Health FSA and Support Order

[Guest afreeling]

The EE has been court ordered to pay 65% of all unreimbursed medical expenses for his ex wife and children. Are their expenses eligible under his FSA plan?

[QDROphile]

What does the plan say?

[LRDG]

Former wife and children are probably qualified beneficieries and eligible for COBRA election in the medical FSA for 35% + expenses, in addition to his court ordered obligation for 65% of their expenses, funded through the EE FSA.

The divorce and court order probably qualify for an election change permitting the employee FSA participant to change his prior medical FSA election, assuming the plan allows mid-year election changes.

I assume the court order is irrespective of the existance of an FSA plan. The Sec. 125 plan can and should accomodate the EE participant's court ordered order of spousal and child support if plan provisions allows mid year election changes.

I have not been a big advocate of non-EE, qualified beneficiary FSAs because there is no tax savings for non-employee spouse/child(ren). This legslitation was instated during a time when Sec. 125's were 'out of favor', also around the time risk shifting was introduced. Both were seen as 'dis-incentive' for ERs and a possible means to eliminate Sec. 125 plans without making the politically unfavorable decisiions to out and out eliminate it from the tax code.

Enough safe guards remained in the tax code and regs, that ERs' continued to offer Sec. 125 despite rish-shifting and COBRA, and eventually the FEDS-FSA? plan was adopted for federal govt. EEs.

[QDROphile]

LRDG's response goes beyond the scope of the question, and it is not a good idea for the plan administrator to figure out or propose the options or the "best" solution. The employee must figure out what the court demands of the employee and the plan should react to what is asked of the plan. The questions may eventually come around to the matters LRDG discusses, but they do not seem to be there yet.