child/health reimbursement account rules for part-year employee


J

Jack Gavin

My question is whether a particular policy is an IRS rule, or merely a
policy of the plan administrator (insurance company).

At the end of 2002, I elected a certain level of payroll deduction for
child care reimbursement for 2003. The per-paycheck amount was based on my
estimated full year costs, which are more heavily weighted by sumer camp
than by school-year care.

Then I got laid off at the end of February. When I recently submitted a
claim, it was for the Jan-June expenses, since the Jan-Feb expenses would
not cover the Jan-Feb payroll deductions. The insurance company (Cigna)
declines the claim, since it includes expenses incurred after Feb.

I feel screwed since (a) I was *never* told of such a policy (yes, I read
all the material from my employer about "use it or lose it"), and (b) it's
was not in my control that I was laid off.

I expect to follow up with some sort of appeal, but I first want to know:
Does the IRS demand that part-year employment implies that only
employment-time expenses are covered? I thought the account for for use
for expenses necessary for the parent(s) to "work or *look* for work".

Likewise, what are the IRS's related rules for health care reimbursement?

Thanks.
 
P

Paul A. Thomas

Jack Gavin said:
My question is whether a particular policy is an IRS rule, or merely a
policy of the plan administrator (insurance company).

At the end of 2002, I elected a certain level of payroll deduction for
child care reimbursement for 2003. The per-paycheck amount was based on my
estimated full year costs, which are more heavily weighted by sumer camp
than by school-year care.

Then I got laid off at the end of February. When I recently submitted a
claim, it was for the Jan-June expenses, since the Jan-Feb expenses would
not cover the Jan-Feb payroll deductions. The insurance company (Cigna)
declines the claim, since it includes expenses incurred after Feb.

I feel screwed since (a) I was *never* told of such a policy (yes, I read
all the material from my employer about "use it or lose it"), and (b) it's
was not in my control that I was laid off.

Both of those excuses are ~your~ problem, and not the problem of the plan.

I expect to follow up with some sort of appeal, but I first want to know:
Does the IRS demand that part-year employment implies that only
employment-time expenses are covered? I thought the account for for use
for expenses necessary for the parent(s) to "work or *look* for work".

Likewise, what are the IRS's related rules for health care reimbursement?

"Child-care", or "health-care"?

The two are different animals, although similar in nature for the purposes
of your situation.

Correct me if I'm wrong:
You had payroll withholding, subject to forfeiture, for child care.
Probably a Section 125 plan (a cafeteria plan) that offers a Section 129
Dependent Care Assistance Program.
You were terminated from employment.
And now expect the plan to pay your child's summer camp?

Please.

Your only saving grace may be that the actual expenses incurred while you
were covered under the plan should be reimbursed. (So you might actually
get a few bucks from the plan) After termination from employment expenses
incurred would generally NOT be covered unless the plan allowed for it. And
generally, dependent care is not one that gets covered for former employees,
unlike say, medical benefits.
 
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J

Jack Gavin

Paul said:
Both of those excuses are ~your~ problem, and not the problem of the
plan.
I understand that the official plan documents are allegedly available for
inspection, and may state that this is the policy. It doesn't change my
feeling that this information should have been included in the materials
actively distributed to employees.
"Child-care", or "health-care"?
Both; two separate questions.
The two are different animals, although similar in nature for the
purposes of your situation.
Understood. That's why I asked the second ("likewise") question.
Correct me if I'm wrong:
You had payroll withholding, subject to forfeiture, for child care.
Probably a Section 125 plan (a cafeteria plan) that offers a Section
129 Dependent Care Assistance Program.
Right.

You were terminated from employment.
And now expect the plan to pay your child's summer camp?

Please.
What please? At the end of 2002, I was required to pick a number for
biweekly withholding, and I cannot change this number midyear without a
qualifying "family event". I have to plan for the whole year (2003) up
front. So I had them take it out at a rate that would cover my full year's
costs. My expenses are below average during the school year, but above
during the summer.
Your only saving grace may be that the actual expenses incurred while
you were covered under the plan should be reimbursed. (So you might
actually get a few bucks from the plan)
Yes, I expect to get covered for the costs incurred during Jan and Feb.
After termination from
employment expenses incurred would generally NOT be covered unless
the plan allowed for it. And generally, dependent care is not one
that gets covered for former employees, unlike say, medical benefits.
*I don't expect any new money from anyone.* I'm just trying to get the
money already withheld from my paycheck, during Jan and Feb.

So the question remains (for each type of plan): Is this an IRS
requirement? Or is it a "feature" of the individual respective plan?
 
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J

Jack Gavin

Arthur said:
But the rules cut both ways. The situation could have been to your
advantage.

The health care reimbursement plan will reimburse qualified health
care expenses incurred while an employee, up to the annual amount
you agreed to pay, even if you did not pay it all in.
I realized that I could get paid upfront for health care even before my
payroll deductions caught up, but I didn't realize that I could keep it
if/when terminated. (I thought I'd have to pay them back the difference.)
Example:

You agreed last fall to have $400/month or 4800 total deducted
from pay pretax to fund your health care reimbursement plan.

Your January contribution is only 400.

On January 15th you incur qualified medical expenses of $4800.

You or your employer terminates your employment on January 31.

Under the Health Care reimbursement plan, even though you
contributed only 400 to the plan, you can receive remibursement
from the plan of the full 4800.

Had you been in this position, you would be praising instead of
complaining about the plan, right?
Of course.
Unfortunately the rules for the CHild Cafre reimbursement plan
reimburse only up to the amount paid in, so that plan doesn't
work the same way, but is usually more steady stream, same
amount/month, compared with health care.

Your HR organization really should have given you the material to
understand this,
Yeah.

but the plan rules govern in any case.


But the plan rules require the expenses be incurreed while an
employee.
Oh well. Thanks.
 

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