1. Where employee's salary increases during the plan year, can the employer give the employee cash in lieu of additional flex credits during the year, and include the amount in the employee's income.
2. Can the employer calculate the flex credits bases on estimated salary at the beginning of the plan year, as opposed to salary levels when the flex credits are allocated?
3. Can employer award flex credits based, in part, on employee performance?
4. Can the employer calculate the flex credits as a percentage of total compensation including fringe benefits?
5. Can the employer set total compensation levels, with a certain percentage being flex credits, so that flex credits would automatically increase as total compensation increases?
6. Can a flex plan have only two options with one being cash and the other being a health spending account?
1. The plan would not be affected by the payment of cash to the employees.
2. As long as flex credits are notional, allocated prior to the plan year, and the benefits are selected prior to the plan year, calculation of the benefits based on a reasonable estimate of compensation would probably not, by itself, affect the plan's status. We would need to consider the plan in its entirety.
3. Entire plan must be reviewed in order to determine consequences.
4. Same as 2
5. Where salary levels increase during the year, additional flex credits cannot normally be allocated during the plan year unless the increase in salary was due to a change in employment status. However, all the facts must be reviewed in order to make definitive comments.
6. Can only be determined after reviewing all of the facts.
1. Since the amount received is included in income, it would not cause the plan to fall outside the guidelines in IT-529.
2 & 4. IT-529 does not set out a formula for calculating the allocation of benefits. If the conditions set our in the bulletin are satisfied, and the calculation of the number of flex credits is based on a reasonable estimate of compensation, the plan would likely not fall outside the IT-529 guidelines.
3. Flex credits must be notional, credits must be allocated prior to the plan year, and benefits must be selected before the beginning of the plan year. Credits can vary from year to year, but, in this case, all the facts must be considered to determine if the plan falls within the guidelines of IT-529.
5. Question of fact.
6. The plan may meet the conditions set our in IT-529 but more information is required.