2010 Flex Spending Issue

[MAJ]

Came across a strange one today - A friend actuallyt. No, he's not strange.

He has/had a Medical Flex account. His company was purchased. He had a few hundred dollar blance on his Flex Spending card. The company told the Employees they had 7 days to use it. It was lost.

Trying to find some details on the this. Just my gut says that's not right and they shouldn't have to forfeit. They should have until the end of the year to use the monies. This happended about 6 weeks ago and I just found out they lost their Flex monies.

Any insight into this would be appreciated.

[BHoffman]

Hi Matthew - see Pub 969, which explains in part:

"Balance in an FSA -
Flexible spending accounts are “use-it-or-lose-it” plans. This means that amounts in the account at the end of the plan year cannot be carried over to the next year. However, the plan can provide for a grace period of up to 2½ months after the end of the plan year. If there is a grace period, any qualified medical expenses incurred in that period can be paid from any amounts left in the account at the end of the previous year. Your employer is not permitted to refund any part of the balance to you. See Qualified HSA distribution and Qualified reservist distribution , earlier."

Perhaps the "end of the plan year" was not 12/31. Maybe the new employer didn't have a plan set up and the grace period was over on that particular date. Lots of maybes.

Here's a link to Pub 969:

http://www.irs.gov/publications/p969/ar02.html#en_US_publink1000204190

Here's an article about new rules for FSAs in 2011:

http://www.associatedcontent.com/article/5885986/new_flexible_spending_account_rules.html?cat=5

[oceanlovin'ea]

March 31

At my husband's place of employment, their year starts April 1 and ends March 31. That is because of when they changed insurance plans.

So for all companies the year end for their Flex Spending wouldn't necessarily be the literal year end.

Linda

[MAJ]

He didn't loose it - They TOOK it..

Understood - Bu it wasn't that he didn' use it.. In early November a portion of the company was sold off to a competitor.

The balance on the Flex account were kept by the original employer with almost 60 days to year end. Doesn' sound right. They were told you have one week to use it. But he was out that one week and - they took his balance. I didn't think that was possible.

Hi Matthew - see Pub 969, which explains in part:

"Balance in an FSA -
Flexible spending accounts are “use-it-or-lose-it” plans. This means that amounts in the account at the end of the plan year cannot be carried over to the next year. However, the plan can provide for a grace period of up to 2½ months after the end of the plan year. If there is a grace period, any qualified medical expenses incurred in that period can be paid from any amounts left in the account at the end of the previous year. Your employer is not permitted to refund any part of the balance to you. See Qualified HSA distribution and Qualified reservist distribution , earlier."

Perhaps the "end of the plan year" was not 12/31. Maybe the new employer didn't have a plan set up and the grace period was over on that particular date. Lots of maybes.

Here's a link to Pub 969:

http://www.irs.gov/publications/p969/ar02.html#en_US_publink1000204190

Here's an article about new rules for FSAs in 2011:

http://www.associatedcontent.com/art...les.html?cat=5

[dtlee]

I had not responded since I did not know the anwer, but this may be related to plan termination rules which are likely quite different from the rules for an ongoing plan. While normally a plan follows the law allowing when expenses must be incurred relative to the plan year, I have not been able to find out what laws govern plan termination. Although I do not like how this worked, it may be correct given the circumstances.

Another possibility is that this is related to the employee being let go in a "partial sale" of the company. Whenever a person leaves the employ of his company, the employee loses coverage of that company. Since this is considered self-insurance, I believe that any expenses incurred up to the point of termination of employment would be eligible even if submitted later (though before the normal deadlines),

[Lion]

Read the Plan

Tell your client/friend to get a copy of the plan, fast, from his former employer or the plan administrator. Probably not just the summary plan as he needs details about termination, of the plan or of himself. Have him read it ASAP to determine if he has any recourse.