Healthcare FSA

[Guest wsdc29]

An election for Healthcare FSA for the 2011 plan year was made. In January, that amount was met and employee received total amount elected, but funding is spread over whole year.

Employee will have a change in status (birth) and wanted to change election to cover the amounts of additional Healthcare expenses between January and the birth. This is a considerable change. Employee will receive 3-4 pay checks after the birth before going on unpaid leave which could mean the Employee doesn't return to work until 2012 (new plan year).

Employer has advised that Employee can change election of the Healthcare FSA, the increase will have to be limited to amount that Employee could pay to the plan during those 3-4 paychecks before going on unpaid leave (that is currently an unknown calculation). Employee expected to increase election by the amounts of Healthcare expenses that have already incurred (e.g. would be eligible for reimbursement today if higher election made in beginning) or those that will incur while still receiving some pay (e.g. deductible to be paid for baby to the hospital).

Please tell me your thoughts. I have done a lot of research on this and have come to no clear answer. I do know that Employer Plan suspends the FSA when there isn't sufficient pay to meet the contribution/deduction and only vaguely mentions making arrangements to pay contributions while on leave (presumably post-tax).

[SLuskin]

You cannot do anything retroactive in a cafeteria plan. So, look at what the status change is - birth of a child - hasn't happened yet. Unpaid leave of absense (for the birth of a child) ok. But the increase in election can only go toward prospective expenses, not expenses that have already occurred, but the participant didn't have the foresight to elect during the election period. I just don't see any real way for the participant to be reimbursed for expenses which have already been incurred, but were in excess of an election made at the beginning of the plan year.

[oriecat]

It is my understanding that if she increases her election due to the change in status, that higher amount only applies from the time of the change, so she would not be able to go back and submit additional expenses from before the birth. So I don't think it would accomplish what she wants, if my understanding is correct.

So for example, her election would be $1000 from 1/1 to 8/31, and she already used that $1000 so she's now at 0.00

Baby is born 9/1 and she changes her election to $2000. She now has an additional $1000 to pay and be reimbursed, but any claims have to be for services after 9/1.

I think this is all due to the consistency rule.

[Guest morris]

Agree with Oriecat and Slushkin.

Additionally, if she wants to make an election for prospective expenses only, then the election can be spread equally over the next 3-4 paychecks.