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Andyg
08-19-2008, 09:32 PM
My wife is changing jobs and her last day at her old company is tomorrow. We had set aside $4500 in her Flex Spending Account for medical expenses this year. To date they had withdrawn about $2500 from her paychecks and we only submitted receipts for a couple of hundred dollars worth. We still planned on using it all this year.

She found out today during her exit interview that she can only submit receipts for services rendered up until her last day of employment. In other words the $2300 that we paid and have not spent yet is being taken by the company. I can't believe that a self funded account can just be reclaimed by the company like that. Now we are out $2300 and will have to either come up with that money on our own or add it to her new company's flex spending account.

I did learn one thing in researching this though that I think might help those in the future. FSAs are fully funded at the beginning of the plan year. In most cases the beginning of the plan year is Janauary 1st. If you plan on putting $5000 into your FSA and spend it all on January 2nd and quit on January 3rd the company has to pay the entire balance minus maybe one paychecks worth of deductions, i.e 1/26th of the $5000.

JimN
08-19-2008, 09:51 PM
"She found out today during her exit interview that she can only submit receipts for services rendered up until her last day of employment."

That sounds wrong. If it's a dedicated plan and the funds are tax-deferred, unless the fine print says hte money has to be used by the last day of work, it should be available until the end of the year. It sounds like she quit and they aren't happy about it, so they're trying to scrounge every dollar they can from wherever they can, which is her, in this case. I would look into this.

Andyg
08-19-2008, 09:56 PM
JimN,
I thought the same thing and so did everyone else that I talked to today. However it was supposedly listed in the fine print of the FSA and from what I did research on the internet it is true. Here is a quote I found on the subject.

"An FSA's coverage period ends either at the time the "plan year" ends for your plan or at the time when your coverage under that plan ends. Example: Loss of coverage due to a separation from the employer.
This means that if you are employed by a company from January through June and covered on their cafeteria benefits plan (including FSA) during that time, but do not elect and pay for continued coverage under that plan (i.e. COBRA). Your coverage period is defined only as January through June, not January through December as one might think.
All covered expenses must be incurred (or be dated) between January and June of that year."

JimN
08-19-2008, 10:04 PM
That bites. Have you talked to the IRS about whether it's still deductible?

Andyg
08-19-2008, 10:31 PM
I just found a document from the IRS (IRS Regulation 1.125-2) that outlines the specifics of the FSAs. In it it states that if the employee continues to make the required premium payments, ie the paycheck withdrawl amounts, that the FSA plan cannot be terminated. Here is the actual quote from the IRS publication. I can't wait to see what her company's response is to this.

"Example. Assume that an employee has elected a $300 calendar year health FSA, with monthly premium
payments of $25 during the 12-month period of coverage. Such employee separates from service for the employer at the end of June and ceases to make additional premium payments. The cafeteria plan may provide that the FSA’s period of coverage does not extend beyond June if the employee does not continue to make the required premium payments. However, if the employee makes the total premium payment for the 12-month period of coverage, the cafeteria plan may not terminate the FSA’s period of coverage merely because the employee separated from service before the end of the coverage period."

WTRSK1R
08-19-2008, 10:38 PM
Andy,
Sorry to hear that you could be hosed out of the $2300. It will be interesting to see what they say about the IRS publication, and how or if they will be able to set up on-going payments so that your wife can continue to coverage through year end.

Another note that some people may not realize is if you elect $4500 coverage and use less then that, I believe you forfit the remaining amount as well at the end of the year. Or at least that is my recollection from when they first introduced these plans at my company.

dtc
08-19-2008, 11:08 PM
Andy -

Best of luck with your situation. I'm sure there are many more educated than I on the subject who will chime in soon, however ...

having been through a separation with/from an employer that involved benefits and FSA monies, I'd be highly surprised if what you (and your wife) have been told by her company is true.

These plans are Federally regulated accounts with Taxation implications. I'd encourage you to talk with your Tax Accountant / Financial Planner and get some paperwork that you can forward to her old HR department. Any company worth their salt has an HR department who is HIGHLY motivated to keep the company out of any legally binding financial PR nightmares.

Share the outcome so we can all learn.

Best,
D

all5ofus
08-19-2008, 11:21 PM
You do have the right to elect to continue participation under COBRA. You will need to continue to make the weekly payments with after tax dollars so you will not get the tax benefit, but you can keep the account active long enough to get your contributed money out. Many HR people do not understand this provision. If your employer does not understand this provision try calling the TPA that administers the plan for your employer.

Andyg
08-19-2008, 11:30 PM
I asked my wife to get a copy of the document that states the company policy in regards to employee termination and the FSA. They sent her a cut and paste from the actual document that I quoted below.

"5. What Happens If I Terminate Employment?
If you leave our employ during the Plan Year, your right to benefits will be determined in the
following manner:
• You will remain covered by insurance, but only for the period for which premiums have
been paid prior to your termination of employment.
• You will still be able to request reimbursement for qualifying dependent care expenses
for the remainder of the Plan Year from the balance remaining in your dependent care
account at the time of termination of employment. However, no further salary redirection
contributions will be made on your behalf after you terminate.
• Your participation in the Medical Expense Reimbursement Plan will cease, and no
further salary redirection contributions will be contributed on your behalf. However,
you will be able to submit claims for health care expenses incurred prior to your date
of termination. You must submit all claims within the number of days listed in the
Adoption Information."

I then looked at the actual document on their benefits website and it stated later on in the same section that you can continue the FSA account by paying the premiums on a post-tax basis and any fees the administrator may charge as I quoted earlier from the IRS regulation.

I can't believe a benefit coordinator from her company doesn't know this. If they do know this and tried to screw us out of $2500 really pisses me off.

D3skier
08-19-2008, 11:30 PM
one other thing you might want to dig up receipts for is generic drugs that you've purchased such as aspirin tums cough syrup etc.... most over the counter drugs are also able to be used on this... dig up as many receipts as you can and try to recover as much as you can. Sorry to hear of this hope this helps you recover a majority of your money.

Andyg
08-19-2008, 11:32 PM
You do have the right to elect to continue participation under COBRA. You will need to continue to make the weekly payments with after tax dollars so you will not get the tax benefit, but you can keep the account active long enough to get your contributed money out. Many HR people do not understand this provision. If your employer does not understand this provision try calling the TPA that administers the plan for your employer.

It is funny you say to contact the administrator as they told my wife the same thing that the HR department did that we could not continue the plan. It makes me wonder if both companies have a stake in this as they get to split her money between them.

all5ofus
08-20-2008, 09:28 AM
It is funny you say to contact the administrator as they told my wife the same thing that the HR department did that we could not continue the plan. It makes me wonder if both companies have a stake in this as they get to split her money between them.

The employer keeps forfeitures to offset other plan costs. The third party administrator gets the same $ per month, per employee fees regardless of how the money goes out. They have no interest in you losing the money. I suspect that you just talked to a poorly trained service rep. I am always more suspect of the employer's motive in cases like this as they directly benefit from the misinformation.

Andyg
08-22-2008, 03:03 PM
I found another solution to my problem. We decided to push off what we were going to use the FSA money for until next year. That means if we didn't have any claims for service or purchases made by Wed of this week we would have lost about $1500 of the $2500 that we put in towards the total of $4000. I figured since the system tried to screw me I was going to screw the system. So we went shopping. We went to Walgreens and purchased $2900 worth of stuff, Prilosec, Claritin, Zyrtec, Cold medicine and some medical equipement. A lot of the stuff is going to go to family members that currently use the stuff. You would be amazed at how far $2900 goes at Walgreens. Needless to say now her company has to fork over $1500 to cover the amount that we didn't contribute this year. If they would have just allowed us to spend the rest of the money that we actually put in they would have saved themselves $1500. It just goes to show you how infexibility in a company ends up hurting them.

atlfootr
08-22-2008, 03:25 PM
What you said in post made me really upset, that fact you were somewhat screwed :rant:
I'd give serious thought to an attorney, you may be able to dispute this ..

Any lawyers in the house?

endl
08-22-2008, 03:30 PM
Andy we have a small company and I do enrollment ect on our FSA but am in no manner an expert. I pay a company to do the administration on ours since we are small and keeps me out of hot water. I also usually ask employees to create a password and account on the administrators site so they can educate themselves, and keep up with their own balances.

This has not happened to any of our employess but raises a good question and I will follow up to make sure I know the correct answer.

You are correct in all that you have wrote. I generally run a report 60 and then 30 days before our plan year to make sure our employees know to spend their money so they do not loose it.

I wonder it you elected Cobra you could continue to have access to spend you money. Anyway sounds like it worked out.

ski_king
08-22-2008, 03:34 PM
Glad to hear you figured out a way to get your money and even screw the company that tried to screw you. Too bad you had to buy a bunch of stuff you can't use, but a great gift for family members.

I know of someone who paid cash for the kids orthodontics on Jan 2nd and got reimburstred full amount. Then quit job 4 weeks later after only having 2 deductions taken.

endl
08-22-2008, 03:43 PM
Hey this below is off our FSA administration companies web site. Looks like it is up to the plan document. That is a decision the management ultimately makes. So if they are looking out for their best interest, then you did you best for yourself.


WHAT IS THE “USE IT OR LOSE IT” PROVISION?
You may request reimbursement for expenses incurred through the last day of the Plan Year. Generally, you will have a 30- to 90-day grace period after the end of the Plan Year to submit the Reimbursement Request Form for expenses incurred in the prior Plan Year (this grace period is defined by your employer). IRS regulations stipulate that any unused or unclaimed balances remaining in your account, after the grace period, are forfeited to your employer.

WHAT IF I TERMINATE OR RETIRE AND HAVE MONEY IN MY ACCOUNT?
Reimbursement is dependent upon the specifications in your employer’s Plan Document. Expenses must be incurred prior to your termination date, unless COBRA is available and elected.

Tom023
08-22-2008, 03:50 PM
nevermind..............................

uncleboo
08-26-2008, 01:40 AM
I would recommend contributing to an HSA account outside of an employer. You keep the money in the account year to year and don't have to worry about losing it to your employer. You also get the tax deduction for contributions made each year. No employer match, but no strings attached either.