Does a company have the right to request a negative balance back from

[Guest lisaH]

My question is based on the idea that it states in our company plan along with our enrollment form that the company has the right to take a negative balance out of an individual's last paycheck. This enrollment form is signed by the individual as they enroll in the plan. Does this give the company the right to request this money back?

[JWK]

There was recently a thread on this topic on this message board.

Short answer is this is not a good idea for several reasons, including possible violations of the Section 125 regs, COBRA, and state wage withholding laws.

[This message has been edited by JWK (edited 01-06-2000).]

[Guest CLKeown]

If it is a Medical FSA an employee is entitled to reimbursement up to the amount he/she elected to contribute for the plan year, regardless of the balance in their FSA. If the employee terminates prior to contributing their full election, the employer is "out-of-pocket" for those funds already reimbursed if they exceed the blance contributed. Employers cannot ask an employee to payback the shortage.

That is the 'down side' to this particular benefit. It is also the reason that many employers do not offer employees the opportunity to contribute the full $5,000 allowed by the IRS.

In a Dependent Care FSA the employee is only entitled to reimbursement up to the balance they have in their account at the time of the request. So with careful administration employees should not end up in a negative position on a Dependent Care Account.

In the event that the employee is reimbursed more than they elected for the year or if they are reimbursed for ineligible expenses you can request reimbursement from the employee.

Carole

[Lisa Hand]

CLKeown: one quick correction: The IRC does not set ANY maximum for the medical reimbursement benefit. The $5,000 is generally the maximum for the DCA benefit, with the specific participant situation defining the actual maximum($5,000 or $2,500 or $4,800). The employer, if they wish to, sets the maximum on the medical FSA. The level funding "risk" is why they would wish to do so.