Reimbursement account termination date vs end of deductions

[Guest smuller]

Due to change in status on December 15 and lower cost we decided to move health insurance and medical reimbursement account to husband's employer as of Jan 1. Notified wife's employer on 12/29 to terminate these accounts as of Jan 1. Her employer required proof of her insurance coverage, and continued deductions until this was forwarded to them in late January. They then refunded the January insurance deductions but not the reimbursement account deductions, saying that the IRS did not allow this. So we tried to get reimbursement for January expenses but they did not allow them. Can they do this, or do they at least have to either 1) refund her January reimbursement account deductions, or 2) reimburse our January expenses?

[GBurns]

What is the plan year?

What does the Plan Document say?

[Guest smuller]

Plan year is calendar year, and change was to coincide with that, but I don't think that would make any difference. This was requested at least a month after the open enrollment period because it coincided with a change in family status. Since spouse no longer works for company, getting the plan documents is more difficult. Also, she was told IRS regulations prohibited the refund, not the plan documents.

[GBurns]

What IRS regulations? Let them state in writing what regs etc they are relying on.

Requesting "at least a month after the open enrollment period " is irrelevant, it is requesting BEFORE it comes into effect that matters.

Salary reductions are made as per the employee's salary reduction agreement. Most employers have the employee fill out a new 1 each year, usually at Open Enrollment. Although your spouse might have filled out 1 prior to the first payroll of the new year this is cancelable if done in a reasonable time before the first payroll. After the deductions have started cancellation of the deduction of FSA amount is not allowed.

The questions then are:

Is there a salary reduction agreement?

Was cancellation in writing or accepted as timely?

The IRS does allow for administrative errors.

Some state laws require a new salary reduction agreement each year.

If there is no SRA then there should have been no deduction.

In any case, if she cancelled in a timely manner (as per the PD, SPD or operating practice) she should be refunded the money. Especially since they are admitting that they were notified pprior to January 1 and/or the first deduction.

Aside from the "rightness" issue, is this worth the hassle? You might want to file a complain for an illegal pay deduction with your state labor regulators and stae Dept of Insurance (if they regulate TPAs) and let them handle it.

[oriecat]

They are certainly trying to have it both ways, aren't they?

If you paid for the period, then you should be covered for the period and claims should be reimbursed.

If you're not covered for the period and they won't reimburse claims, then they have to give the funds back. What else are you paying for then? They can't just keep your money for nothing.

Is that too much of an over-simplification?