Medical Flexible Spending reimbursements for prior year expenses

[Kathy]

I have a client who incurred a medical expense toward the very end of the last plan year (hospitalization) but was not billed for it until this year. I vaguely remember reading an article that said the IRS would allow such expenses to be reimbursed with current year medical flexible spending account dollars but can’t seem to find it now. Is old age getting to me or does anyone else remember the article?

[Moe Howard]

Your client needs to read his FSA plan's summary plan description. I'll bet you a shrimp po-boy sandwich that it says "all claims for plan year ended 12/31/2000 must be submitted by him to the FSA administrator by 03/31/2001.... and that only his contributions during year 2000 can be used to pay those claims".

[Kathy]

Thank you! I finally found the article I was remembering. It was an EBIA article that mentioned a case where a judge ordered a plan to pay just such a claim because the SPD said expenses "incurred" in the covered period and the employee interpreted that to mean "paid" in the covered period. Furthermore, the SPD referred the participant to Pub. 502 for further guidance and the publication, speaking about deductible medical expenses, said expenses "paid" in the current tax year. So, the judge apparently went against the regulations and found in favor of the participant who believed he was following the rules when he submitted claims for expenses paid in the current period even though the medical care that gave rise to them was in the previous period.

I don't think this helps my client. Thanks for answering though!!!