Retiree flex

[SLuskin]

Does anyone have any experience with a retiree in a flexible spending plan? He will be getting a payout over a few years, and wants to "payroll deduct" for his unreimbursed medical expenses and his wife's COBRA premiums.

------------------

[Lisa Hand]

Your Plan documents will detail who is eligible to participate in your plan. If it does not state retirees, then the docs would have to be changed to accomidate this request and all retires would then be eligible. However, Preliminary Draft IRS Examiniation Guidelines (Spring 1998) note pension reductions cannot fund coverage on a pre-tax basis. So if his payout is from a qualified plan then it seems the IRS has prohibited the use of those funds in a 125 Plan.