Employee Termination

[Guest sfranklin]

I have an employee who has terminated effective July 18th. We will be paying this person for the last time this week. I currently have the FSA deduction deducted from the last paycheck. I have another employee that states that we shouldn't take the last deduction from the paycheck because COBRA is based on the amts. on the last day worked and that would change if a deduction was taken from the last paycheck. Please advise.

[SLuskin]

We take the regular amount from the last paycheck assuming that the check is for days worked before termination. For example, we are paid on the 15th and the last of the month. The check on the 15th is for work starting the 26th of the previous month through the 10th of the current month. If the person worked during that time, we would take the deduction from the check issued on the 15th of the month.

[QDROphile]

Consider what the plan says about the period of coverage and how that relates to the date of termination. The salary reductions should not be made for pay outside of the period of coverage, but should be made for pay within the period of coverage. Coverage usually ends on the date employment ends.

The statement about COBRA makes no sense to me.

[MARYMM]

Consider what the plan says about the period of coverage and how that relates to the date of termination. The salary reductions should not be made for pay outside of the period of coverage, but should be made for pay within the period of coverage. Coverage usually ends on the date employment ends.

The statement about COBRA makes no sense to me.

The COBRA statement didn't make any sense to me at first either. Then I realized that the OP might be referring to COBRA eligiblity for the FSA. If the terminated ee's FSA account balance is negative, there is not COBRA offer made ; if there is an account balance, COBRA must be offered. That contribution from the final paycheck could move the balance from negative to positive.

[LRDG]

If it's income earned during the period of coverage, FSA deductions should be made from the final pay check, irrespective of the date the check is issued. Post employment/participation claims are typically honored if incured during the period of coverage, service dates no later than the date of termination.

[Guest ehs]

We have debated this topic for many years and have applied a last deduction rule as the coverage end date. Our plan document is vague, probably on purpose, and we thus use the last paydate as the end of the coverage. There is no definition of coverage period. As for determining whether or not a participant is entitled to COBRA, using the final paycheck rule allows us to avoid sending out erroneous information. Once the person is removed from the report, we know that no more deductions will occur and our reporting will be accurate. More often than not, HR does not communicate to Payroll in a timely manner and deductions ultimately continue until there are no more paychecks forthcoming. We uniformly apply the same rule to all accounts, unless otherwise directed by a client.