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How to Pursue Improper Forfeiture of Dependent Care FSA Funds

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My husband contributed $1000 to a dependent care FSA (I believe in July, August 2016), before being laid off 9/2/16 due to his employer being acquired.2016-2017 Flexible Spending Account Plan Summary Plan Description states: "What happens if I terminate employment? (b) You will still be able to request reimbursement for qualifying dependent care expenses incurred during the remainder of the Plan Year from the balance remaining in your dependent care account at the time of termination of employment. However, no further salary redirection and Employer contributions will be made on your behalf after you terminate. You must submit claims within 90 days after the end of the Plan Year in which termination occurs...The Plan Year begins on July 1 and ends on June 30. Plan Year end + 90 days = September 28, 2017.
We attempted to file a claim 11/23/16, and were told that the administrator's contract with the employer had terminated 10/31/16 (which HR indicated was also due to the acquisition), and that we needed to have filed a claim prior to that date. While I can see that the administrator's responsibility may be limited by contract, I can't see how the employer doesn't have a responsibility to abide by the terms of the summary plan description, which is essentially a contract. We have attempted to ask HR if funds were transferred to a new administrator, because presumably they simply rolled employees into the existing benefits contracts under the acquiring company. However, they have been very rude and unhelpful, and act as though they have no obligation to us, despite the fact that this is our money, and their plan clearly stated we continue to have a right to it. Their position is simply that all contracts terminated due to acquisition and they owe us nothing.

My initial assumption was that they have some ERISA obligations as a plan fiduciary, but in researching, it appears dependent care FSAs are outside of ERISA, so I can't find any regulation outside of IRS, which doesn't care about anything other that claims being legitimately tax deductible. I did attempt to complain to DOL, via "Ask EBSA," and they did attempt to talk to the employer, but apparently can only attempt to gain voluntary compliance, which was not successful.

It seems like my only recourse is to sue, which obviously isn't worth it for $1,000, but I am tempted based on principle. It's just so egregious, and this unwarranted forfeiture hits at a time when money is already tight due to a job loss. Since HR has no incentive to help former employees, there's really nothing stopping them from systematically stealing our money.

Any advice?
 

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rated:
Was the claim for a date of service while your husband was still covered by benefits?

If the date of service was after hie benefits term date, he would not be eligible for the money.

rated:
racbowden said:   "What happens if I terminate employment?"
  
I don't think this applies. I think you're employer ceased to exist, and it's a stretch to say that you were "terminated" when it's more likely that your employer went bust.

You need to find a different section in the plan documents to support that you're supposed to get your money back.

rated:
Chyvan said:   
racbowden said:   "What happens if I terminate employment?"
  
I don't think this applies. I think you're employer ceased to exist, and it's a stretch to say that you were "terminated" when it's more likely that your employer went bust.

You need to find a different section in the plan documents to support that you're supposed to get your money back.

  Assuming that the new company purchased the old company, and not just it's productive assets, the old company is part of the new company.

rated:
stanolshefski said:   the old company is part of the new company.
  
For that to be true, then he didn't "terminate employment," and it wouldn't apply nor would the OP have received this response.
racbowden said:   were told that the administrator's contract with the employer had terminated

She'd have been referred to the new administrator.

The OP's entire position is that there were rules for "terminating employment" that aren't being followed. I'm saying he didn't terminate either because the company went under or the employment never stopped.

However, the OP does mention the "lay off" because of the acquisition. She has no way of knowing what the terms of the acquisition were.

rated:
Chyvan said:   
stanolshefski said:   the old company is part of the new company.
  
For that to be true, then he didn't "terminate employment," and it wouldn't apply nor would the OP have received this response.
racbowden said:   were told that the administrator's contract with the employer had terminated

She'd have been referred to the new administrator.

The OP's entire position is that there were rules for "terminating employment" that aren't being followed. I'm saying he didn't terminate either because the company went under or the employment never stopped.

However, the OP does mention the "lay off" because of the acquisition. She has no way of knowing what the terms of the acquisition were.

  OP contributed under the old companies plan. OP was terminated. Therefore, OP's plan should treat OP like a terminated employee.

rated:
stanolshefski said:   Therefore, OP's plan should treat OP like a terminated employee.
  
Not when the company goes under. Google it. You do NOT know under what circumstances this company was acquired.

From her own writings:

She knew in August something was up.

The husband was fired 9/2

She is complaining about not having money.

She waited until Nov to claim

And it's now May before she seeks help.

The "terminated employment" angle isn't going to win this.

rated:
Chyvan said:   
stanolshefski said:   Therefore, OP's plan should treat OP like a terminated employee.
  
Not when the company goes under. Google it. You do NOT know under what circumstances this company was acquired.

From her own writings:

She knew in August something was up.

The husband was fired 9/2

She is complaining about not having money.

She waited until Nov to claim

And it's now May before she seeks help.

The "terminated employment" angle isn't going to win this.

  Not sure what you are harping on?
 You will still be able to request reimbursement for qualifying dependent care expenses incurred during the remainder of the Plan Year from the balance remaining in your dependent care account at the time of termination
That's pretty clear - and the plan year hasn't ended yet.

rated:
Glitch99 said:     Not sure what you are harping on?

That she did nothing but wait when she knew that something was up, and now 9 months later she's hanging her hat on summary plan documents for a plan that may no longer exist.

rated:
Chyvan said:   
Glitch99 said:     Not sure what you are harping on?

That she did nothing but wait when she knew that something was up, and now 9 months later she's hanging her hat on summary plan documents for a plan that may no longer exist.

  Did nothing but wait?  What could she have possibly "knew" was up?  Husband was terminated, terminated participants get reimbursed for qualified expenses through the end of the plan year, plan year ends this July.

Are you claiming that an employer can chose to close up shop and simply keep all the accumulated FSA balances for themselves, regardless of the plan terms?  Someone has her money, and yes, it still is her money.

rated:
Chyvan said:   
stanolshefski said:   Therefore, OP's plan should treat OP like a terminated employee.
  
Not when the company goes under. Google it. You do NOT know under what circumstances this company was acquired.

From her own writings:

She knew in August something was up.

The husband was fired 9/2

She is complaining about not having money.

She waited until Nov to claim

And it's now May before she seeks help.

The "terminated employment" angle isn't going to win this.

  As I stated previously if the company was acquired the plan *still* exists at the new company.  If only the productive assets were purchased, then it's a big problem for OP.https://www.fatwallet.com/forums/finance/1569800?showmessage=198...

rated:
Glitch99 said:   Are you claiming that an employer can chose to close up shop and simply keep all the accumulated FSA balances for themselves,
  
Yes. That is exactly what can happen.

stanolshefski said:   As I stated previously if the company was acquired the plan *still* exists at the new company.  If only the productive assets were purchased, then it's a big problem for OP.https://www.fatwallet.com/forums/finance/1569800?showmessage=19881352
  
I know what you said, and then you keep giving me red like it's not a remote possibility.

rated:
racbowden said:   My husband contributed $1000 to a dependent care FSA (I believe in July, August 2016), before being laid off 9/2/16 due to his employer being acquired.2016-2017 Flexible Spending Account Plan Summary Plan Description states: "What happens if I terminate employment? (b) You will still be able to request reimbursement for qualifying dependent care expenses incurred during the remainder of the Plan Year from the balance remaining in your dependent care account at the time of termination of employment. However, no further salary redirection and Employer contributions will be made on your behalf after you terminate. You must submit claims within 90 days after the end of the Plan Year in which termination occurs...The Plan Year begins on July 1 and ends on June 30. Plan Year end + 90 days = September 28, 2017.
We attempted to file a claim 11/23/16, and were told that the administrator's contract with the employer had terminated 10/31/16 (which HR indicated was also due to the acquisition), and that we needed to have filed a claim prior to that date. While I can see that the administrator's responsibility may be limited by contract, I can't see how the employer doesn't have a responsibility to abide by the terms of the summary plan description, which is essentially a contract. We have attempted to ask HR if funds were transferred to a new administrator, because presumably they simply rolled employees into the existing benefits contracts under the acquiring company. However, they have been very rude and unhelpful, and act as though they have no obligation to us, despite the fact that this is our money, and their plan clearly stated we continue to have a right to it. Their position is simply that all contracts terminated due to acquisition and they owe us nothing.

My initial assumption was that they have some ERISA obligations as a plan fiduciary, but in researching, it appears dependent care FSAs are outside of ERISA, so I can't find any regulation outside of IRS, which doesn't care about anything other that claims being legitimately tax deductible. I did attempt to complain to DOL, via "Ask EBSA," and they did attempt to talk to the employer, but apparently can only attempt to gain voluntary compliance, which was not successful.

It seems like my only recourse is to sue, which obviously isn't worth it for $1,000, but I am tempted based on principle. It's just so egregious, and this unwarranted forfeiture hits at a time when money is already tight due to a job loss. Since HR has no incentive to help former employees, there's really nothing stopping them from systematically stealing our money.

Any advice?
 



I have no idea on solution, but this seems like a totally illegal ripoff.

rated:
Chyvan said:   
Glitch99 said:   Are you claiming that an employer can chose to close up shop and simply keep all the accumulated FSA balances for themselves,
  
Yes. That is exactly what can happen.

Generally, once terminated you can only be reimbursed for expenses incurred prior to termination and the remaining funds are lost. But this particular plan (at least according to OP) specifically allows for reimbursement thru the remainder of the plan year. 

If OP had received proper notification that the plan was terminating prematurely, then sure, you might be correct. If the business is now defunct/bankrupt there might be no money for OP to get, and you'd more-or-less be right even through she's technically owed the money. But a company cannot spontaneously decide to end the plan and keep the money whenever they happen to feel like it.

rated:
Suggest pursuing with the company that acquired your husband's employer.

rated:
IANAL

It does appear that dependent care FSAs aren't covered by ERISA. That is a little hard to find but here is a laywer saying so.

I agree you've got a contract and your interpretation of the contract sounds right.
Their argument that your contact terminates on acquisition sounds like BS

Maybe sue them in small claims?

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