Flexible Spending Account

[newtova06]

What is the name of your state? VA
I recently left a position after a discussion that the job was just not a good fit for my background and expertise. Before I had the conversation with my boss about this, I had submitted a medical claim to my flexible spending provider and received reimbursement for more than I had contributed to that time. On my last day of work, the HR person approached me to ask how I planned to reimburse the company on that pay-out since it was over the amount I had contributed. I told her, I did not plan on paying back, that was one of the downsides to FSA, I'm sure the company would not pay me back if I had not used all the money in my account. Anyway, she indicated she was going to contact the company lawyer & I just wanted to make sure that I was right & there's no way they can force me to pay back that money? Thanks...

 

[JETX]

I just wanted to make sure that I was right & there's no way they can force me to pay back that money?

Sorry, but your assumption is not correct. They can file a lawsuit against you, and likely win, if you do not reimburse them for the overpayment.

 

[cbg]

Not in this case, Jetx. The poster is absolutely correct. That is one of the risks on both sides of an FSA - the employee can't get the money back if there is anything they don't use, and the employer can't get the money back if they have overpaid an employee before they term.

And that is what the company lawyer will tell the HR person if he knows anything at all about FSAs.

 

[newtova06]

FSA Account

Thanks for the responses. I had a feeling the HR person was on a "fishing" expedition in hopes that I'd bite and write a check...

 

[cbg]

Jetx would be correct if it were almost any other type of overpayment; wages, vacation, health insurance premium etc. It's ONLY because it is an FSA that the company has to eat the overpayment.

 

[newtova06]

FSA Account

I understand, there are no issues/concerns in any other aspect, just the FSA. In fact, there is still one more paycheck outstanding, I'm to receive this week. I am going to monitor that closely to ensure I am paid for all of my hours worked in that pay period.

 

[JETX]

Jetx would be correct if it were almost any other type of overpayment; wages, vacation, health insurance premium etc. It's ONLY because it is an FSA that the company has to eat the overpayment.

Sorry, but you are not correct.
The 'FSA" (Flexible Spending Account) is an IRS plan, whereby the taxpayer is able to pay for certain allowed expenses (medical, child care, etc.) using pretax dollars. And yes, though an individual loses any unspent funds in the account, if the account is negative balance (as in this case), the employee must either repay the fund 'shortage' or it will be reported as income to the IRS.

 

[cbg]

No, I am not incorrect. The employee can opt to have it appear as income to be taxed; that's his call, not the employers.

I didn't say there were no taxable repercussions. The company cannot sue him for the repayment. If he'd rather pay the tax, that's his option.

 

[Beth3]

Sorry, but you are not correct.
The 'FSA" (Flexible Spending Account) is an IRS plan, whereby the taxpayer is able to pay for certain allowed expenses (medical, child care, etc.) using pretax dollars. And yes, though an individual loses any unspent funds in the account, if the account is negative balance (as in this case), the employee must either repay the fund 'shortage' or it will be reported as income to the IRS.

JETX, sorry but you're dead wrong on this. The IRS guidelines on this are extremely clear. FSA plans are intended to function as an insurance plan and therefore employers offering such accounts are at risk. The full amount of each employee's planned deferral into the medical savings account must be made available to him or her for the entire Plan Year, up to the maximum amount the employee planned to defer. If the employee leaves his or her employment with the medical account in "arrears," then the employer is SOL. The employer may not seek repayment of the balance.

Perhaps you're thinking about the dependent care account. For whatevever reason, Congress did not impose the same requirement on those. An employee deferring money for child care cannot withdraw more than he or she has actually deferred at any point in time.

 

[JETX]

JETX, sorry but you're dead wrong on this. The IRS guidelines on this are extremely clear. FSA plans are intended to function as an insurance plan and therefore employers offering such accounts are at risk. The full amount of each employee's planned deferral into the medical savings account must be made available to him or her for the entire Plan Year, up to the maximum amount the employee planned to defer. If the employee leaves his or her employment with the medical account in "arrears," then the employer is SOL. The employer may not seek repayment of the balance.

Perhaps you're thinking about the dependent care account. For whatevever reason, Congress did not impose the same requirement on those. An employee deferring money for child care cannot withdraw more than he or she has actually deferred at any point in time.

All I can say is.... I have gone around this path before with a client and talked directly with the IRS Regional manager... and the information I provided is from him. Y'all can argue semantics all you want.. as to whether the employer has the right to demand recovery or the IRS or whoever.... I stand by what I have provided.

Oh, and if the IRS is clear on this as you claim... how about providing a link to an IRS publication or website showing this 'clarity'???

I add the following from other sites:
"Upon termination of employment, any overpayment from the medical spending account will be taken from the employee's final paycheck as allowed by IRS regulation."
http://planet.tvi.edu/ppo/fsapol.htm

"CLAIM OVERPAYMENT RECOVERY
The recovery of claim overpayments is time consuming and requires diligent efforts. HSB Recovery Complete offers specialized personnel to identify and collect overpayments. This allows claims payers to focus on the adjudication and administration of claims."
http://www.healthscopebenefits.com/products_services/products_benefits.html

 

[cbg]

Suppose you provide a link to the IRS statute that says the company can sue him for the overpayment?

 

[JETX]

Suppose you provide a link to the IRS statute that says the company can sue him for the overpayment?

Therein lies the reason I had to contact the IRS. There are not supposed to be 'over disbursements' from flexible spending accounts.... and that is why I was not able to find anything in purusing the IRS forms and publications.... and the reason I had to call the IRS office directly.
However, I did provide (in my edited earlier post) some links to other employers who did reference the subject.

 

[Job_Hunting]

I add the following from other sites:
"Upon termination of employment, any overpayment from the medical spending account will be taken from the employee's final paycheck as allowed by IRS regulation."
http://planet.tvi.edu/ppo/fsapol.htm


***Well, I don't know who's right and who's wrong here, but I recently left a job and they darn well deducted every cent of overpayment on my FSA from my final paycheck.

 

[Beth3]

Call the federal Department of Labor and file a complaint. Your employer was absolutely in the wrong to do that. 202-693-4650

 

[Job_Hunting]

Beth,
Thank you very much for the info.

One question though, could there perhaps have been some different sort of account my past employer opened for us, that WOULD allow them to take that difference from my pay?--I just want to be certain before I make waves.....Thanks so much--