1. (a) Benefits available for selection by participants. A participant may elect, in accordance with the procedures set forth in this section, one or both of the following benefits, subject to all the requirements and conditions contained in these rules:

   1. (1) health care reimbursement plan;
   2. (2) dependent care reimbursement plan.

2. (b) Health care reimbursement plan.

   1. (1) Pursuant to the health care reimbursement plan, a participant may elect to receive reimbursements of certain health care expenses which are excludable from gross income. The health care reimbursement plan is intended to be qualified under the Code, §105, is an optional benefit under the flexible benefits plan, and constitutes a separate written employee benefit plan as contemplated by the Code, §105, and Treasury Regulation 1.105-11.
   2. (2) Maximum benefit available. Subject to the limitations set forth in these rules and in the plan, to avoid discrimination, the maximum amount of flexible benefit dollars that an employee may receive in any plan year for health care expenses under the health care reimbursement plan is $5,000. In no event shall the monthly maximum salary reduction amount, exclusive of any administrative fees, exceed $416 per month, except an employee may prepay the health care election amounts for the remainder of the plan year by accelerating payroll deductions prior to or in anticipation of going on leave without pay or terminating (including retirement) employment, or an employee who is classified as a nine-month faculty member, and who elects to receive annual compensation in fewer than 12 months, shall redirect the annual election amount in nine equal monthly amounts.

3. (c) Dependent care reimbursement plan.

   1. (1) Pursuant to the dependent care reimbursement plan, a participant may elect to have payments made or receive reimbursement for dependent care expenses. The dependent care reimbursement plan is intended to be qualified under the Code, §129, is an optional benefit under the flexible benefits plan, and constitutes a separate written employee benefit plan as contemplated by the Code, §129.

   2. (2) Maximum benefit available.

      1. (A) Subject to any limitations imposed by these rules and the plan, to avoid discrimination, the maximum amount that an employee may receive in any plan year in the form of payment of or reimbursement for dependent care expenses under the dependent care reimbursement plan, is the lesser of:

         1. (i) the employee's earned income for the plan year (after all reductions in compensation including the reduction related to dependent care expenses);
         2. (ii) the earned income of the employee's spouse for the plan year; or
         3. (iii) $5,000. ($2,500 in the case of a married employee who files a separate federal income tax return.) In no event shall the monthly maximum salary reduction amount, exclusive of any administrative fees, exceed $416 per month or $208 per month in the case of a married employee who files a separate federal income tax return, except an employee who is classified as a nine-month faculty member who elects to receive annual compensation in fewer than 12 months shall redirect the annual election amount in nine equal monthly amounts.
      2. (B) In the case of a participant's spouse who is a full-time student at an educational institution or who is physically or mentally incapable of caring for himself, such spouse shall be deemed to have earned income of not less than $200 per month if the participant has one dependent and $400 per month if the participant has two or more dependents in accordance with the Code, §21.

Source Note:The provisions of this §85.5 adopted to be effective August 12, 1988, 13 TexReg 3754; amended to be effective September 28, 1989, 14 TexReg 4787; amended to be effective September 1, 1990, 15 TexReg 4646; amended to be effective September 1, 1991, 16 TexReg 3779; amended to be effective September 1, 1992, 17 TexReg 2874; amended to be effective September 1, 1994, 19 TexReg 3765; amended to be effective February 12, 1998, 23 TexReg 1313; amended to be effective September 16, 1999, 24 TexReg 7276.