Can Employers Prorate an Employee's Reimbursement After Termination?
Prorating ICHRA Allowances
ICHRA allowances are set as fixed monthly amounts, and StretchDollar's standard plan documents don't include proration language. Because these are standardized legal documents designed to work consistently across all StretchDollar employers, we're not able to customize them for individual proration formulas. This article explains how monthly transfers work and how to handle a prorated amount when an employee's coverage starts or ends mid-month.
How the Monthly Transfer Works
Each month's allowance transfer initiates on the 25th. Once it's been initiated, we're not able to stop or edit it.
Key cutoff: the 25th
If an employee's termination date falls before the 25th, they will not receive a reimbursement transfer for the following month.
If an employee terminates after the transfer has already been initiated, any repayment of those funds is handled directly between your company and the employee — StretchDollar isn't able to reverse or claw back the transfer.
Adjusting for a Prorated Amount
If you need to pay an employee a prorated allowance (for example, for a partial first or last month), the auto-reimbursement for that employee must be canceled first. From there, you can issue a one-time reimbursement for the prorated amount instead.
Steps:
- Cancel the employee's auto-reimbursement before the next transfer initiates.
- Calculate the prorated amount outside the portal (see note below).
- Submit a one-time reimbursement for that amount.
Portal Limitations
The StretchDollar portal does not calculate proration for you.
Employers are responsible for determining the prorated amount based on the employee's coverage start or end date.
Need Help?
If you have questions about a specific situation, reach out to Support@StretchDollar.com— we're happy to help however we can.