After the initial panic wore off, I realized this is just my FSA* provider, and my exposure is limited to $381. Had it been my 401(k), I would be turning green and menacing. My editorial comments appear in red.
Dear Valued Client, (Uh, oh.)
It is with tremendous regret that we must inform you of an unfortunate situation with your Flexible Benefits Administrator – 1Point Solutions. On September 22nd, they closed their doors and issued termination notices to all of their employees. Essentially, we were notified around midday today, however, with very little detail. As we were able to extrapolate additional information (A google search on the newswire.), the closure appears to be the result of multiple lawsuits relating to 1Point’s inability to properly account for several employers’ 401(k) plans. (More likely, losing a large contract that would maintain the financial shell game.) At 12:50 this afternoon we were notified by 1Point that the Judge overseeing the case along with the legal counsel have tentatively approved a plan to have a court approved administrator take over the 1Point flex plan administration. Further details are to be issued tomorrow morning. Unfortunately there are still a large number of details that remain unanswered.
We have contacted the Tennessee State Attorney General’s office and the legal counsel for 1Point Solutions. We assure you we will do everything possible on your behalf to resolve this situation.
The concept of having a third party manage the flexible spending accounts seems inherently bogus, because all they do is hold onto the money and dole out checks a month after I submit claims for reimbursement.
(*FSA accounts let you set aside a lump sum for certain medical, child care and transit purposes. The amount is in pre-tax dollars, thank you John Q. Public. Any money you don’t use by the end of the year is forfeited.)
Well, I’m glad your exposure is limited here. I completely agree with you about bringing a third party in to administer 401(k) plans andother benefits. It just seems like companies that do this are asking for trouble. With all that money in play, it would be far too tempting for the administrating agency to perpetrate a shell game or other type of fraud.
The name of the game is float, and the interest the 3rd party makes between when the money comes in and the money comes out. Same deal with tax filing services for a payroll processing company.
Still, losing $381 of what would have been PRE-tax funds, so more like $600, really sucks.
$381 is $381, either way. While it may hypothetically take $600 in pre-tax dollars to replace $381 after taxes, he wouldn’t see the $219 of tax money anyway, so I don’t think he could be said to have lost it — just the $381.
But still, how mind-bogglingly frustrating! I’ve never had a need for an FSA, but I can see their utility. I hope your money is recovered. Any idea of the chances?
John, I think the third party also gets paid for their “service.”
Mitch – The $381 is pre-tax dollars, or about 300 bottles of aspirin.
Kiri – My employer said they’d cover any losses on the frozen account assets.
Last year’s plan (under another provider) issued reimbursement checks when the account was funded. For example, if I allocated $1200 and submitted expenses of $800 in January, I would expect to receive a $100 check each month through August. It was very annoying. 1Point was different in that they paid eligible expenses when they were submitted. Theoretically I’m currently $350 ahead.
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