Page 167 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
under the cafeteria plan, she is permitted to alter the amount of her
cafeteria plan deductions to more closely match her altered medical
expenses resulting from the adoption.
The reason it is so important to closely match the amount of actual
expenses incurred to the amount withheld under a cafeteria plan, is that

if an employee does not submit a sufficient amount of qualified expenses
to be reimbursed from the withheld funds,the remaining funds will be lost
at the end of the plan year. Only those expenses billed to the employee
prior to year-end can be reimbursed through the plan.When a reimburse-
ment request is made, an employee must provide a receipt from the health
care provider,and make a written statement that he or she has not received
reimbursement for this expense from any other source. Consequently, it is

best for employees to make a low estimate of the total amount of quali-
fied expenses that they expect to incur by the end of the year, rather than
have too much withheld and then lose the unused portion.
Example. Allison Schoening receives a periodic statement from the
FSA plan administrator, informing her that she still has $250 of funds
left in her cafeteria plan account with one month to go before the plan
year-end. Accordingly, she accelerates the purchase of several prescrip-
tions at the local pharmacy on the last day of the plan year, even though
she will not need the medication for some time to come. Because this

action is acceptable under the cafeteria plan rules, reimbursement of the
late purchases from the fund are approved, and she does not lose any
funds from her FSA account.
Another problem for employees is that contributions to an FSA plan
are treated as separate pools of funds if they are intended for medical
expense reimbursements or for dependent care reimbursements. Cash
from these two types of funds cannot be mixed. For example, if an

employee contributes too much money to a dependent care account

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