FSA Forfeitures

[Guest JSQ]

In a FSA when employee contributions are forfieted what options does an employer have with respect to such forfietures. I understand such amounts can be allocated to participants (basically pro-rata and not to the participant who forfeited such amounts) or used to pay reasonable administrative expenses. But it appears these forfeitures are plan assets and as such may only be used for the benefit of participants.

An employer has asked if he can set up a "compassionate use" fund to pay expense such as medical travel or wigs for cancer patients for plan participants or all employees and use the forfieture amounts to pay this?

My gut feeling says no but has anybody dealt with this.