Is there any legal jargon in regards to a company terminating their FSA Plan with a TPA?

[Guest sfranklin]

We are a TPA who recently had a company terminate their FSA plan due to being acquired by another company. We have paid out more money in reimbursements than what has been made in deductions. We have sent them a spreadsheet outlining this. Is there any legal jargon that states that if they terminate their plan they are responsible for paying if the reimbursements exceed the deductions?

[oriecat]

I would think that would be covered in your administrative contract with them.

[SLuskin]

Why would you have advanced funds in the first place? I thought the best way to administer the plans is to make sure that the funds are "general assets of the employer".

Is there any chance that the acquiring company would be liable to you?

[Ron Snyder]

Did you loan the client your own money, or did you pool clients funds? I hope that this is your own money you have loaned, because if you are pooling claims into one claims payment account, your plan is a MEWA and is subject to regulation by both the USDoL as well as your state insurance department. If its your own money, what does the loan documentation provide?

If you are stupid enough to pool clients funds (thus borrowing from other clients) or to loan your own funds to clients for payment of claims without covering yourselves, you deserve to be out-of-pocket for excess claims paid. In fact, you should be out of the business.