Out of Country Expenses

[Guest moseelig]

I have an interesting dilemma...I have a participant in a Cafeteria Plan who is employed in the U.S.A; however, resides in the Domincan Republic (DR). Can he be reimbursed for medical expenses he incurs in the DR? Also, can he be reimbursed for childcare expenses in the DR? Lastly, he provides care and support for his elderly mother-in-law; would he have the ability to run her expenses through the plan as well, assuming she is a U.S. Citizen, or does citizenship make a difference? I would appreciate any feedback.

[leevena]

Can only answer 2 or 3 for you. I don't know the answer about reimbursement from DR providers for dep care.

Medical expenses from outisde the US are ok. The dependent care expenses are not just for kids, but for adults as well. Without knowing what you mean by "support", I cannot tell you if these specific expenses are elgible.

[Guest moseelig]

Thank you for responding. Support and care for the elder mother-in-law includes an adult daycare facility and out-of-pocket health expenses.

[LRDG]

Expat employees are not considered in-eligible according to IRS regs. If the individual is an ex-pat employee who otherwise meets eligibelity to participate there should not be a problem.

I'd suggest becoming familiar with the Hearth and Dependent care systems in the DR to determine they don't include procedures or cost not routine under the US systems, procedures not eligible under IRS Secs. 125, 213, 129 and 152.

The restrictions on types of expenses eligible for reimbursement from Medical FSA's, for instance expenses covered by insurance or otherwise reimbursable or paid, or an ineligible procedure under Sec. 213. Dependent care where there may be limitations or requirements for local licensed providers, or K level care provided in a grade school or educational institution.

In the case of child care center, that for instance may provide meals or require insurance coverage/permiums for the child, if invoiced seperately, food/meals are not child care, same with insurance. While these may be required, provided and necessary to nurish and protect the child while attending the child care center, it is not child care and therefore not eligible under tax code. There is some tollerence for items not invoiced seperately, or not itemized by institution on receipts.

FYI Sec. 213 is a list of eligible Medical procedures and circumstances for receipt of eligible medical care, eligible for deduction from individuals income tax return or for exclusion from taxable income under a Sec. 125 plan.

Sec. 129 addresses rules for eligible child/elder care expenses from individual income tax return for child care tax credit or for exclusion from income through a Sec. 125 plan that include a Sec. 129 Dependent/Child/elder Care FSA, allowed under the tax code.

Sec. 152 describes eligible dependents, for instance, child/ren, grand-child/ren, elderly dependents who qualify as dependents for individual income tax filing status, and thereby qualify under Sec. 125 & 129 plans.

IRS requirements for qualifying elderly dependent, you must provide/contribute no less than 50% to their support to claim MIL as a dependent on individual tax returns. If MIL meets IRS dependent status requirements for income tax filing purposes, expenses qualify under the Sec. 125 and 129 plans. See IRS Sec. 129 & 152 for defination of qualifying individuals for dependent status for elderly & child expenses.

For elder care expenses in a care facility, it is not always possible to seperate cost of custodial care provided from the cost of medical care provided. In general, the care is typically eligible under Medical FSA because the custodial care is required due to medical condition. However, care consist of primarily costodial care which is often provided in addition to the underlying medical necessity for providing it. It might be advantageous to allocate expenses between both the Medical FSA and the DCFSA if possible to achieve 100% of the cost included in the plan without exceeding maximums imposed under the respective spending accounts.

I mentioned only what I recall from memory, it's been some time since I had occasion to research/use elderly care provisions, I suggest you review the respective secions of the code.

edited multiple times: addition of elderly dependent & elder care; clarity; general corrections

[SLuskin]

What about reimbursing individually owned health insurance premiums if the document so provides. We have a client with a Latin American operation. The employee-participant lives here, and splits his time between US office and Rio office in Brazil. He participates in the group medical plan of the employer. He has also purchased an individual policy in Brazil to cover expenses there. Can he pretax the Brazilian policy premiums in the premium reimbursement account? (I know EBIA cautions against using this account, but our software provider has slots for it)

[LRDG]

I'm with EBIA on this one. However if your plan includes this benefit for domestic, non-expat population, I don't know of any reason why the plan would not cover the Brizalian expat policy.

I'm not going so far as to say it's IRS eligible, the regs are not there yet with respect to wether premium reimbursement plans for individually owned policies are eligible, IMO.