Talk:Highly compensated employee

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Reader feedback: Explain how it works with an FSA

216.15.48.249 posted this comment on 24 December 2014 (view all feedback).

Explain how it works with an FSA

Flexible spending arrangement refers back to here as "Certain limitations may apply if you are a highly compensated participant or a key employee".

I searched Publication 560 (2013), Retirement Plans for Small Business and Publication 969 (2013), Health Savings Accounts and Other Tax-Favored Health Plans. Pub 969 clearly states "Certain limitations may apply if you are a highly compensated participant.", but I am unable to find where those limitations are defined. LadyGeek 10:15, 25 December 2014 (CST)

Here is the legal code: 26 U.S. Code § 125 - Cafeteria plans, Legal Information Institute
Here is the wording from the IRS: Publication15-B,

Plans that favor highly compensated employees. If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. A plan you maintain under a collective bargaining agreement does not favor highly compensated employees.

A highly compensated employee for this purpose is any of the following employees.

  • An officer.
  • A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock.
  • An employee who is highly compensated based on the facts and circumstances.
  • A spouse or dependent of a person described in (1), (2), or (3).

Plans that favor key employees. If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. However, a plan you maintain under a collective bargaining agreement does not favor key employees. A key employee during 2014 is generally an employee who is either of the following.

  • An officer having annual pay of more than $170,000.
  • An employee who for 2014 is either of the following.
    • A 5% owner of your business.
    • A 1% owner of your business whose annual pay was more than $150,000.

--Blbarnitz 11:00, 25 December 2014 (CST)

Yes check.png Done I have updated Highly compensated employee and Payroll deduction. --LadyGeek 12:10, 25 December 2014 (CST)