Lauren asked us: “How long do employers leave the health spending account active for an employee who has stopped working for their company?
According to the PHSP rules, it is a plan of insurance — the employer is effectively the insurer.
Therefore technically (like with any other insurance) when the ‘insurance policy ends’ (i.e., the day after the employee’s last day of work) the coverage stops from that point — however the insurer remains liable for events that occurred ***during the period of coverage***.
For example, say an employee’s last day of work is 31 Jan 2014. The employee will remain able to claim for medical events that transpired up to (and including) 31 Jan 2014. So lets say the Employee had dental treatment on 20 Jan 2014 — the employee must still be able to file this claim and have it paid even after 31 Jan.
In this respect there is no difference as with any other person — the terminated employee will have up to the end of the current benefit period PLUS the run-off time, in order to file the claim.
Again, its no different than other insurance. For example, if you let your car’s insurer know on 21 Jan that you want the policy to end after 31 Jan, and the vehicle is then stolen on 31 Jan, then that insurer is still liable to cover the loss — even if you only file the claim on 2 Feb (or anywhere within the standard limitation period).
Some companies try to circumvent this; subsequent termination they go mark the terminated employee as additionally ineligible for the preceding period when the person was a legitimate employee. However, this seems to me to be asking for trouble if a CRA evaluation is done.
The PreTax Health Support Team
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