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Guest achloe81
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Guest achloe81

:angry: OK, I am really tired of researching this...I know this may be a tired topic, but I need help!!

Situation: An employee with a FSA terminates mid year, plan doc says that they have 30 days following termination to submit any claims, can terminated employee submit a claim for the full election (as long as incurred during employment) after the fact?? Cobra does not apply. There is not a grace period.

I know that you cannot recover any $$ if the account is overspent, and I know that a participant can utilize the full election at any time during employment--but what happens after termination of employment? I have used several different software packages to manage these accounts and all reduces an employees election to contributions less reimbursements at time of termination. The software will not pay out anything over the contribution amount.

Is termination an allowable change of status that the employer can initiate that in effect will reduce the election if the account is not overspent?

Help!

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Guest Sieve

How about this from Prop. Treas. Reg. Section 1.125-5(d)(1) relating to FSA reimbursement: "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 for the same period of coverage). Thus, the maximum amount of reimbursement at any particular time during the period of coverage cannot relate to the amount that has been contributed to the FSA at any particular time prior to the end of the plan year."

Logically, that makes sense. Why penalize an employee who has received services if the employee happens to be laid off (or otherwise terminates) before having made a claim? And the the regs do not differentiate between voluntary & involuntary termination of employment.

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The following refers only to the Medical FSA.

Sieve, not exactly. Tres. Reg. Section 1.125-5(d)(1) relates to available balance for purposes of the Uniform Coverage rule. That is to say claim payments may not be limited to contributions, but must relate to the annual elected amount, reduced by prior claims, not limited to available balance.

For a non-cobra Medical FSA participant, the date/s of service for Medical claims can be no later than the last day/date of employment. Services can be provided=performed no later than the date of termination=last day worked in order for the claim to be honored.

Within 30 days of the date of termination, the terminated Medical FSA participant can claim up to the annual elected amount reduced by prior claims, for dates of service not later than the termination date, submitted within the 30 day period as described in the PD for submitting claims.

For example, during a calendar plan year, employee A terminates employment on July 1, the plan year for employee A is 01/01/09 through 07/01/09. Assuming employee A made an annual election of $1200 for the 01/01/09 through 12/31/09 plan year and contributed $100 per month with no prior claims, employee A would have $600 available balance,

No more than 30 days following A's July 1 date of termination, A submitts a claim for $1200, with a service date/s of March 5, 2009. In order to comply with IRS regs, the plan is obligated to reimburse A's claim/s in the amount of $1200. That is also an example of the Uniform Coverage Rule.

I know that you cannot recover any $$ if the account is overspent, and I know that a participant can utilize the full election at any time during employment--but what happens after termination of employment?

Your comment about utilizing the full election amount at any time during employment is not exactly as stated in the Regs. The Regs refer to the term Period of Coverage for clarity or in an attempt to distinguish terms that have more than a single interpretation.

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:angry: OK, I am really tired of researching this...I know this may be a tired topic, but I need help!!

Situation: An employee with a FSA terminates mid year, plan doc says that they have 30 days following termination to submit any claims, can terminated employee submit a claim for the full election (as long as incurred during employment) after the fact?? Cobra does not apply. There is not a grace period.

I know that you cannot recover any $ if the account is overspent, and I know that a participant can utilize the full election at any time during employment--but what happens after termination of employment?

As Seive pointed out with the quote from the proposed regs, the uniform coverage rule means that at any point during the period of coverage--from first day of plan year until the day employment terminates, from the description of the plan implicitly in the OP--the entire amount elected for the FSA (less prior reimbursements by reason of that FSA) must be available at all times during the period of coverage.

Suppose it's a calendar year cafeteria plan and EE elected $1200 for a 2009 health flex. $100 per month is being withheld. If terminated on 3/6/2009, when only $200 has been withheld (January and February), one might colloquially think the FSA to be "overspent" if he's already been reimbursed more than $200--say $350. The other $850 may be applied if he submits a claim by 4/5/2009 (30 days) for expenses for medical services provided on or before 3/6/2009. It matters not that he's "overspent" already.

Is termination an allowable change of status that the employer can initiate that in effect will reduce the election if the account is not overspent?

No.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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achloe81, "I know that you cannot recover any $$ if the account is overspent, and I know that a participant can utilize the full election at any time during employment--but what happens after termination of employment?"

Medical FSA participants can received reimbursement of claims that exceede their available/accumulated Medical FSA balance. Not only can they receive more in claim reimbursements than the amount of their contributions at any point in the plan year, but the plan can not in any way tie their reimbursements to their available/accumulated balance.

"I have used several different software packages to manage these accounts and all reduces an employees election to contributions less reimbursements at time of termination. The software will not pay out anything over the contribution amount."

You should verify that the software is programed correctly. There is no reasonable explanation for the software to reduce EE elections to contributions less reimbursements at time of termination. Administration programs I'm familiar with do allow the administrator/user to override system functions and allows administrator to establish plan limits and function at the Group level for each organization administered on the system, resulting in an override of admin system default program settings. Even limits established at the Group level could inadvertently be overwriden at the individual employee level under certain circumstances.

Each program has it's own 'glitches', for instance one administration system required each group's plan year dates and FSA plan maximums to be set up on the system by the system administrator. However, when employee elections were imported on to the system, the Group level FSA maximum amounts were overridden during the EE election data import function. Through a process of trial and error, or as we affectionately referred to it, system testing performed for the Vendor, it was revealed that the system override did not happen when EE elections were hand keyed onto the system, only when the EE election data was import onto the system. There may be something similar responsible for what you are experiencing.

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Guest achloe81
achloe81, "I know that you cannot recover any $$ if the account is overspent, and I know that a participant can utilize the full election at any time during employment--but what happens after termination of employment?"

Medical FSA participants can received reimbursement of claims that exceede their available/accumulated Medical FSA balance. Not only can they receive more in claim reimbursements than the amount of their contributions at any point in the plan year, but the plan can not in any way tie their reimbursements to their available/accumulated balance.

"I have used several different software packages to manage these accounts and all reduces an employees election to contributions less reimbursements at time of termination. The software will not pay out anything over the contribution amount."

You should verify that the software is programed correctly. There is no reasonable explanation for the software to reduce EE elections to contributions less reimbursements at time of termination. Administration programs I'm familiar with do allow the administrator/user to override system functions and allows administrator to establish plan limits and function at the Group level for each organization administered on the system, resulting in an override of admin system default program settings. Even limits established at the Group level could inadvertently be overwriden at the individual employee level under certain circumstances.

Each program has it's own 'glitches', for instance one administration system required each group's plan year dates and FSA plan maximums to be set up on the system by the system administrator. However, when employee elections were imported on to the system, the Group level FSA maximum amounts were overridden during the EE election data import function. Through a process of trial and error, or as we affectionately referred to it, system testing performed for the Vendor, it was revealed that the system override did not happen when EE elections were hand keyed onto the system, only when the EE election data was import onto the system. There may be something similar responsible for what you are experiencing.

Thanks for verfiying for me what I thought was the correct response. I think the software issue made me second guess myself...and I should have properly termed "employment" in my comment as "period of coverage"...you guys are tough!! Thanks for keeping me straight! :wub:

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"Thanks for verfiying for me what I thought was the correct response. I think the software issue made me second guess myself...and I should have properly termed "employment" in my comment as "period of coverage"...you guys are tough!! Thanks for keeping me straight! "

Not trying to be tough on you at all, just trying my best to keep you straight.

I am curious about the system glitch, and what you uncovered as being responsible for the problem.

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