If has QSC, can employee remain "active participant" of FSAs at $0 premium so expenses incurred after change to $0 premiums are eligible for reimbursement?

[Guest sarikfan]

This is the current practice at my company and is great for employees, but I can't find anything to support it.

Again, scenario is that employee has a qualified status change that allows her to change her FSA election. She chooses to stop making additional premium/contributions, but employer keeps her as a "non-contributing participant" so she can submit expenses for reimbursement for services, etc. incurred after she stopped making contributions.

Is this permitted? Can she continue to submit expenses incurred through the end of the plan year up to the amount of her reduced annual election ?

Or, can she only be reimbursed for eligible expenses incurred before she stopped making her contributions?

Or maybe something different?

I have been digging in EBIA Cafeteria Guide XXI C. Example 1 makes reference to changing to 0 premiums, but this is not how we treat changes. In the other examples (blended method), there is no mention of changing to 0 premiums.

I am interested to hear how you handle this.

Thanks!

Sarikfan

[oriecat]

This is all new to me, and I am interested in seeing any responses you get on this.

Would this be another way of looking at it?

1. EE elects $1200 for the year

2. EE has contributed $600 so far

3. EE has QSC and then changes election to $600 for the year

4. Since EE has already paid her $600 for the year, she no longer has to contribute but is still covered for the full year at the $600

Is that how it works?