Healthcare FSA

[alexa]

I have an employee who elected $4200 effective 1/1/2012

Theer was a system error snd $175 has not been taken semi-monthly for 5 pay periods. Employee just noticed. How would we fix this? Can we double up next 5 pays to catch up for the $875 not deducted to date?

[Guest matthew222]

Yes and I highly recommend clicking on the checkmark with the ABC above it next time.

[QDROphile]

Might be better to work out the make-up schedule with the employee rather than unilaterally adjustig payroll.

[alexa]

Touched base with our ERISA attorney. He said that the safest approach is to start the $175/pay deduction and not do a make-up. He also said that the employee would be allowed reimbursment for the entire $4,200

He equated it to a missed 401k cntirbution whereby employer puts in half plus match plus interest:)

[Chaz]

Touched base with our ERISA attorney. He said that the safest approach is to start the $175/pay deduction and not do a make-up. He also said that the employee would be allowed reimbursment for the entire $4,200

He equated it to a missed 401k cntirbution whereby employer puts in half plus match plus interest:)

I respectfully believe that this is not the safest approach. There is a risk that the IRS will deem this to be a violation of the irrevocability rule. I think the better approach would be to collect the missed contributions from the participant.

[QDROphile]

I agree with your ERISA attroney's conclusion, but not the reasoning. The employer failed to collect the premium timely through its own fault and is choosing to provide the coverage without remedial efforts. That is a provider prerogative. Dn't expect the same considertion from the insurance carrier.

[alexa]

I agree with your ERISA attroney's conclusion, but not the reasoning. The employer failed to collect the premium timely through its own fault and is choosing to provide the coverage without remedial efforts. That is a provider prerogative. Dn't expect the same considertion from the insurance carrier.

This is a health FSA not a medical premium

[QDROphile]

You might try to look a bit deeper into the principles. This is employer provided health insurance, it has a premium, it has a policy limit that happens to be equal to the premium if the premium is paid for the entire coverage period. The risk shifting should be a clue about the insurance element. Contrrast a dependent care FSA.

[alexa]

You might try to look a bit deeper into the principles. This is employer provided health insurance, it has a premium, it has a policy limit that happens to be equal to the premium if the premium is paid for the entire coverage period. The risk shifting should be a clue about the insurance element. Contrrast a dependent care FSA.

Yes, I am familiar with this. So if an insurance company forgets to bill you for say 2 months, do you still owe them the premium? I'm guessing that we could have also asked the employee to make-up the 2 months of missed "premium" as well over an agreeable reasonable period to both parties?

[QDROphile]

That is what I suggested in the first place. But you are in a postion of failing to "bill" and it will be interesting to see if the employee does not cooperate with bailing out the employer. You have been advised by your lawyer. My only objection to the advice is the bad analogy to a 401(k) plan. Lawyers sometimes just don't know when to shut up.

[alexa]

That is what I suggested in the first place. But you are in a postion of failing to "bill" and it will be interesting to see if the employee does not cooperate with bailing out the employer. You have been advised by your lawyer. My only objection to the advice is the bad analogy to a 401(k) plan. Lawyers sometimes just don't know when to shut up.

I am an HR Corporate Benefits Manager and if I have an email in writing from my ERISA attorney saying safest course is to let this backbilling go , I'm a happy camper:)

[alexa]

Touched base with our ERISA attorney. He said that the safest approach is to start the $175/pay deduction and not do a make-up. He also said that the employee would be allowed reimbursment for the entire $4,200

He equated it to a missed 401k cntirbution whereby employer puts in half plus match plus interest:)

I respectfully believe that this is not the safest approach. There is a risk that the IRS will deem this to be a violation of the irrevocability rule. I think the better approach would be to collect the missed contributions from the participant.

Chaz,

Can you offer more detail on my situation where this may be violated. We haven't allowed the employee to make any changes; we will start dedcuting the $175/pay going forward and keep his orignal election of health FSA of $4200 intact.

Alexa

[Guest matthew222]

Why are you beating a dead horse? We've indicated that you can go ahead and "make up" the deductions (always better if you work it out with the employee and it sounds like he is on the same page per you first post). Regardless of what we've indicated, you already spoke to your ERISA attorney and he provided you with an alternative way to handle this situation. I'm assuming you aren't going against his or her advice, right?

[alexa]

Why are you beating a dead horse? We've indicated that you can go ahead and "make up" the deductions (always better if you work it out with the employee and it sounds like he is on the same page per you first post). Regardless of what we've indicated, you already spoke to your ERISA attorney and he provided you with an alternative way to handle this situation. I'm assuming you aren't going against his or her advice, right?

I do not appreciate your tone.

Chaz made a comment on irrevocability and I wanted to understand it given my specific situation, that's all. I thought that was these message boards were all about. Folks sharing theri experiences so it can benefit others

Of course, I am going to follow my attorney'ss advice.

[Guest matthew222]

Sorry if I came across the wrong way. A lot of times there are multiple ways to fix a "problem" is all I was saying.

[Chaz]

Hi Alexa,

First, you should definitely give great weight to what your counsel advises. He knows your particular circumstances best and, after all, you are paying him for his services.

Under the cafeteria plan rules, an election is generally irrevocable for the period of coverage. That means that, in effect, an election cannot (generally) be changed either by action of the employer or the employee. If you decide not to collect the full amount of employee's election in these circumstances, the IRS could deem this as an election change.

In the cafeteria plan world we are dealing with proposed regulations that sometimes do not provide much guidance with real-world situations such as this one. I am not saying that the IRS will definitely say that "forgiving" the missed contributions will be impermissible but I think the safer, conservative, approach would be to make mutually agreeable arrangements for the missed amounts to be paid. That way, the employee will have salary reduced the full amount.

I would defer to your counsel's advice, though.

Chaz

[alexa]

Sorry if I came across the wrong way. A lot of times there are multiple ways to fix a "problem" is all I was saying.

No problem

obviously I am seeing that and my attorney recommended what he thinks is the saftest route and I am very happy to go that route frankly.