@blewis11 wrote:
My employer is willing to work with me on the situation, just want to make sure they are following any mandated rules, per the IRS guidelines.
Generally, all the rules for a section 125 plan must be in writing, and they must apply uniformly to all employees. Also, in general, one of the reasons for forfeiture is that it pays part of the cost of administering the program--the employer doesn't get the money back, the benefit administrator does (if the plan is run by an outside administrator).
One important thing I don't know is if the plan can be changed retroactively. That would be a question for a tax attorney hired by your employer, or by the payroll company they use to process the benefit.
Then, if a change can be worked out, your employer has two more key things to consider.
1. If they create a policy to return the unused benefit to you, that must apply equally to everyone else, this year and going forward. Do they want to do that? (They may also be required to file a corrected W-2. I'm not sure about that, though).
2. If they use an external benefits administrator, will this affect their contract with the benefits administrator, and in what way? Will it increase the cost of offering the benefit?
This answer has been verified for accuracy by an Intuit expert employee
