The employer must notify FlexBank promptly so that deposits will no longer be credited to the employee’s account and reimbursement requests will be limited to claims incurred prior to termination. If applicable, it is your responsibility to send a COBRA notice enabling the employee to continue his health FSA.
Please note: Health Care (medical, vision, dental) claims incurred prior to termination are reimbursable up to the full annual election, regardless of when the claim is received by our office.
The Uniform Coverage Rule causes a health FSA to operate like insurance, with the employer bearing risk as would an insurance company that provides coverage for a fixed monthly premium. Thus, an employer may experience a loss if a participant terminates employment after incurring YTD expenses exceeding year-to-date deposits.
A requirement that a participant repay any experience losses to the plan upon termination of employment would be a method of eliminating the employer’s risk of loss, and it therefore would be a direct violation of the uniform coverage rule and is not permitted.