orhtodontia and reimbursement under a health fsa

[Guest Nini]

Assume the following - Orthodontic services began in 11/05.

1. Participant begins participation in health fsa 01/01/06 and continues to receive orthodontia treatement throughout 2006 - can these expenses be reimbursed from the health fsa?

2. Again, participant begins participation in the health fsa 01/01/06, however, paid orthodontist in full in 2005 through a financial institution and continuing those payments in 2006 and continuing treatment in 2006. Are those payments being made to the financial institution reimbursable under the health fsa?

Most of the guidance on orthodontia is informal - just wondering how others have dealt with this.

If you know of any written guidance, please provide link.

Thanks for any help provided!

[A Shot in the Dark]

Nini:

Any expenses incurred after the participant's date of participation is reimbursable. So expenses incurred from November to December 31, 2005 would not be reimbursable. Expenses incurred after January 1, 2006 are reimbursable.

I believe payments to the financial institution are reinbursable to the extent the payments are repaying otherwise eligible expenses.

[GBurns]

Nini

What guidance have you found?

Have you been able to get a copy of the 1997 IRS Info-Letter on the subject? If no, maybe our Moderator Lisa Hand might be kind enough to provide a copy if she still has it.

Most likely you will have to go with the Info-Letter and common industry practice as can easily be found via a Google search. While it is true that just because nearly everyone does something, that does not necessarily make it right, that is the nature of the beast. If you think about it, the whole industry relies on "merely Proposed Treasury Regulations" which a number of Courts have declared to not "have any effect of law".

[Mary C]

It does not matter when the expenses were paid, the reimbursement is based on when services are received. Our company asks for a breakdown of the fees - placement fee and monthly maintenance fee. We then reimburse on a pro-rated basis. For example, if the total fee is $3,600, and $1,000 was the placement fee, then we allocate the remainder, $2,600, over the course of treatment. If the treatment is expected to last 24 months, then $108.33 is reimbursable each month. We would only reimburse the months after the participant enrolled in FSA and under your example, no reimbursement would be made for the placement, or for the months of 11/05 or 12/05. I believe this method is in line with the letter guidance issued by the IRS.

[Guest Nini]

Thanks for the information - I have tried to find the 1997 IRS Info Letter but have not been able to find it. Most of the information I have found is through research in the EBIA manual and informal comments made by IRS officials at different conferences.

The part we are still struggling with is the second scenario - prepayment made in 2005 with financing through a financial institution. The orthodontist was paid in full in 2005 but the participant is submitting claims for reimbursement to pay off the loan - treatment is continuing into 2006. Should these claims be reimbursed?

Again, thanks for any assistance!

[GBurns]

This is just my opinion.

2005 is not relevant since the person was not a plan participant.

2006 claims are reimburseable. IMHO these are still claims related to expenses incurred in 2006 and services rendered in 2006. I do not think that it matters who is being paid as long as it is being paid for eligible medical expenses incurred during a covered period.

When you pay a co-pay by credit card, it is not the Dr that you actually pay, it is the Credit card company who pays the Dr and then bills you via your statement and it is the Credit Card company to whom you actually cut a check in payment, isn't it?

Try contacting Lisa Hand the Moderator and ask her for her help.

[jmor99]

One way to take care of it is the participant asks the orthodontist to provide a per visit average--all charges totalled up and divided out equally over the anticipated time period. The orthodontist provides a "bill" at each visit, just for the participants FSA claims use. The scenario provided by Mary C is the correct one.