FSA - Change of employer

[Guest Dan12]

How would an FSA be handled in this case?

Our company recently won a contract that has an expected

start date of Mar 1, 2002. To clarify my employment

situation for this scenario, my employer will remain the

same (Company #1) until the new contract begins and we

become part of a joint venture (Company #2). Company #1 is

providing a 2002 benefits package which has a larger FSA

provision than either the existing package or the future

package at the new company:

2001 - Company #1 - $2500

2002 - Company #1 - $4000

2002 - Company #2 - $2000

I'm interested in the medical portion of the FSA, not the

dependent care. Here are my questions:

1. If I choose to participate at the $4000 level for Jan/Feb and

use all of it in Jan/Feb, what is my liability to Company #1 when

I begin employment with Company #2?

A. $4000/12 months * 2 months participation in plan =

$666.66

B. $4000/2 months participation =$2000

C. other - please explain

2. What happens if the start date slips to Apr 1, 2002?

3. Where can I find legal guidance in the IRS codes? I know

it's under Section 125 but where exactly? I've researched their

web site to no avail and have called them but they don't

expect to get back to me within 2 weeks.

4. If I choose to seek legal guidance, who should I use? I

talked to my tax preparer(EA) and he didn't know much

since this isn't his specialty.

Thanks,

Dan

[Jbentz]

That is a tough one. Have you spoke with your HR department, either your current one or your future one? I think it would depend on the "joint venture" between the companies and the arrangement they are making.

Questions to ask your HR department:

Will i be switching plans to the new company?

What is the plan year for the upcoming FSA plan? January -February? January -December?

How are they planning to role out the transition, are you going through the new hire process for your benefits? (this might effect your other benefits depending on any waiting period.)

Keep asking questions and getting answers in writing. I am sure you are not the only employee in this boat.

If you speak to an attorney, I would get a benefit attorney. Or ask to speak to the attorney who is handling the joint venture of the companies and the FSAs.