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new "Use it or lose it" ruling
Can plans make changes during the current plan year? Yes, if they modify their document to reflect the new ruling, they may extend the period for the current year by two and one half months. This means that a calendar plan year would allow receipts for services that occur prior to March 15, of the following year.
Do companies have to allow the extension? No, the ruling says that they may extend the period, not that they must extend the period.
May employees increase the amount that they elect? There is no allowance increase the amount of the election in the current year. However, nothing would stop employees from increasing elections (as a result of a permissible election change event) in the waning days of a plan year to purposely maximize their benefit during the grace period.
Do terminated employees have the ability to extend the period for which they may receive reimbursement? The rules regarding terminations are not clear. Since the grace period rule is an optional rule, it would appear that participant is not “entitled” to carry over the unused amounts and thus an employee/plan sponsor could presumably limit the grace period to “participants”.
I have other questions not addressed here. Call the Benefits Administrator at AIM. They can be reached at 502/426-1235.
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