Cafeteria Plan question

J9JC · March 2007

Our company does not offer a cafeteria plan so I was hoping one of you might be able to help me with this question a family member has. Her son was recently diagnosed with cancer, she put in $4500 into her cafeteria plan for dental work he needed in 2007. The doctors said he will not be able to have any dental work until they clear up the cancer, which is in his nasal passage and neck. Right now there is no time period as to when he may be able to be cleared for dental work if ever if things do not go well. Is there any exception for this kind of thing to possibly get the money out if he is not eligible to use it during the plan year?

NeedCoffee · March 2007

As far as I know, the answer is no. One of the risks EEs take when putting money into a cafeteria plan or HSA is that its a "use it or lose it" scenario. I haven't run across any documentation where an exception was made. If I were you I would try to get some information together on ways she can use that money during this plan year - like towards cancer treatment, deductibles, etc!

AJ SPHR · April 2007

A clarification - the HSA does NOT have a "use it or lose it" scenario. It remains the employee's money forever .. well, at least until they spend it.

Also, I think the original poster is referring to a Flexible Spending Account, right? And yes, that employee can submit any eligible expenses to receive reimbursement not just the expense he thought he would originally have.

Wildsporty · March 2007

Once the money is in it cannot be taken out except for the reasons allowed by the plan.

Medical expenses, Prescription or over the counter drugs, Out of pocket expenses for the medical treatment are all qualifying expenses. If the individual is having cancer treatment than this individual should have enough of those expenses to use the money in the 125 account.

Each plan is set up differently, however, our plan allows the employee to also use that money for Dependent and Spouse expenses for Dental and medical.

Shirley

stilldazed · March 2007

Agree with NeedCoffee. No exeptions. It's part of the risk. However, there may be some other medical expenses that would qualify for some or all of the money. $4,500 is a awful lot of money. As a protection measure by your company, you can consider placing some limits on how much an employee can contribute. The part you may have figured out by now is that for the worker the money is use it or lose it. You are the messenger, you are delivering a bad news message to the worker about the worker's money, the worker will be frustrated and in the heat of the moment (which may last a week or more) accuse your company of not being fair, stealing employees' money, and call a 1-800-Icanhelpyouforfree number, and you'll spend the $4,500 trying to diffuse the situation.

Best wishes.

Dutch2 · March 2007

Frist thing... she needs to talk with the HR person at her employer and check their plan document. Our plan is the same as the others have mentioned; once the money is in, pre-tax, it can't be used for anything else and if it is not used for an expense incurred in the calendar year it is forfeited. However, our plan allows thesd funds to be used for basically any medical expense that is not covered by our insurance plans. Therefore, she may be able to use this money to help off set the costs associated with the cancer treatment.
Good luck.

J9JC · March 2007

Her HR has told her no exceptions, but she asked me to check since her company is going through a merger and most of the HR dept moved on already and the only person left is a part time HR person. It is a big mess at this point, honeslty as this is a side issue mentally to the impending fight that her son will be going through. Thank you for the responses!

NeedCoffee · March 2007

You may want to just suggest she gets a copy of the SPD for the plan - it may be easier than trying to nail down an absent HR team.

NaeNae55 · March 2007

Unless she has an incredibly great health plan, she will spend a lot of the $4500 this year anyway. There are deductibles, co-pays and co-insurance. There are medications that are not covered, and other items insurance doesn't pay for that might be covered under the FSA (aspirin or other things his doctors prescribe you to get for his comfort). Also, the employee may find that she has some unexpected health expenses too (like a need for anti-depressants, etc.) If there is still money left in the fund, she might consider other alternatives. Could she use any dental work herself? How about a 2nd pair of eye glasses?

Unfortunately, anything left over will be gone.

The only other things I can think of are drastic. For instance, a change in family status will allow for a change in the FSA coverage. Is the employee divorced? Can the son be legally changed to be the dad's responsibility?

I am really reaching here, but hate to see her lose so much money when she has enough to deal with right now.

Good luck to you, and especially good luck to the employee and her son.

Nae

Beverlee · March 2007

Have her, or help her, go to irs.gov and print Publication 502, Medical and Dental Expenses. You will be surprised at what all is eligible to be spent, including mileage to and from the doctors. Depending on when the plan year ends, she should be able to prepay deductibles, copays, etc. As a survivor myself, unfortunately- the $4500 may be spent quickly.

All My Best~

stilldazed · April 2007

No exception available, but the though the worker 'planned' to use the money to recoup some expenses RE: dental work, it can be used for any qualifying medical expense. Advise the worker to ask her employer for clarification based on the employer's SPD, save receipts for other medical expenses not reimbursed by health insurance (including some travel, R&B, OTC, etc.), and prepare to get some or all of the money back for non-dental expenses. IRS outlines what is reimbursible. With such a serious dx, it seems that there will almost inevitably be some other medical expenses that might qualify.

Best wishes--with the question/issue and the son's prognosis.

phammond · June 2007

I am so sorry to be responding this late in the game, but one more thought . . . the IRS recently ruled and allowed an extension of the plan year up to 3 months, but it's up to each individual company to make the determination as to the length of time they're going to allow and revise their plan accordingly. In other words, if the plan year normally ends December 31, there's a possibility they've extended it and she might have up until the end of March to spend these monies. Might be worth investigating further . . .

Cafeteria Plan question

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