FSA Contribution vs Reimbursement

[Guest JTrini]

We have an employee who made an election for their HCRA for 2009. They had one payroll deduction, but the employee was then fired. The employee incurred an expense prior to their termination which exceeded their YTD payroll deductions. We know we can't force the former EE to pay the remainder of their 2009 contribution, but we in HR need the actual IRS reg citation and can't seem to find it. Can anyone point us in the right direction? Thanks in advance!

[J Simmons]

Does your cafeteria plan attempt to continue the participation of all mid-year terminated EEs with current year health flex accounts to the end of that year?

Otherwise, look at Prop Treas Reg § 1.125-5(d)(1): " the payment schedule for the required amount for coverage under a health FSA may not be based on the rate or amount of covered claims incurred during the coverage period. Employees' salary reduction payments must not be accelerated based on employees' incurred claims and reimbursements."