Flexible spending arrangements (FSAs)

[Lori Friedman]

I'd like to pose something to those of you who frequently work with medical FSAs (either with or without cafeteria plans).

It's my understanding that an employer doesn't become the "Benefits Police" when it sponsors a medical FSA. The plan sponsor merely has to make a reasonable effort to determine that an employee has submitted an eligible expense claim. Usually, "reasonable" means:

(1) providing information and guidelines to participants

(2) obtaining documentation of a claim, and

(3) having each participant attest, when he/she signs and dates a reimbursement claim form, that the claim is for an eligible medical expense paid or incurred for the benefit of the participant, spouse, or dependents.

The employer's not held to the lofty standard of scrutinizing and investigating every request for reimbursement. Also, the employer probably doesn't want to take on the role of researching, analyzing, and applying federal tax law.

Any thoughts out there?

[QDROphile]

I think #3 is a little weak. The participant cannot adjudicate qualification of medical expenses. The plan administrator will have to decide whether or not the airhead claims for Airborne will be reimbursed.

As for #2, it involves making sure that the expense is incurred within the coverage period.

[Jacmo]

Actually, the employer IS the benefits police, as needed per section 125. Even though an employer may hire a TPA to administer an FSA, ultimately the employer is the plan sponsor and subject to all of the requirements of section 125, including determining if an expense is eligible or not.

The employer IS held to the "lofty" standard of the law--section 125.