Section 125 News focuses on two areas.  First, we have set up several links to IRS information on Flexible Benefits Programs.  These include information on medical/dental/vision expenses; dependent care expenses; a segment devoted to “Frequently Asked Questions”; and information on Transportation Reimbursement Expenses.

 Additional links are included when any recent, newsworthy information about Section 125 programs, COBRA or Section 132 Programs develops.

 THE BEST PLACE TO BEGIN ANY INFORMATIONAL SEARCH FOR IRC INFORMATION IS IRS.GOV  

 RECOMMENDED IRS FORMS AND PUBLICATIONS LINKS 

1)     FREQUENTLY ASKED QUESTIONS provides extensive answers to many of the most commonly asked Flexible Benefit Questions by employers and plan participants.  The topics listed range from “Accident and Health Plans” to “Written Plan.”

2)     PUBLICATION 502 (MEDICAL AND DENTAL EXPENSES) provides a list and accompanying narrative about some of the most common medical and dental reimbursable expenses via a Flexible Benefits Program.  The publication also lists examples of expenses not allowable for reimbursement.  The discussion begins on Page 4 of Publication 502.

3)     PUBLICATION 503 (CHILD AND DEPENDENT CARE EXPENSES) compares the tax savings using the dependent care tax credit vs. a Flexible Spending Account.  The discussion on “Employer-Provided Dependent Care Benefits,” (i.e., Dependent Care FSA’s) begins on Page 12 of Publication 503. 

4)     If you open a Child Care Dependent Day Care Flexible Spending Account, you are required to complete IRS FORM 2441 and attach it to your federal tax return.  Directions for completion of the form are found in INSTRUCTIONS FOR FORM 2441.

5)     You need to complete FORM W-10 (Dependent Care Provider’s Identification and Certification) if you participate in the Dependent Day Care FSA program.     Attach the completed W-10 to a copy of your 1040 return.  The W-10 Form does not need to be sent to the IRS, only kept as part of your permanent tax return records.  

SECTION 125 UPDATES  

IRS SUSPENDS 5500 FILING 

In 2002, the IRS suspended filing of Form 5500 for Cafeteria Plan Sponsors, pending evaluation “whether this method of reporting the information required by section 6039D is appropriate.”  NEWS RELEASE 2002-43 announces the suspension of the 5500 filing, while NOTICE 2002-24 outlines the details the specifics of the ruling.

In some cases, we still recommend filing of the 5500, but for the majority of plan sponsors filing will not be necessary until further guidance by the IRS.  Contact us at info@pzappaandassociates.com if you have any additional questions on 5500 filing.

IRS APPROVES OVER THE COUNTER (OTC) DRUG REIMBURSEMENTS

In September 2003, the IRS approved reimbursements for purchase of over the counter drug items. Eligible for reimbursement are purchases of such OTC drugs as antacids, allergy medicines, pain relievers, and cold medicines. Vitamins and other related purchases "for the general well being of the individual" are not eligible for reimbursement.

NEWS RELEASE 2003-108 announces the approval of reimbursement of OTC drugs in a FSA program, while REVENUE RULING 2003-102 details the specifics of the ruling.