Rehired Participant

[Guest Linda W.]

One of our clients has a situation where an employee was layed off about 5 months ago. This employee participated in the health FSA offered by the employer. At the time the employee was layed off, he had been reimbursed for expenses up to his annual election, although he did not have nearly that much withheld up until that time. He is now being rehired. Our plan document allows for plan entry immediately upon rehire. Can the employer require that his deductions for the rest of the plan year be in an amount that would "make the plan whole?" Or, can the employee may a totally new election or is he required to step back into his prior election? My thought is that because he is being rehired after 30 days, the employee can do whatever he chooses, and the plan will remain in the negative where his account is concerned. Thank you in advance for your responses.

[SLuskin]

You are correct. If the document allows immediate entry upon rehire, then the employee can make whatever election he wants, and the payroll deductions will go from the election date to the end of the plan year. You can't look back at what he did before.