papogi and JerseyGirl are you out there?

[Guest Cgross]

Both of you have helped me in the past!

I'm having a hard time today...

Question relates to Flexible Spending Accounts and employee terminations.

Employee terminated May 1st.

They had contributed $400 of their election of $1200 but had only submitted

claims for $200 prior to termination. The plan document allows for a 90 day period to submit claims after the date of termination.

Isn't this employee allowed to submit claims up to the elected amount as long as they were incurred prior to the date of termination?

I think they are entitled to the entire election amount as long as the charges were incurred prior to the termination date, and as long as they were submitted within the claim filing deadline.

Thanks for your help.

[Guest JerseyGirl]

Gee, now I feel like a super hero – JerseyGirl to the rescue!!

You are correct—A terminated participant has access to their entire annual election amount for a Medical FSA, in this case the entire $1200. The stipulations are as you stated; they must have incurred the expense during the time they were employed by the plan sponsor and they must submit the claim within the time frame spelled out in the SPD. If there is no specific time limit for terminated participants, they have the same time-frame for claim submission as any other participant –usually 90 days from the plan year-end.

Every once in a while we will see an employer who wants to attempt to limit the reimbursement amount to the actual dollar amount contributed up to the termination date, but that eliminates the *shared risk* factor, and is a definite *no-no*!

[Guest Cgross]

Thank you!

Can you leap plan documents in a single bound????

Stop speeding DOL auditors????

[papogi]

I'm here, but the other Wonder Twin beat me to the correct answer.

"Wonder Twin powers...activate! The shape of...a stack of Section 125 regulations!"

[GBurns]

What happens if this employee elects COBRA?

Did they get a COBRA notice which included the FSA?

[Guest JerseyGirl]

The COBRA issue wasn’t part of the original question posted by cgross.

To answer your first question, GBurns, should the terminated employee elect to continue contributions to the medical FSA with after-tax money via COBRA, they then have the entire balance of the plan year to incur expenses. As for your second question, although I have certain *super powers*, I don’t have x-ray eyes nor do I use a crystal ball, and therefore have no idea what type of COBRA notice this terminated employee received.

As a general rule, most terminated employees do not continue to contribute to a 125 plan. Once they have lost the tax-savings advantage of participation, it loses some of its luster. The exception to that is the occasional person who was planning an expensive procedure later in the year (Laser eye surgery, for example) elected accordingly, incurred no expenses of consequence while on the payroll, and is terminated before the Big treatment has been rendered. By electing COBRA continuation they can have the procedure as originally scheduled and get reimbursed with partially pre-tax money rather than losing contributions made prior to termination.

[WDIK]

SAT time.

Superman is to Lex Luthor as JerseyGirl is to...

a) ManhattenGirl

b) GBurns

c) HIPPA

d) JerseyBoy

[Guest Cgross]

No, NOT SATs!

Since I don't have my number 2 pencil I can't respond.

To answer your question GBurns, this employee did receive a COBRA election notice and did not elect to continue his coverage under the FSA.

Hope you all have a good day!

[GBurns]

Here is a good recent discussion:

http://benefitslink.com/boards/index.php?showtopic=25584

However, my experience is that COBRA notices are quite often deficient in that they very often omit reference to, or inclusion of, the FSA. Which means that the employer might be out on a limb if the employee gets savvy to what could have been.

[Lisa Hand]

A good way to avoid confusion on the FSA COBRA options is to have a separate COBRA notice for specifically the FSA, that way employees can not say they thought it was part of the health insurance COBRA and declined by mistake.