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Participant quits while on LOA and after being reimbursed full annual election


Guest bosco

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Guest bosco

I've read 1.125-3 and it does not speak to the fact if a participant chooses to catch up missed contributions, gets reimbursed their full election, and just tells their employer "not coming back". Does the reimbursements become taxable to the now ex-employee, or does the employer ask for the reimbursement to be returned?

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  • 1 month later...
Guest sniffles

if this is a flexible benefit plan for healthcare costs and the ex-employee's claims were for qualified health care expenses then you do nothing. That is part of the "use-it or lose-it".....the employee could elect to have $100.00 per payperiod deducted and on January 3rd use and be reimbursed for the full election. Nothing you can do.

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Some of the 125 rules are in the proposed regs which are harder to find because they are not listed in normal places like the eCFR.

I believe but am not certain that this is the latest:

http://www.irs.gov/irb/2007-39_IRB/ar14.html

From the preamble at that link: "The new proposed regulations retain the rule that the maximum amount of reimbursement from a health FSA must be available at all times during the period of coverage (properly reduced as of any particular time for prior reimbursements). The uniform coverage rule does not apply to FSAs for dependent care assistance or adoption assistance."

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

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