FSA Excess Contributions

Clare

We have one employee who did not use all of her Dependent Care FSA funds. I believe we can decide to apply this to administrative costs or distribute equally to others who were in the plan for 2005. Is this correct? What has your practice been? Thanks! Clare, Wisconsin

LarryC

Excess money left after the claims deadline goes back to the company. This supposedly offsets the money that the company paid out in claims, but the employee left before the company could recoup the money to cover the claims. It never comes out even and the company usually loses.

jmcaa

Since our Flex is in a Section 125 Plan, the employer automatically is saving money. The Employer does not have to pay the matching FICA/Social Security taxes on the employee election amounts. That is an automatic 7.65% SAVINGS for the Employer.

So, at the end of the plan year we deduct the $5.00 per month fee charged by our TPA, deduct any excess distributions from terminating employees and anything left is distributed evenly among the employees who were participating as of December 31st and are current employees when the distribution is made sometime in April.

This works great for us. So far we have given approximately $22 in the first year and about $41 in the second year back to employees.

Close to the end of each plan year I send out e-mails to any employee who has either not filed any claims against their election or who have alot of money left in the election reminding them to file their claims.

Some employees sign up for the Flex and just don't follow through. I certainly wouldn't leave my money somewhere if I could get it back!