Can an employer specify what is eligible under a FSA?

[Guest Cgross]

Good Morning.

Can an employer (plan) pick and choose what expenses will be reimbursed under a flexible spending account? I know that to be eligible they have to qualify under Section 213, but what if the plan doesn't want to cover something that is eligible under this Code Section? Is it enough to just specify it is not eligible in the Flex plan SPD?

[QDROphile]

Yes. No, unless the plan terms specify that the eligible expenses will be as stated in the SPD, but that would not be a good idea for plan design.

[jsb]

Consider your plan administration and employee satisfaction. Not everything that employees submit will be covered in any event. Why would you want to limit this further with an [arbitrary?] employer rule? I have found it much easier to be in full conformance with the law; that way, if something must be denied, it's because of those darned old IRS regulations not because of some employer-initiated policy that was a good idea when implemented long ago, but we can't remember why.

[GBurns]

Yes, coverage can be limited and items excluded if detailed in the PD and SPD etc, but it usually is instead done by categories such as medical, dental or vision. Notice that in the HSA Notices the IRS refers to limited scope FSAs.

[E as in ERISA]

I think that for over-the-counter items some plans provided a list of what is/isn't eligible under the plan (based on the plan's interpretation of what is/isn't deductible). It was done outside of the SPD or any formal document. It might not overrule plan terms, but just be helpful to an employee in deciding what form of remedy they should buy.