Flexible Spending Account (FSA) IRS Rules

mycafeteriaplan bullet imageIRS Rules for Flexible Spending Accounts (FSA)

The following are guidelines established by the relevant sections of IRS code for Medical Flexible Spending Accounts and Dependent Care FSAs (or DCAPs).


mycafeteriaplan bullet imageMedical and Dependent Care Accounts

  • Only employees participating in the plan can submit claims for reimbursement.
  • Participants can submit claims at any time during the current claim period (the plan year or period designated in the employer’s Plan Document and/or Summary Plan Description) and for a specified period after the claim period (called the “Run-Out Period”) as defined by the employer’s Summary Plan Description (SPD).
  • All expenses must be incurred during the plan year to be eligible for reimbursement. In addition, any money left in a participant’s account(s) after all reimbursements (for expenses incurred during that plan year) have been processed cannot be carried forward or returned; nor can any unused funds in an account be used for expenses eligible for reimbursement in another account.
  • Terminated employees can submit claims for a specified period after the date of termination (if so stated in the SPD), as long as the claim date of service occurred prior to the termination date and while the employee was a participant in the plan.
  • Participants cannot receive payment from any other source for expenses reimbursed by the plan, and must certify (by signing the claim voucher) that they are not eligible to bill any other source for the expense submitted.
  • Expenses reimbursed by the plan cannot be claimed for income tax purposes.
  • Recurring expenses or expenses from service dates spanning two plan years cannot be submitted on one claim form. Recurring expenses must be submitted and reimbursed as they occur, and services spanning two plan years must be split and submitted separately (in each claim period).
  • Documentation of expenses submitted for reimbursement must accompany the claim form and include the following information:
  • Provider name and address
  • Patient/Dependent name
  • Date of service
  • Description of service
  • Amount charged

NOTE: a “paid receipt” or credit card receipt is not proper documentation. However, a pharmacy receipt that lists clearly what is purchased is acceptable.

Click here for more information on how to submit a claim.

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mycafeteriaplan bullet imageDependent Care Accounts Only

  •  A participant is only eligible to have a Dependent Care Account if he or she pays dependent care expenses in order to be able to work. If married, the participant’s spouse must also work, go to school full time, or be incapable of self-care.
  • Only dependents under the age of thirteen or dependent adults or children over the age of thirteen who are incapable of self-care are covered.
  • Dependent care services may take place either inside or outside the home.
  • A participant’s Maximum Contribution Amount cannot be more than the smaller of either of the following:
  • The smaller of the participant’s or the participant’s spouse’s income. If the participant’s spouse is a full-time student or incapable of self-care, he or she is considered to earn: $2,400/year with one dependent or $4,800/year with two or more dependents.
  • $5,000/year if a participant’s tax filing status is “married filing jointly” or “single head of household” or $2,500/year if the status is “married filing separately.”
  • Expenses are not eligible if the service provider is the participant’s child or stepchild and is under the age of 19, or if the participant claims the provider as a dependent for income tax purposes.
  • In addition to the documentation required for all reimbursable expenses, dependent care claim submissions must include:
  • Provider’s Taxpayer Identification Number (TIN) or Social Security Number (SSN)
  • Dependent’s age
  • Signature of the provider
  • Dependent care reimbursements cannot exceed the election amounts deposited into the account to date, minus any reimbursements previously paid.

Click here for more information on how to submit a claim.

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mycafeteriaplan bullet imageChange of Status Criteria for Medical Accounts

In order to make a mid-year change of election in a participant’s medical account, the qualifying event must fall into one of the following six categories:

  • A change in the participant’s legal married status
  • A change in the participant’s number of dependents
  • A change in the work schedule of the participant, the participant’s spouse or the participant’s dependent
  • A change in the place of work or residence of the participant, the participant’s spouse or the participant’s dependent
  • Termination or commencement of employment of the participant, the participant’s spouse or the participant’s dependent
  • A dependent satisfies or ceases to satisfy the dependent eligibility requirements for a particular benefit

If such a qualifying event occurs and the participant wishes to make a change in his or her election (consistent with the resulting gain or loss of eligibility for coverage), the plan administrator must be notified within 30 days of the event. Changes are made effective the date that the Change of Status form is filed with the plan administrator. To file a Change of Status form, please see your employer.

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mycafeteriaplan bullet imageChange of Status Criteria for Dependent Care Accounts

In order to make a mid-year change of election in or termination of a participant’s dependent care account, the participant must have a change in family status falling into one of the following six categories:

  • A change in the participant’s legal married status
  • A change in the participant’s number of dependents
  • A change in the work schedule of the participant or the participant’s spouse
  • Termination or commencement of employment of the participant’s spouse
  • An unpaid leave of absence taken by either the participant or the participant’s spouse
  • Significant change in the participant’s or the participant’s spouse’s health coverage as a result of the spouse’s employment status

If such a qualifying event occurs and the participant wishes to make a change in his or her election (consistent with the resulting gain or loss of eligibility for coverage), the plan administrator must be notified within 30 days of the event. Changes are made effective the date that the Change of Status form is filed with the plan administrator. To file a Change of Status form, please see your employer.

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