My question is actually 3 questions, I've never run across a situation like this before.

1 - Can an employer request that an employee (or former employee) pay back an amount that was reimbursed to the employee under and FSA if that amount exceeded the employee's election. For instance if the employee elected $ 500 for the year and was reimbursed $ 600.

2 - If the employer cannot do so, can they add the amount that was over reimbursed to the employee's W-2 as a taxable fringe benefit?

3 - If a non-qualified expense was reimbursed in "error" can the employer add the amount of the ineligible expense to the employee's W-2 either as income or taxable fringe benefit?

I am new to this company and it appears that the prior Payroll/Benefits administrator was not particularly conversant with FSA regulations. So I am now trying to correct the situation as best I can. Your thoughts are appreciated.

Exactly how did an over-reimbursement occur? Administrative error? software error?

Lisa -

As I stated in my first post, I am not sure what the prior administrator did.

I am assuming; however, that it is a case of administrator error. Both in the case of the over reimbursement and the non-qualified expense reimbursement I believe it is a case of administrator error.

Carole

Lisa -

To be more exact - it appears that the employee in question incurred, sumitted and received reimbursement all within the 4 days preceeding his termination.

To thicken the plot - the former payroll and benefits administrator and the employee were close friends.

I believe this may have actually been an attempt to defraud the company. Of course, I cannot prove anything was done with malicious intent.

Thanks,
CK

Our claim form and SPD state that the employee must reimburse to the employer any amounts for claims reimbursed which should not have been (either ineligible or over the election amount in case of a screw up). It further states that the employee may be responsible for the payment of all related taxes on amounts paid from the plan that are related to the expense in question.