Retroactive claims

[Guest Alan Stonewall]

If a flexible spending account plan is established (adopted by the employer) today with January 1, 2002 effective date, are medical expenses incurred prior to today, but during the plan year (January 1, 2002 to December 31, 2002) reimbursable? Or are only expenses incurred after the plan is adopted reimbursable?

I cannot find anything that says the effective date of a 125 plan cannot be retroactive, and the standard for covering expenses is that they are incurred during the plan year.

Salary reductions will be prospective only. i.e., will begin with the next payroll.

[jpod]

I would have to search through the regulations to find the precise words and phrases, but this certainly seems to be totally inconsistent with the "period of coverage" requirement.

[papogi]

125 elections must be made prospectively. In other words, elections have to be made before the period of coverage begins. There's no way to set up an FSA today and have it retroactive to 1/1/02. That goes against 1.125-1 Q-15.

You need to set up a shortened plan year FSA. The 12-month coverage rule does not apply to short plan years.

[Kirk Maldonado]

Cafeteria plan adopted on retroactive basis was invalid. American Family Mutual Ins. Co. v. U.S., DC W Wis. 12/3/92, 16 EBC 1332, 815 F.Supp. 1206.