Terminating Participation

[Guest rallen]

What happens if an employee who has elected to contribute $5000 to the FSA.... in March the employee terminates employment therefore they have only contributed $1200, but has used $5000 from their account. Can one ask the employee to pay back to the company the amount that they used in excess of what they contributed. I read my summary plan documents but am not positive what to do. I read in the plan description that the employer reserves the right to use any forfeited money by the employee to offset loses, but that is if the employee has excess money in the account.

In addition, now this employee has received funds from us in excess do they have to report that as additional income?

Thanks for your help!

[oriecat]

I've read differing opinions about whether you can ask for the money back. In my view, it is improper. Even if you asked, what are the odds you will get it back. This is one of the losses that your forfeited monies would offset. If you always got it back, then you would never have losses and there would be no risk on the employers part.

No, the excess is not reportable as income.