Flexible Spending Accnt Balances at Termination

Cotterwood

In the process of updating my Personnel Policy Manual I came across a sentence that I'm not sure is correct. Can somebody review and give me a yes or no - positively? Thanks ahead of time.

Termination of Health Care Account

"Expenses are NOT eligible for reimbursement after participation ends - even if there is an unused balance remaining in the Health Care Account." Is this a part of the Fed. Reg. for this program?

Don't know when this was added, but I don't believe it is correct. I know we HAVE been allowing employees to collect against the account - with the usual time stipulations.
This is the last section I have to update.

Thanks for your speedy responses.
I'm at [email]cwood@tcpud.org[/email]
Thanks again

amwkim

Once an employee terminate, all of their benefits terminate too. We allow employees to use thier FSA for expensed incurred on or before their final active date. Allowing them to use the account after they terminate is not allowed.

Cotterwood

This is what I was thinking was correct. However, I think I need to really check into this, as I just got two completely different answers. I want to make sure this update is absolutely correct. Thanks so much for your input.

lnelson

[font size="1" color="#FF0000"]LAST EDITED ON 05-17-04 AT 06:57PM (CST)[/font][br][br]The ee can turn in receipts for payment within 90 days of termination as long as receipts are for services on or prior to term date.

Also an ER should offer COBRA for the FSA which if accepted the ee would continue to pay the weekly,biweek, etc. amount and the plan would then continue until the end of that plan year.
Should the ee stop payments it will term as of date of last pymt and again the ee would have 90 days to submit receipts for payment as long as on or before this termination.

Are we confused yet? x:-/

"Expenses are NOT eligible for reimbursement after participation ends - even if there is an unused balance remaining in the Health Care Account." Is this a part of the Fed. Reg. for this program?"

P.S It should read, Expenses are NOT eligible for reimbursement if incurred AFTER participation ends.....

Cotterwood

Hey, thanks for the info.

I've never heard about the continuation of an FSA through COBRA. Are you absolutely sure about this?

juju

I have heard of the COBRA continuation, however it makes no sense to me as the original benefit of a FSA is to contribute pre-tax money. If you are paying it into COBRA, it is most likely post-tax. Someone correct me if I'm wrong...

amwkim

You are not wrong, but COBRA has to be offered for FSA accounts. I am always sure to explain to COBRA apps that there is not "good" reason to continue their FSA.

lnelson

The only benefit to continue is if they still have a balance in the FSA and are expecting more incurred medical costs in order not to loss out on the funds remaining.

Carey

Section 125 FSAs are subject to COBRA, and you must offer COBRA. While there is no tax advantage to continuing the FSA under COBRA, if the employee terminated toward the end of the year and hadn't used his FSA money, there could be substantial incentive to continue it under COBRA so he didn't lose it all.

dbutton111

Employees can not get reimbursed for expenses incurred after the date of their termination from the plan. This falls in line with the "lose it or use it" rules.

Keep in mind that only health care FSAs can be COBRA-ized. Dependent care FSAs can not.