Cafeteria Plan Reimbursement to Terminated Employees

PeggyH

If an employee elects coverage under our medical reimbursement cafeteria plan and terminates employment mid-year and subsequently requests reimbursement for expenses incurred prior to their termination date, are we required to reimburse all expenses requested up to the maximum amount they declared at the beginning of the plan year? Or are we only obligated to reimburse up to the amount they had contributed at the time of termination? Our TPA and I are disagreeing on this issue. The plan document does not stipulate and I think we are required to reimburse up to the maximum amount declared by the employee regardless of what they have contributed at the time of termination. Out TPA is saying if the employee waits until after their termination date to request reimbursement, we are only obligated to pay up to what they have contributed at time of termination. If anyone can cite some official IRS document that addresses this situation, I would appreciate it.

NaeNae55

How long do your employees have to turn in claims after the end of the plan year? 60 days? 90 days? My understanding is that employees who term have the same amount of time to turn in their claims from the date of termination, but the dates of service must be before the term date (unless for some odd reason they elect COBRA). If the DOS are before term date, then they have access to the full amount and not just the amount they have contributed.

Sorry I cannot cite the IRS regs on this. Your TPA should be able to though if they are correct.

Good luck!

Nae

FunHRBanker

[font size="1" color="#FF0000"]LAST EDITED ON 11-02-07 AT 02:45PM (CST)[/font][br][br]I agree with Nae. Our termed employees have 90 days post term to request reimbursement for their expenses incurred prior to their term date. They have access to the full election amount. They may also have COBRA rights if they have a positive balance at the time of termination.

If the TPA is thinking of Dependent Care Reimbursement, they are correct. EEs can only take out what they've put in YTD.

PeggyH

I agree with both of you. Our plan document doesn't address how long they have to request reimbursement after termination, but I would agree they would have the same rights as all active employees, but the clock would begin ticking at termination date. Thank you all so much.

Dutch2

Yep, they are eligible for the full amount they pledged. We recently had this happen to us. Ee pledges to put in the maximum amount she is allowed for the year, she has surgery in February and decides not return. We had to pay her for the full amount she had pledged for the year and she only made three of her 26 equal payments for the full amount. Turns out I am sure the had this planned out but no way to prove it. She immediately went to work for another er.
Good luck...