FSA debit cards - loaded with contributions to date?

[Guest djohnson]

I am trying to get up to speed about the participant's use of a debit card. A prospective employer's communication material indicates that when using a debit card, the partipant can "spend" up to the amount that he has contributed to the FSA at that point in time.

Granted, I have not followed FSA's for a few years, but previously the employer had to be "at risk" by reimbursing the participant up to the amount he elected to contribute for the plan year.

Has something changed via Regs. that treats the "at risk" concept differently for debit cards?

[GBurns]

No nothing has changed, "at risk" is still there whether cards or not. It is caveat emptor when deciding to use a debit card for your employees.

[Kirk Maldonado]

Is it possible that the debit card was issued with respect to a dependent care FSA? (I don't know whether they actually exist; I'm just throwing out the possibility.)

[GBurns]

Yes they do exist and they would be capped to the available contribution.

[Guest djohnson]

G Burns says that the "at risk" concept still exists, and let the buyer beware re: debit cards. If I am understanding you correctly, then a participant can use his Health FSA debit card for expenses over and above the amount he has contributed thus far.

The Health FSA debit card I read about in a plan sponsor's benefits literature stated that debit card usage is limited to the amount contributed to date.

Are you stating that this plan sponsor may be out of compliance with Section 125?

Thank you!

[GBurns]

Yes and no.

It is possible to limit the card to the amount contributed and any claims in excess would have to be submitted in the normal fashion and be reimbursed manually.

I would expect that to be a nightmare, but that would be the only way to stay compliant that I can think of and still limit the card.

If the card is limited and no additional method of reimbursement exists, then the plan would not be in compliance.