Q. Who can participate in a Flexible Spending Plan?

A.  Any employer can sponsor a cafeteria plan for its employees, regardless of size.  Eligible employers include corporations ("Subchapter S" or "Subchapter C"), partnerships, non-profit organizations, government entities, limited liability companies (LLC), limited partnerships (LLP), and sole proprietorships. Businesses that are under a controlled group may also sponsor a single plan for all of their employees.

Only employees of the sponsoring employer can participate in a cafeteria plan. Examples of individuals that are NOT eligible to participate in a cafeteria plan include:

Self-employed individuals (but they can sponsor a plan)

Partners in a partnership (but the partnership can sponsor a plan)

A more than 2% shareholder in a "Subchapter S" corporation

An owner of a "Subchapter C" corporation can participate in the plan but is limited to only elect 25% of the total contributions in the plan. Please refer to Non-Discrimination tests here.