Change in Medical FSA Election When Planned Surgical Procedure Not Ava

[Christine Roberts]

During open enrollment, cafeteria plan participant elects to contribute $3,000 per year towards Medical FSA, due to planned LASIK surgery. Surgery was to occur towards end of year but now physician says participant is ineligible for treatment. No change in status events are relevant. Is there ANY way to avoid having her forfeit the $3,000, other than buying LOTS of eyeglasses?? I have heard that there is some support for the practice of allowing unused FSA money to carry over to FSA account for the following plan year . . .

[KIP KRAUS]

Christine:

My understanding of the carry over provision is that any money carried over must be allocated to all plan participants, or to pay plan expenses.

[Christine Roberts]

Thanks, Kip -- I agree those are the current rules. I could swear, though, that I just read something about proposed changes to (i.e., relaxation of) the "use it or lose it rule" in this context. If I recall correctly it was mentioned in conjunction with finalization of the proposed flex plan regulations. If you (or anyone else) encounters this in your circulating material or otherwise, please post accordingly.

[Guest ronc]

I believe what you read had to do with FSAs funded by true employer dollars used to fund an FSA and not employee pre-tax contributions.

[Kirk Maldonado]

Christine:

If I remember right (which is always a risky proposition), you are recalling a statement in a newsletter that was mentioned in Benefits Buzz about a week or two ago.

[Guest kclark]

According to interpretations I have read of the final & proposed regs. regarding Health FSAs, the only time Health FSA elections can be changed is where there is an event that would allow coverage of an additional individual or eliminate coverage for an already covered individual (e.g., the addition or loss of a family member). This would be tied directly to allowable life status events.

The only reference to a carry-over from year to year was in the context of whether the regs. would apply to a Health FSA outside of a section 125 plan. This would apply where a flat dollar amount is given to employees to be used for medical expenses and no employee salary reduction is involved. This was being considered as allowable for unused $ to be carried over. No final decision was given.

Don't know whether that helps or not, but since your situation is a Section 125 plan, it looks like the employee is going to have to buy a lot of glasses!