Please help with cafeteria plan

Paula · October 2001

If an employee is terminating employment with us and has been reimbursed more (from his cafeteria plan) than he has had deducted from his pay, is there anyway for us to retrieve these losses from the employee?

Thanks for your reply.

bsa · October 2001

No. It's the risk an employer takes when they offer a flexible spending account. The opposite can happen also, where an employee contributes too much and can't recover it.

Mikki H · October 2001

I have heard that some employers put their own maximum limit on the amount that an employee can elect, this would then reduce their potential for loss. I don't know if this is within the guidelines since we do not use the cafeteria plan with FSA (we use a POP, premium only plan).

Gracie · October 2001

Looking at what's presented, it seemed that the process is flawed. This type of situations should not have happened. An employee usually will specify how much they want deducted per pay check. The reimbursements should not exceed what was contributed at any point in time. Unless you had allowed the reimbursements to be paid such that you take into considerations to whole year contributions. In this case, you should have a clause in your plan re: termination of services and how to recover over-reimbursements.

If you do not have a policy in your plan re: recovering the over-reimbursement, you should not penalise the employee for his over-reimbursements but should spend time and efforts to review and tighten the plan/ processes involved in reimbursing for expenses covered under your cafeteria plan.

These are just some of my thoughts.

rachd · October 2001

In regards to the medical expense account of a Cafeteria Plan, you pay out what they have elected for the year (if they turn in adequate claims) NOT just what they have had deducted! Employers take on some risk with a Cafeteria plan but that is why they are allowed to set a limit to what people can elect. And employees CAN pay the money back, but they CANNOT be forced to by the company (as in by a policy either). If they choose not to, then the company is stuck- HOWEVER, at the end of the year, many people often don't use their entire account balances and that money is forfeited back to the employer- so, often, it at least evens out the loss or helps the employer cover plan fees. Unlike the Med Expense account, the Dependent Care account works differently in that it only pays out what has been deducted so there's not usually problems with that. I work as a Third Party Administrator and have resources available if you have any further questions- you can email me at [email]rachel@cdscpa.com[/email]. I hope I helped!

Rachel

marcus · November 2001

Ditto to Rachel's reply. It is completely accurate.

SandiF · October 2001

Remember that this is a plan regulated under ERISA and has specific laws. Under the health reimbursement part of the plan, you are reimbursed for the claim you've submitted (as long as it's not more than the annual election)whether or not that amount of money has been deducted from your pay. You can't change the plan to say otherwise.

Mikki H · October 2001

It seems to be more risky for the employer than the employee, but we have employees who will not even consider the FSA because they are afraid of losing it. And as someone mentioned, this applies to the medical part of the plan. If you participate in the dependent care portion, it is my understanding that this is handled differently in that you do only get reimbursed for the amounts that have already been deducted from your paycheck.

SandiF · October 2001

You're right, it is more risky for the employer. You're also right that a lot of employees won't use it. We've never had a problem because so few do. Dependant care is reimbursed differently than health care. You get reimbursed just the amount that's been deducted. Imagine employees who would take the full $5,000 deduction and be reimbursed right away! And leave. x:D

jude · November 2001

Since our turnover is so high we have a limit on the Health Care FSA.

90 days to 1 year is $600.00.
1-2 years is 1,000.00
2-5 years is 2,000.00
5-9 years is $4,000.00
9+ years is 6,000.00

We have had our plan in place now for 6 years and we always come out ahead at the end of the plan year.

Please help with cafeteria plan

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