Pre-tax payroll deductions

jmyowell

[font size="1" color="#FF0000"]LAST EDITED ON 01-29-07 AT 01:56PM (CST)[/font][br][br]We have a situation where an outside company facilitates our Flexible Spending Account. This company also made cancer policies available to our employees and our company agreed to pay the premium and collect the money from the employee through payroll deductions (pre-tax). We now want to stop this practice and if the employee wants to keep the cancer policy they will have to make the premium payment on their own. No more payroll deduction. Question, can we stop that payroll deduction anytime during the year or do we have to wait until the plan year is over. We were all set to stop the deductions next month when someone told me we had to wait until the end of the plan year because the employee was doing it on a pretax basis. Our plan year ends May 31. Is this correct or does it matter when we stop it. Can't we stop a benefit at any time? Thanks all for your help.

marc

If this was done as part of a cafeteria plan election, you must wait until the plan year is over.

You don't let them drop out of the plan during the year, why should the reverse be true?

Dutch2

I agree with Marc. However; check your plan documentjust to make sure. It will probably tell you if you can or can't and if the plan year is a calendar year or some other arrangement.

BettyBoop FL

You cannot opt out until the end of the cafeteria plan year. Be sure that you do not apply your fiscal year end unless the cafeteria plan dates are the same. We do all cafeteria plan deductions thru Payroll deduction from the employee pay, then the outside plan service bills us after the fact on a monthly basis & the payments go to them from AP. We do not advance the payment.

dbutton111

I almost agree with the others, but if you're in effect cancelling the plan, then the deductions would stop. Just like if a company stopped having dental in the middle of the year and cancelled their contract with the dental carrier. Then the employee deductions would also stop since the plan doesn't exist anymore.