The Issue The issue in this case is whether the unused balance in a state employee’s flexible spending account must be forfeited as a result of her failure to file claims exhausting the account before the April 15, 2002, deadline.
Findings Of Fact The State of Florida has established a Salary Reduction Cafeteria Plan (“Plan”) for the benefit of its employees. The Plan, which is set forth in a formal written document that was most recently amended and restated as of September 20, 2000, is designed to take advantage of provisions in the Internal Revenue Code that permit the exclusion of reimbursement for various specified expenses——such as medical and dependent care costs—— from the gross income of employees who participate in a “cafeteria plan”1 that meets all the conditions prescribed under federal tax law. Simply put, the Plan allows state employees to pay for certain qualified expenses with pretax dollars by electing to have a predetermined amount deducted from each paycheck and deposited into a “flexible spending account,” out of which qualified expenses can be reimbursed, tax free, according to the terms of the Plan. Pursuant to authority granted under Section 110.161, Florida Statutes, the Florida Department of Management Services (“DMS”) operates and administers the Plan. The Division of State Group Insurance (“Division”) is designated in the Plan document as the Plan’s “Administrator.” Petitioner Elsa Lopez (“Mrs. Lopez”) is a state employee. She works as a secretary in the Office of the Public Defender for the Fifteenth Judicial Circuit, in West Palm Beach, Florida. During the “open enrollment” period2 in 1998, Mrs. Lopez elected to participate in the Plan during “plan year”3 1999, authorizing the state to reduce her salary by $2,500 over the course of the plan year, the money to be placed in a flexible spending account for the purpose of reimbursing her (with pretax dollars) for dependent care expenses. In this way, Mrs. Lopez effectively sheltered $2,500 from federal income tax. In late 1999, in order to continue paying for dependent care with pretax dollars, Mrs. Lopez again chose to participate in the Plan, authorizing the state to reduce her salary by $3,500 during plan year 2000. Mrs. Lopez made the above-described elections by signing, in each instance, an Open Enrollment Form. She signed the first of these forms on October 15, 1998, and the second on September 30, 1999. On both forms, an “employee certification” appears just above Mrs. Lopez’s signature. This certification states in pertinent part: I understand that I will forfeit any balance(s) remaining in my account(s) at the end of the Plan Year in accordance with the Internal Revenue Code Section 125. If eligible expenses are not incurred during my eligible period of participation equal to the[4] account balance and/or if claims for the expenses are not filed with the Division of State Group Insurance by the claims filing deadline date (April 15), I will forfeit any remaining balance(s). The risk of forfeiture to which the certification refers is an important condition for the favorable tax treatment accorded flexible spending accounts established under cafeteria plans. Federal law requires that, to qualify for the tax break, a cafeteria plan cannot provide for deferred compensation. See 26 U.S.C. § 125(d)(2)(A). The Internal Revenue Service has determined that plans which allow participants to carry over unused contributions from one plan year to another operate to enable participants to defer the receipt of compensation——and thus do not meet the conditions for excluding contributions from income. See Prop. Treas. Reg. § 1.125-1, Q/A-7 (49 F.R. 19321, 19324, 1984 WL 139403). Consequently, employees participating in a qualified plan must timely “use or lose” their respective contributions in exchange for the benefit of paying for health and/or child care expenses5 with pretax dollars. To preserve the tax-exempt status of the Plan, DMS has promulgated rules intended to prevent the Plan from providing deferred compensation. For example, Rule 60P-6.0081(3), Florida Administrative Code, provides that nitial requests for reimbursement for expenses incurred during a participant’s period of coverage must be postmarked or received if not mailed, at the Department no later than April 15 following the prior Plan Year. DMS has also mandated that “if unused portions of the participant’s annual election remain in an account for which otherwise eligible claims are not received prior to the claims filing deadline, these funds shall be forfeited.” Rule 60P- 6.010, Florida Administrative Code (emphasis added). The term “claim filing deadline” is elsewhere defined as “April 15 following the participant’s period of eligibility.” Rule 60P- 6.006(1), Florida Administrative Code. Faithful to the foregoing rules, the Plan document prescribes a reimbursement procedure for dependent care expenses that provides in pertinent part: (a) Expenses That May Be Reimbursed. Under the Dependent Care Component, a Participant may receive reimbursement for [covered costs] incurred during the Plan Year for which an election is in force. * * * Use-It-Or-Lose-It Rule. If a Participant does not submit enough expenses to receive reimbursements for the full amount of coverage elected for a Plan Year, then the excess amount will be forfeited[.] Applying for Reimbursements. A Participant who has elected to receive dependent care benefits for a Plan Year may apply for reimbursement by submitting an application in writing to the Administrator in such form as the Administrator may prescribe, during the Plan Year but not later than by April 15 following the close of the Plan Year in which the expense arose[.] Plan § 7.5 Mrs. Lopez understood that her funds were subject to forfeiture under the “use it or lose it rule.” She also knew that the claim filing deadline for plan years 1999 and 2000 was April 15 following each respective plan year. What Mrs. Lopez did not know, she insists, is that the claim filing deadline for plan year 2001 was April 15, 2002. Mrs. Lopez chose to participate in the Plan during plan year 2001, not by submitting an Open Enrollment Form, as in previous years, but by doing nothing, which resulted, by operation of the Plan, in a “rollover election.” A rollover election occurs, pursuant to the provisions of Section 4.4(b) of the Plan document, when an existing participant fails timely to submit an Open Enrollment Form, which inaction is deemed to constitute an election of the same type of coverage as was in effect for the previous plan year. In accordance with Section 4.4(b), Mrs. Lopez was deemed to have authorized the state to deduct $3,500 from her salary for plan year 2001, such untaxed amount to be used for the reimbursement of dependent care expenses. Mrs. Lopez does not complain that the rollover election thwarted her actual intent. In fact, Mrs. Lopez desired to participate in the Plan during plan year 2001. Because she did not submit an Open Enrollment Form for plan year 2001, however, there is no document bearing Mrs. Lopez’s signature below an “employee certification” acknowledging the April 15, 2002, claim filing deadline——a date which, as just mentioned, she denies having been aware of. Mrs. Lopez goes beyond merely disclaiming knowledge of the deadline; she charges that the state misled her into believing that she could file claims for reimbursement through June of 2002. According to Mrs. Lopez, she placed a telephone call to the Division in February 2002 to request claims forms and inquire about the deadline for filing claims, which she knew from experience was approaching. The person with whom she spoke, says Mrs. Lopez, told her that claims incurred during plan year 2001 could be submitted until June 2002. Needless to say, the Division disputes Mrs. Lopez’s account of this purported conversation. However, because Mrs. Lopez has not been able to identify the person with whom she claims to have spoken, the date and time of the alleged call, or even the phone number she dialed, the Division was hard-pressed to present evidence directly refuting Mrs. Lopez’s testimony. Therefore, the Division adduced evidence concerning the routine practices and procedures of its customer service employees. This evidence persuaded the undersigned (who hereby finds) that it is highly unlikely Mrs. Lopez was informed by a customer service representative6 that the claim filing deadline was in June of 2002.7 That said, the undersigned accepts Mrs. Lopez’s testimony (and finds) that she was told about a June 2002 deadline. Resolving conflicts in the evidence, he finds that what happened, more likely than not, was that the customer service person informed Mrs. Lopez, correctly, that the claim filing run-out period lasted through the end of June 2002. (The “claim filing run-out period” is the “period during which [DMS] will accept documentation in support of claims filed within the claim filing deadline. This period will not extend beyond June 30 following the end of the prior plan year.” Rule 60P- 6.006(2), Florida Administrative Code (emphasis added). The claim filing run-out period gives a participant whose timely filed claim lacks proper documentation a little extra time to submit such documentation and thereby prevent denial of the claim. See Rule 60P-6.0081(4), Florida Administrative Code.) For reasons that cannot be determined, the customer service representative probably believed, mistakenly but not unreasonably, that Mrs. Lopez wanted to know whether additional documentation (such as the child care provider’s invoice8) relating to an already, or soon-to-be, filed claim for reimbursement could be submitted at a later date. While the customer service person most likely answered a different question than the one Mrs. Lopez meant to ask, there is no evidence that he or she acted improperly, negligently, or with the intent to deceive Mrs. Lopez. Mrs. Lopez failed to submit her claim before the April 15, 2002, deadline. This forced the Division, as the Plan’s Administrator, to declare her unused balance of $3,500 forfeited under the “use it or lose it rule.”
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that that Division enter a final order denying all claims for reimbursement of dependent care expenses incurred in plan year 2001 that Mrs. Lopez submitted after the claim filing deadline of April 15, 2002, and declaring the entire unused balance remaining in her account for that year forfeited. DONE AND ENTERED this 3rd day of June, 2003, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of June, 2003.
Conclusions An Administrative Law Judge of the Division of Administrative Hearings has entered an Order Closing File. A copy of the Order is attached to this Final Order as Exhibit A.
Other Judicial Opinions OF THIS FINAL ORDER PURSUANT TO SECTION 120.68, FLORIDA STATUTES, AND FLORIDA RULES OF APPELLATE PROCEDURE 9.030(b)(1)(c) AND 9.110. TO INITIATE AN APPEAL OF THIS ORDER, A NOTICE OF APPEAL MUST BE FILED WITH THE DEPARTMENT’S AGENCY CLERK, 2555 SHUMARD OAK BOULEVARD, TALLAHASSEE, FLORIDA 32399-2100, WITHIN 30 DAYS OF THE DAY THIS ORDER IS FILED WITH THE AGENCY CLERK. THE NOTICE OF APPEAL MUST BE SUBSTANTIALLY IN THE FORM PRESCRIBED BY FLORIDA RULE OF APPELLATE PROCEDURE 9.900(a). A COPY OF THE NOTICE OF APPEAL MUST BE FILED WITH THE APPROPRIATE DISTRICT COURT OF APPEAL AND MUST BE ACCOMPANIED BY THE FILING FEE SPECIFIED IN SECTION 35.22(3), FLORIDA STATUTES. YOU WAIVE YOUR RIGHT TO JUDICIAL REVIEW IF THE NOTICE OF APPEAL IS NOT TIMELY FILED WITH THE AGENCY CLERK AND THE APPROPRIATE DISTRICT COURT OF APPEAL. MEDIATION UNDER SECTION 120.573, FLA. STAT., IS NOT AVAILABLE WITH RESPECT TO THE ISSUES RESOLVED BY THIS ORDER. FINAL ORDER NO. DCA09-GM-231 CERTIFICATE OF FILING AND SERVICE I HEREBY CERTIFY that the original of the foregoing has been filed with the undersigned designated Agency Clerk, and that true and correct copies have been furnished to the persons listed below in the manner described, on this ay of June, 2009. U.S. Mail: The Honorable Bram D. E. Canter Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 Robert Quintin Williams Williams, Smith & Summers 380 West Alfred Street Tavares, Florida 32778-3206 Hand Delivery Matthew Davis, Esq. Assistant General Counsel Department of Community Affairs Agency Clerk LOB ge Viren Ford
The Issue The central issue in this case is whether FMG met the qualifications to bid as set forth in the Invitation to Bid. Specifically involved is whether or not FMG met the requirement of having been engaged successfully in the business of food service management for at least a ten (10) year period prior to the date of the bid. As a secondary issue, FMG argued that the requirement is a minor irregularity which, by rule, should be waived.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: Petitioner, FMG organized and filed its Articles of Incorporation on November 8, 1985. The Florida corporation has remained active with all fees due the Secretary of State having been paid through December 31, 1987. On July 14, 1986, Thomas David Witten, became the majority shareholder and president of FMG. Mr. Witten's prior work experience included seventeen years of food service management with the Marriott Corporation followed by six years with Canteen. Mr. Witten left Canteen in 1985. While with Canteen, Mr. Witten had Successfully negotiated the contract at South Florida State Hospital for the food service management program. Canteen had obtained this contract after the bid process in 1981. On May 4, 1987, HRS mailed an Invitation to Bid (ITB) to obtain competitive prices for the food service management program contract to commence July 1, 1987. The ITB required the bidders to have engaged Successfully in the business of food service management for at least ten years prior to the date of the bid. The bidder was also required to furnish, as a part of its bid, a written statement evidencing its ability to accomplish the Specified work. As part of the written statement, the bidder was required to include information as to the immediate availability or ownership of the necessary equipment to perform the work, and the financial worth or reputability of the bidder together with the experience which the bidder has had in Successfully completing projects of a similar size, scope and responsibility The ITB also set forth specification; one of which was a performance and payment surety bond in the amount $250,000 to be furnished by the bidder to the hospital upon award of the contract. On May 14, 1987, HRS conducted a pre-bid conference. In attendance were representatives from Canteen, FMG, ServiceMaster, Food Service, and Service America Corporation (not a party to these proceedings). At this pre-bid conference no question was raised by FMG as to the qualification requiring ten (10) years experience in the business of food service management. The bid proposal submitted by FMG responded to the bidder's qualification by enclosing the curriculum vitae for members of FMG's professional staff. Documents regarding the experience of T. David Witten, Jimmy Blicharz, Williams Cox and Robert J. Trinley were included. Mr. Blicharz's career summary described thirteen years of operational and marketing management in the food service industry. Mr. Witten's curriculum vitae described twenty-three years of food service management experience as previously described. Mr. Cox's experience dated to 1966 and detailed food service activity as both food service director and dietician for various health care providers. Mr. Trinley's experience included over twenty-five years of administrative work with various health care providers. FMG described its bidder experience by listing work which had been performed by its individual employees at various institutions. In each of the instances, the experience noted was as a member of the staff of another company- not FMG. FMG, the company, was the bidder for bid number 595-530. HRS opened the proposals for bid number 595-530 on June 10, 1987. Additional information was requested from all bidders. On June 11, 1987, HRS requested the following information from FMG: Demonstration of ten (10) years of corporate history and corporate management of food services for institutions of Similar size and complexity. A written statement evidencing FMG's ability to accomplish the Specified work. FMG's reply to the HRS request maintained that the experience of its principal employees qualified FMG under the bid requirement Clearly, FMG had not successfully engaged in the business of food Service management for at least ten years prior to its bid proposal. HRS did not waive the ten year requirement. HRS, Food Service, ServiceMaster, and Canteen have agreed to readvertise bid number 595-530. The results of the bid tabulation for bid number 595- 530 were as follows: A. Food Service $103,979 B. ServiceMaster $110,000 C. FMG $ 96,900 D. Canteen $106,000 Four other potential bidders did not submit a proposal.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That HRS enter a Final Order denying the protest filed by FMG. DONE and RECOMMENDED this 22nd day of October, 1987, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of October, 1987. APPENDIX TO RECOMMENDED ORDER 87-3131BID, 87-3132BID, 87-3133BID Rulings on Petitioner, FMG's Proposed Findings of fact: Accepted, finding of fact paragraph 1 Accepted, finding of fact paragraph 2 Paragraphs 3 and 4 are accepted but deemed unnecessary since, at best, the described activities have only occurred within the last two years. Paragraph 5 is accepted, finding of fact paragraph 2. Paragraphs 6 and 7 accepted but are unnecessary to the resolution of the issues in this cause. Paragraph 8 is accepted in material part in finding of fact, paragraph 6. Paragraph 9 is accepted and addressed in material part in findings of fact paragraphs 2 and 6. Paragraph 10 is accepted as provided in findings of fact, paragraphs 2 and 6 the balance of paragraph 10 is deemed unnecessary. Paragraph 11 is accepted as addressed in finding of fact, paragraph 6. Paragraph 12 is rejected as unnecessary. Paragraph 13 is accepted only to the extent addressed in findings of fact, paragraphs 10 and 11. The balance is rejected as contrary to the weight of the evidence. Paragraph 14 is rejected as an argumentative conclusion outside the scope the issues to be resolved. Paragraph 15 is accepted in finding of fact, paragraph 14. Paragraph 16 is rejected . Mr. Witten's individual experience is not at issue. Mr. Witten, individually, was not the bidder. FMG chose to submit the proposal and waived its right to challenge the bid qualification requiring ten years experience. The conclusion reached in Paragraph 16 is contrary to the weight of the evidence and the law. Paragraph 17 is rejected. The conclusion reached is argumentative and contray to the weight of evidence and the law. Rulings on HRS' Proposed Findings of Fact: Accepted. Accepted. Accepted but deemed unnecessary to the resolution of the issues of this case. Accepted as addressed in finding of fact, paragraph 3. Accepted as addressed in finding of fact paragraph 3. Accepted as to date for incorporation otherwise rejected as unnecessary. Accepted. Accepted. Accepted. Paragraph 10 and 11 are addressed in material part in finding of fact, paragraphs 6, 7, 10, and 11. Paragraph 12 is accepted. Paragraph 13 is accepted to the extent that its alleges the requirement was considered indispensable, otherwise rejected as unnecessary or not supported by evidence. Paragraphs 14 and 15 are accepted. Rulings on Canteen's Proposed Findings of Fact: Accepted. Accepted. Accepted. Accepted but unnecessary to the resolution issues in this cause. Accepted. Accepted. Accepted but unnecessary. Accepted. Accepted. Accepted but unnecessary as the parties agreed the sole issue was whether or not FMG met the bid qualification requiring ten years of experience. Rejected. All parties had waived any right to challenge the ten years requirement. Rejected as argumentative Allegation that bid was done as corporation not individually is accepted. Accepted. Rejected. FMG's position is that qualification should be waived. Accepted. COPIES FURNISHED: William E. Williams, Esquire Fuller & Johnson, P.A. 111 North Calhoun Street Tallahassee, Florida 32302 Phil Dresch 2304 Parklake Drive, North East Building 9, Suite 290 Atlanta, Georgia 30345 Roy C. Young, Esquire Young, VanAssenderp, Varnadoe & Benton, P.A. 225 South Adams Street, Suite 200 Tallahassee, Florida 32301 Lawrence F. Kranert, Jr., Esquire District 10 Legal Counsel East Broward Boulevard Fort Lauderdale, Florida 33301-1885 Celeste Rossi, President Duval Street West, Florida 33040 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Robert S. Power, Agency Clerk Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-700
