amount set aside must remain the same throughout the year. The only time you may change the amount during the year is if you have a change in family status. A change in family status includes adoption, birth, marriage, divorce, death or a change in employment. BE CONSERVATIVE IN YOUR ESTIMATE! Example #1: In 2005, Johnny elects to contribute $2000 for reimbursement of eligible medical expenses under the Employer’s Health FSA. On December 31, 2005, Johnny has only incurred $1000 in expenses; therefore, he has a $1000 Temporary Carry Over Amount following the 2005 plan year. For 2006, Johnny again elects to contribute $2000. Johnny incurs a $3000 expense on January 15, 2006. Under the new rule, the $1000 Temporary Carry Over Amount may be applied to the $3000 expense incurred on January 15, 2006. The remaining $2000 would be available for reimbursement under his 2006 election. Example #2: Same facts as Example #1, except assume that Johnny only incurs a $500 expense on January 15, 2006 and he incurs no other expenses during the grace period (which cannot exceed 2 ½ months). In this example, $500 of the $1000 Temporary Carry Over Amount may be applied to $500 expense and the remaining $500 is forfeited. If you are interested in a more comprehensive explanation or the exact wording of the notice please use the following links. Click Here to read IRS Notice 2005-42 (May 18, 2005). Click Here to read the Treasury press release Click Here to read an in-depth analysis Shaffer Insurance Services, Inc. (Ashley Gillihan and John Hickman, Alston & Bird, LLC). Shaffer Insurance Services, Inc. Benefits Division wants your company to take advantage of this change in the law during the 2005 plan year and have this change in the law applied to your 2006 contracts so we are updating your plan automatically to take advantage of this change. If your company does not want to take advantage of this change for 2005 plan year please print this page and fill out the form below then fax this page back to Shaffer Insurance Services, Inc. Benefits Division. You will be asked this question again during enrollment for the 2006 plan year. We (Company Name) _________________________ do not wish to change our current Cafeteria Plan in the 2005 plan year to take advantage of the change (IRS Notice 2005-42 May 18, 2005).
Signed by Plan Administrator _______________________________ Company Name: _________________________________________ Date: ___________________
Shaffer Insurance Services, Inc. Benefits Division Tel: 661 575 9331 Fax: 661 280 2016 Toll Free: 866 412 5872 |
