Section 125 Plan > How to Get Started

You can start an FSA at any time. Plus, you can have a short plan year for the first year so that future plan years coincide with either your fiscal year, calendar year or health plan. The choice is yours. To set-up your FSA Plan, contact IOI at 1-888-697-0021.

Since employee participation is vital to the success of this plan, we recommend your plan be implemented no sooner than one month after the FSA application is submitted.

Plan Design & Administration
Plan setup and ongoing administration is easy with our turnkey service. Simply complete the EZFSA Plan Application and we take care of the rest.

  1. Plan Consulting -- Upon receiving your application, a plan specialist will contact you about plan options.
  2. Plan Setup -- The setup kit includes “signature-ready” custom plan documents and forms, an employer/bookkeeper education videotape and a checklist for plan implementation. For existing plans, the service also includes a plan review and amendment, if needed.
  3. Employee Enrollment Assistance -- This service includes educational materials such as a videotape, brochures and enrollment forms (also available in electronic formats, including e-mail and internet-enabled enrollment services). Confirmation of election letters, claim forms and instructions for filing are provided to all participants.
  4. Employee Account Management -- Employee contributions are collected for each pay period and added to employees' account balances. Daily services include account balance tracking, claims adjudication and claims payment by check or direct deposit.
  5. Participant Assistance -- Employees have 24-hour access to their accounts via the Internet and 800-line interactive voice response, and daytime access to our 800-line Call Center. Employee statements are included on claim reimbursements and on demand.
  6. Annual Plan Compliance -- Services include reconciliation and reporting of employee account balances, plus compliance with discrimination testing requirements. A “signature-ready” IRS Form 5500 is provided along with information for W-2 Wage and Tax Statements.

Important Information

  • The plan must be in writing and a Summary Plan Description must be distributed to each plan participant.
  • Elections cannot be changed or revoked at any time during the plan year unless the participant has a change of status, or the required contributions to pay premiums for the elected benefits change during the plan year.
  • COBRA continuation forms should be provided to all terminating participants in the medical reimbursement portion of the plan. However, COBRA need not be offered for subsequent plan years.
  • If disability insurance is paid on a pre-tax basis, benefits received from the insurance carrier by the employee may be taxable. Under most circumstances, it's recommended that disability insurance not be included in the plan.
  • No more than $50,000 of employer-sponsored group-term life insurance may be provided to employees on a pre-tax basis.
  • Insurance products with a return-of-premium feature cannot be paid for on a pre-tax basis.
  • The plan may not discriminate in favor of highly compensated or key employees.
  • The plan must provide a written statement by January 31 of every calendar year showing the amounts paid or expenses incurred for daycare expenses during the previous calendar year. This amount is shown on the employee's W-2.
  • Employers maintaining FSA Plans must file IRS Form 5500 each year.
  • For a medical FSA, the employer must make the full election amount available to participants on the first day of the plan. If an employee leaves employment before fully funding the plan, the company must complete funding. In case of a deficit in the plan account, the company must fund this deficit until employee deposits cover the balance. Generally, the employer's FICA savings outweigh this risk.
  • Eligible expenses must be incurred during the plan year. Funds elected by participants, but unused at the end of the year, will be forfeited to the plan.
  • Because employees do not pay any social security tax on income redirected to the plan, their social security benefits may be slightly reduced.