Company dropped spending account; money still coming out of check

How do cafeteria plans work?  Should I still be having money deducted for the cafeteria plan if my company no longer offers flex spending accounts?  There are thousands of dollars coming off of my salary per year listed as “Cafeteria Plan” because originally this was pre-tax money to be spent on Health and, I believe, child care.

Now that this money is coming off and (possibly) going no where, is my company ripping me off or worse am I going to be responsible to the IRS for this money?

Short Check

Dear Short Check,

It’s possible that the heading “cafeteria plan” also includes your medical insurance contribution.  You can double-check the amount being taken out, and see if it matches how much you are supposed to pay for your health plan.  Your share of the medical insurance bill would still come out of your check before taxes, which is the core function of the cafeteria plan.

In any case, it is illegal for your employer to take money from your paycheck and use it for anything other than the benefit that you signed up for.  Assuming that you want to keep your job, then you might want to approach your employer with an “I’m confused” story rather than an “I’m suing you” story.  It may be that your previous deduction got carried over, even though the reimbursement plans are no longer offered.

The employer can correct the error, and the money would come to you in your paycheck, taxed like all of your other wages.  The IRS would not come after you for taxes on money that you never technically received.  So no worries there.

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Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.