Employees can find eligibility requirements confusing. HR managers can, too. Because let’s face it– the rules and regs around eligibility aren’t always easy to understand. But they aren’t impossible to understand, either. (Thankfully). You just need to get the basics and then commit to understanding the nuances.
Ready to jump into the eligibility pool with both feet?
Let’s start with an FSA… What do you say when an employee asks:
“Am I eligible for an FSA?”
From a regulatory perspective, in order to offer employees a Flexible Spending Account (FSA), you have to be offering health benefits. There are no special rules around which kind of health benefits have to be offered- low deductible, high deductible. (We’re looking at you, HSA…)
Any further restrictions on employees’ FSA eligibility are up to you. If you decide to introduce any restrictions, be aware of how they may come up in non-discrimination testing. For example, it wouldn’t work to implement a policy that favors salaried employees over hourly ones, because you wouldn’t pass testing.
In short, you can apply further restrictions for FSA eligibility. But before introducing further restrictions on employee eligibility, make sure they will not limit your ability to pass your nondiscrimination testing.
In response to your employee’s question: “Since we offer health insurance, yes, you are eligible for an FSA.”
What about a Limited FSA or Dependent Care FSA? Do the rules change?
Not for a Limited FSA. As long as you are offering insurance coverage, employees are eligible. They technically don’t even need to be on your company’s insurance (e.g. they could be on their spouse’s insurance). To be eligible, they simply have to be offered the insurance (and eligible under any restrictions you may have imposed).
The only condition with a Dependent Care FSA is that the employee must have a qualifying eligible dependent (as outlined in IRS regulations). No qualifying dependent, no Dependent Care FSA.
Now, on to Health Reimbursement Arrangements (HRAs).
“Am I eligible for an HRA?”
As far as HRAs go, making sure employees are eligible for them isn’t nearly as difficult as understanding how to design one.
In order to have an HRA, an employee must be covered by a group health plan. The easiest way to ensure an employee is eligible for an HRA is to offer the HRA to employees covered by your company’s group health plan. However, technically, an HRA could be offered to any employee who is covered by a group health plan (whether through your company or through a spouse’s employer). An employee who bought inpidual coverage, such as through the Exchange, would not be eligible for an HRA.
If an employee asks “Am I eligible for an HRA?” tell them where to find their Plan Highlights and offer to sit down with them to review any questions.
Next: Health Savings Accounts. (My personal favorite).
“Am I eligible for an HSA?”
As an employer, the only step you need to take to ensure employees are able to enroll in an HSA is to offer a qualifying HDHP. Pretty easy, right?
Your employees, on the other hand, will need to take the four contingencies below into account:
- Must be enrolled in a qualified HDHP (either through the employer or elsewhere).
- Cannot be claimed as a dependent on another person’s taxes.
- Cannot have other coverage that’s non qualifying. (This contingency most often crops up when a spouse is enrolled in a Medical FSA, which automatically covers your employee. Enrollment in an HSA could also be delayed if employees have access to FSA funds from the prior plan year through an Extended Grace Period).
- Cannot be covered by Medicare.
The supportive one-liner we recommend you give employees who aren’t sure about their HSA eligibility? Point them to the HSA Basics page. They can find guidelines on requirements for eligibility. Additionally, they can review a tax guide, such as this one, to determine if they are eligible for an HSA.
Finally, Commuter Benefit Plans. This one is nice and easy…
“Am I eligible for a CBP?”
In a word, yes.
To expand on that slightly, there is no ‘rule’ regarding who you can offer benefits to. Many employers will offer commuter benefits to all employees upon hire. That being said, you can set requirements (much like the FSA).
Often, employers have a requirement in place stating that employees need to be employed for a certain number of days before they are offered benefits. Other employers decide to only provide benefits to full time employees.
What an employee needs to do to be eligible for a CBP is fairly minimal. But you as an employer may have more hoops to jump through when it comes to which employees need to be offered a commuter benefit.
Local transit ordinances, such as those in San Francisco, New York City and D.C. may indicate (1) which employers are required to offer benefits and (2) what employees (or employee classes) must be offered the benefit. Not sure what local commuter benefit ordinances exist in your area? Learn more to make sure you are compliant.
“Am I eligible for COBRA?”
As an employer, you are required to offer COBRA if you (a) offer health benefits and (b) have 20 or more employees.
In order for an employee to be eligible for COBRA, they must be enrolled in one of the many COBRA eligible benefits, such as medical or vision. For employees who want a head start on determining if they are COBRA eligible, we recommend our blog 6 Things Employees Should Understand About COBRA Coverage.
The final word
In the end, when employees ask “Am I eligible for…?” the answer is going to depend less on what they need to do and more on what you as the employer need to offer.
Once all the ducks are in a row for eligibility, help employees get their ducks in a row for Open Enrollment.