A Look at Flexible Spending Accounts (FSAs)
Posted on August 6, 2012 by Beverly Mudd in Benefits
What’s a flexible spending account?
A flexible spending account, or FSA, helps you pay for out-of-pocket health care and dependent day care expenses on a pre-tax basis.
How does this work?
It’s easiest to explain with an example. Let’s say you want to get laser eye surgery later in the year and you know it’s not covered by your health or vision plan. With an FSA, you can elect to pay for the surgery with money set aside from your paycheck before taxes. You can either use your FSA debit card or you can receive reimbursement after submitting proper documentation as long as the service was rendered within your current plan year.
There’s one tricky thing about FSAs – because they act as a tax break, the government requires us to make sure all FSA expenses are considered eligible by the Internal Revenue Service (IRS). In order for TriNet to continue to offer this helpful benefit, we have to play by the rules. Here’s a brief breakdown of the frequently asked questions from our FSA customers regarding government regulations:
What’s the “Use It or Lose It” rule?
The IRS requires that any unused funds in your FSA at the end of your plan year are automatically forfeited. In other words, you may not carry balances over from one plan year to the next and you can’t receive a refund of the unused amount.
Why do I need to provide the receipts from my FSA debit card purchases to TriNet?
We know this step is tedious, but the IRS requires FSA plan administrators to verify that all debit card purchases are approved expenses. When you swipe your FSA debit card, we don’t always get all the information we need to validate your purchases. If this is the case, we’ll ask you to submit additional documentation to confirm your expenses are FSA-eligible.
Some charges are automatically approved without documentation, such as a copay at a physician’s office. Also, most pharmacies that sell FSA-eligible items link prescriptions to the Inventory Information Approval System (IIAS), which uses barcode technology to determine if the expense is eligible at the point of sale. Pharmacies, drug stores, and retail stores that accept FSA debit cards for over-the-counter medications and prescriptions fall into one of two categories. Some are 100 percent approved by the IRS and only allow FSA-eligible items to be purchased with the swipe of a FSA debit card. If your retailer falls in this category, you will not have to provide additional documentation. The second category includes retailers that allow FSA debit card transactions for expenses that may not be eligible according to the IRS guidelines. For this category of retailer, TriNet is required to request additional documentation from you to verify that all items paid for are FSA-eligible.
The cool thing is, if you’re using your FSA for an expense you make regularly, such as daycare, you won’t have to continue sending documentation. Coming soon, TriNet will start automatically setting up your debit card transactions to be recurring charges for the rest of the current benefits plan year. Each plan year you’ll have to set up this automatic approval so you don’t have to provide documentation every month. This gives you a lot less to worry about.
What information is required when I send my receipts to TriNet?
- Health Care FSA: An Explanation of Benefits (EOB) from your insurance carrier OR an itemized receipt on provider letterhead. An itemized receipt must include the merchant or provider name, a description of the service or product, the date of purchase, the amount paid, and the patient name.
- Dependent Day Care FSA: A third-party bill OR an itemized receipt on provider letterhead. The itemized receipt must include the provider’s tax identification number (such as a social security number or federal employer identification number), service dates, dependent name and date of birth, amount paid, and a description of the service.
When will I be reimbursed?
When you submit a completed claim, TriNet makes an effort to process it within 5 business days. Keep in mind that claims are not considered complete unless they include supporting documentation. Reimbursements can’t be made until all services have been rendered.
What are dual purpose expenses?
A dual purpose expense occurs when a product or service that’s usually used for general health purposes, which are not IRS-approved, is being used to alleviate a medical condition. These expenses may be eligible for reimbursement if a Letter of Medical Necessity (LMN) or a signed doctor’s note is provided to TriNet. For example, many people take iron supplements for general health purposes. This doesn’t qualify as an FSA-eligible expense. However, if a doctor tested a person’s blood and discovered he’s anemic, he would probably be prescribed an over-the-counter iron supplement. This may be an FSA-eligible expense. In a situation like this, you’d need to provide a doctor-signed LMN including your specific diagnosis, a recommendation to take that specific over-the-counter item, and documentation of the product and cost.
What’s TriNet doing to improve the FSA experience?
We’ve just purchased new software that will allow our FSA participants to determine which expenses are FSA-eligible. This software will be incorporated in our site by the end of August.
We’re working on implementing feeds from our medical, dental, and vision carriers to update our FSA system. These feeds will provide additional ways for the system to automatically document debit card transactions so you may not have to validate the expense. We are still in the early stages of developing this feature.
You can now email TriNet’s FSA team directly, email@example.com, for answers to your FSA-related questions.