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Fox & Fox
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Questions and Answers

1: What happens to any unused contribution? Why can't the participants get a refund of their unused contributions at the end of the Plan Year?

A flex benefit plan may not allow participants to defer compensation earned in one year to the next year. As such, participants may not carryover unused elective contributions or employer provided benefits from one plan year to another. This rule is referred to as the "use it or lose it" rule. This issue is outlined in greater detail in Prop Treas Reg §§ 1.125-1, Q&A 7, 1.125-2, Q&A 5(a).

2: What is the weekly deadline to submit claims and when should I expect to receive my check?

Monday, 5 pm (PDT), is the submission deadline for claims that are to be paid on the following Tuesday. Any claim received after the Monday 5 pm deadline will be paid on Tuesday of the following week. Fox & Fox pays flex claims weekly each Tuesday and the checks are posted for an afternoon pickup by the USPS.

3: Why can't I submit expenses from last year even though I was billed for those expenses in the current (plan) year?

Expenses are treated as having been incurred on the date the participant actually received the services that generate the billing, not when the participant is actually billed or pays for the services. Expenses are not treated as incurred during the plan year if such expenses are incurred prior to the later of the following:

  1. The effective date of the Flexible Spending Account (FSA)
    or
  2. The date the participant first becomes enrolled in the FSA. Please remember that enrollment in the plan is for a 12 month period and each participant must reenroll for the subsequent plan year if they desire coverage for that year. Prop Treas Reg §§ 1.125-1, Q-17, 1.125-2, Q 7(b)(6).

4: Can I still submit claims incurred after my termination with the company?

To be reimbursed under an Flexible Spending Account (FSA), expenses have to incurred within the period of coverage. The period of coverage is defined as the period the participant is funding (or the employer is funding) the FSA. Hence claims submitted for expenses generated after termination of employment are not (normally) reimbursable under the FSA. The only exception to this rule is if the participant is covered by (and the plan is subject to) COBRA.

5: How does COBRA affect Flex Benefit Plans?

COBRA continuation coverage requirements apply only to the type and level of coverage under the Flex Plan that a qualified beneficiary (as defined by COBRA) is actually receiving on the day before the qualifying event. Under the regulations (Treas Reg ?4.4980B-2, Q&A 8) COBRA continuation may be limited to continuation during the year of the qualifying event only if:

  1. The benefits of the health FSA are excepted benefits within the meaning of IRC §§ 9831 and 9832.
    and
  2. The maximum amount the health FSA can require to be paid for a year of COBRA continuation equals or exceeds the benefit available under the health FSA for the year.

Very few health FSA benefits will not qualify as excepted benefits under IRC §§ 9831 and 9832. The second condition will almost always be met by the COBRA 2% cost increase.

No COBRA continuation need be offered to the qualified beneficiary if the above conditions are satisfied and the maximum benefit available to the qualified beneficiary under the health FSA for the remainder of the plan year is equal to or less than the maximum amount the plan could require as payment to maintain COBRA coverage.

Example. Assume that conditions 1 and 2 above are met. Alexa has elected to contribute $200 per month to her health FSA, for a 12 month total of $2,400. Alexa terminated employment on June 30, six months into the plan year. As of the date of her qualifying event, she had been reimbursed $1,700 from health FSA. The employer need not offer COBRA continuation coverage to Alexa as her premium for the remainder of the plan year would be $1,224, but the amount available for reimbursement would be only $700.

Example. As above, assume that conditions 1 and 2 above are met. Jonathan has elected to contribute $150 per month to his health FSA for a plan year total of $1,800. Jonathan terminated employment on June 30, six months into the plan year. As of the date of the qualifying event, Jonathan had been reimbursed $300 from his health FSA. The employer must offer Jonathan continuation coverage for the remainder of the plan year as the amount of premiums Jonathan has to pay for the remainder of the plan year, $918, is less then the benefit available to Jonathan for the remainder of the plan year, $1,500.

6: Do I need to include a receipt of expenses with my reimbursement request form?

Yes, a copy of a receipt of expenses or a copy of the billing for unpaid expenses needs to accompany your reimbursement request form. Please send copies, not originals.

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