FSA deductions and new hires

[Guest Benmark]

Another question on taking deductions.....in the case of a health or dependent care FSA which is elected by an employee during the latter part of their grace period (31 days from eligibility date), do most companies:

(a) amortize the goal based on the effective date and retroactively collect (pre-tax) deductions

(b) amortize the goal based on the next subsequent paycheck and begin taking those deductions with that paycheck

Example. Employee is eligible on March 1 but does not enroll in FSA until March 30 for 1000. In (a) the employee owes $100 per month and an extra $100 is collected on the April 15 payroll. In (b) the employee owes 111 per month with no retro.

In both cases, the participant would be able to claim expenses going back to thier effective date (or at least that is how we do it). However, have any of you heard of companies only allowing employees to begin participating when the first deduction gets taken? In other words, the employee in the example would not be able to claim expenses until April 1?

Sorry this is so complex!!