Health Care and Dependent Care FSA - Section 125 Regs. that outline when plan participation ends

[Guest akwallace]

A former employee left the company, and left a balance in his Dependent Care FSA. He did not incur claims prior to his termination date, so his balance is forfeited.

He is asking where in the Section 125 guidelines does it state that claims are not eligible after an employee's termination date.

Would anyone know where I could find some reference to how the plan participation rules work?

Thanks.

[GBurns]

If you do not know where this is in law, How are you in any position to tell him so?

If you do not know where and what the law says, How did you decide or know that his money is forfeited?

Regardless of what section 125 etc might or might not say, What does your SPD etc say?

[Guest akwallace]

The SPD clearly states the plan rules, but this particular employee is claiming he called the IRS directly and was told there are no such guidlenes that would allow an employer to prevent employees from submitting claims after their employment termination date. So he is asking where specifically in the regulations it states this.

[papogi]

The regs allow an employer to have participation in the plan cease upon termination (most common), but they also allow an employer to allow expenses past the termination date. This is up to the employer, and as long as the rule is applied uniformly, the employee will have to live with it.

[Lori Friedman]

As other people have noted, the plan document dictates a participant's cut off date.

Please see Reg. Sec. 1.125-2, Q&A 7(b)(3). The law permits a plan to:

(1) cease coverage when an employee separates from service, or

(2) continue coverage until the end of the plan's period of coverage, or

(3) specify a time period in between termination and end of the plan's normal period of coverage (30 days, 60 days, etc.).

Each plan is governed by its own document. Many plans cut off participation at the time of an employee's termination. Other plans, however, have a "grace" period after an employee's separation; coverage continues even though the individual isn't making any additional contributions to the plan.

[GBurns]

Although your SPD might state something, it should be supported by your Plan Document and law. From what you pointed out all you have looked at and all you showed the employee was the SPD, with which he disagrees with stated reason. The onus seems to be on you to respond to the employee since you are denying a claim. The procedures to be followed in the denial of a claim should also be in both the SPD and the PD. Have you informed or discussed this with the employee? I advise that you do not leave it up to the employee to find his way through this alone, he/she seems determined and you seem vulnerable.

You might want to read this and draw an analogy:

http://www.watsonwyatt.com/us/pubs/insider...ent=The+Insider

Grande v. Allison Engine Co., Inc., 2000 U.S. Dist. LEXIS 12220 (S.D. Ind. 2000)