Mid year change from employee to partner

[Guest Dolores Lawrence]

An employee is promoted to and becomes an equity partner on June 1. The company's cafeteria plan is on a calendar year. The employee has participated in the 125 plan, and has made YTD salary deferral contributions in excess of claims submitted for the DCAP and Medical FSA portions of the plan. Can this person, after promotion, submit claims that pertain to child care and medical services after June 1 in order to use up the remaining funds in his spending accounts, or can he only submit claims for pre-June 1 medical and child care?

[SLuskin]

It depends on the plan document. Some are written for daycare that they can submit claims until the end of the plan year, even after termination. Promotion to partner is viewed the same as termination. The documents that we use don't permit that. They permit claims up through the date of termination. We have a 90 day grace period after termination for the person to submit claims for those expenses, after that, they lose the money.