Important Reminder:

***Flexible Spending Account (FSA) Status Change Rules***
Final and New Proposed Regulations Effective January 1, 2001

The FSA Final Regulations and the New Proposed Regulations which pertain to Status Changes are effective as of January 1, 2001 for plan years beginning on or after that date. These regulations were issued by the Internal Revenue Service (IRS) on March 23, 2000 and ProBusiness Administrative Services (ProBusiness) prepared and set out a detailed description of the new rules in the August, 2000 version of Tech Flex. Please refer to the previous version by clicking on August edition, so that you can refresh your memory on this topic! ProBusiness will begin to administer our client's plans according to the new regulations beginning January 1, 2001. Also, ProBusiness is preparing amendments for client Summary Plan Descriptions (SPDs) and Plan Documents to reflect the new regulations. Current clients should expect to receive the amendments to their current plan documents which reflect the modification to the Status Change rules within the timeframe required by ERISA . When you receive the updates, don't forget to supply the SPD portion to your participants!

Department Of Labor Final Regulations on ERISA Claims Procedures

The Department of Labor (DOL) has issued Final Regulations pertaining to Group Health and Disability Claims and how they must be handled in conjunction with ERISA. These regulations amend the September 1998 Proposed Regulations and are effective for benefit claims filed on or after January 1, 2002. ProBusiness is currently researching and analyzing this issue and will address the new regulations in depth in a future Tech Flex. Rest assured that, just like with the FSA Status Change rules, we will provide you with a detailed report on this issue in plenty of time for you to be fully prepared and informed. We will also send a reminder as the actual effective date draws near. ProBusiness will also timely amend our clients' SPDs and Plan Documents as needed to reflect any changes required by the new regulations.

Department Of Labor Final Regulations on Summary Plan Description Disclosures

The DOL has also released Final Regulations pertaining to SPD disclosures. These regulations, which set out the information that must be included in a plan's SPD, will be effective January 1, 2003. These regulations incorporate the text of the Interim Regulations issued in 1997 and the Proposed Regulations released in 1998. Again, ProBusiness will timely address any relevant changes affecting our clients and their plans in a future detailed Tech Flex and will modify the SPDs created for our clients to conform to any new requirements set forth in the new regulations. As usual, we will also send a reminder as the effective date draws near.

Various Plan Contribution Limits for 2001

• §401(k) and 403(b) limits will remain at $10,5000
• §408(p)(2)(a) Simple plan limits will be increased to $6,500
• §457(b)(2) limit will be increased to $8,5000
• §415 limit for Defined Contribution Plans will increase to $35,000
• §415 limit for Defined Benefit Plans will increase to $140,000
• §414(q) highly compensated employee definition will increase to $85,000

FICA Taxable Wage Base Change for 2001

In 2000, the FICA taxable wage base is $76,2000. That is, any amount of income up to $76,200 is taxed at a 6.20% tax rate for FICA purposes. As of January 1, 2001, the FICA taxable wage base will increase to $80,400. The tax rate, however, will remain at 6.20%. The Medicare FICA taxable wage base remains unlimited (tax rate of 1.45%) in relation to Social Security.

Please contact ProBusiness for further information at:
20000 North Creek Parkway, Suite 200, Bothell, WA 98011
Phone: (425) 415-4000 Fax: (425) 417-4795
e-mail: bsa@probusiness.com

(ProBusiness does not make any representation or warranty that the information contained in this newsletter, when used in a specific and actual situation, meets applicable legal requirements. This newsletter should not be construed as legal advice. Your legal counsel should be consulted on all specific fact situations.)

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