A health FSA has 47 participants and the employer is the named plan administrator. Employer processes the payroll and the salary reductions, but the reimbursements are made by submitting the reimbursement form to an outside company who cuts the reimbursement checks. (This outside company is in the business of selling insurance and performing limited benefit services such as this.)

I know that the HIPPA privacy rules exempt health FSAs with less than 50 if they are self-administered. I hope this plan qualifies for the exemption--any thoughts???

It's not exempt because it is not self-administered. While the employer is the named administrator, a third party has been hired to help administer the plan. Thus, the HIPAA privacy rules apply. The rationale is that protected health information is being sent to a third-party for claims processing.

thanks--thats what I suspected!