Expense Eligibility

[Guest lschaab]

An employee whose spouse has a minor child (by a previous marriage) does not claim the child as a dependent. By court order the spouse is responsible for 50% of the medical expenses the child incurs. Can the employee make an election to enroll in a spending account for the expenses her spouse incurs for the child?

[Guest JerseyGirl]

As always, I would suggest a review of the Plan Documents to make certain this is allowed by the plan design.

The definition of a *dependent* under Code 152 states a relative (including step-children) of the participant for whom the participant provides over half the support during the calendar year is considered to be a dependent of the participant regardless of who takes the tax credit for this dependent. I would think that if the employees spouse is providing 50%+ support for the child and has the documentation to prove it, this would be a permissible use of a 125 plan.

One caution when adjudicating claims however; I would like to see supporting documentation for the spouse paying 50% of each total expense, so there can be no question that what is being reimbursed is only half of each eligible expense and not the entire expense.

[papogi]

For cases with children of divorced parents, each parent can claim the medical expenses they incur for the child, regardless who takes the tax exemption or who provides more than 50% of the expenses. If your employee incurs 50% of the medical costs, then whatever that figure is can be submitted and paid through that employee’s flex account. The other parent can take care of the expenses he/she incurs under their own flex account, if they have one. Your employee can’t get reimbursed for expenses incurred by the former spouse, however. I agree with JerseyGirl that if the entire amounts are being submitted, some form of documentation stating that your employee is responsible for only 50% of each bill is a good idea.