Why is documentation needed when the flex card is used?
Many flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) offer participants the use of a debit card, or flex card, to pay for eligible expenses. Using the flex card is a bonus for the participant’s cash flow because they do not have to submit a claim and wait to be reimbursed. The flex card, however, does not replace the requirement to confirm the expense is eligible for reimbursement from the plan.
A common misconception for participants who use a flex card for the FSA or HRA is that they do not have to do anything additional after they make a purchase or pay for an expense with the card. While in some cases, this may be true, there will be times when the participant has to validate the funds were used for eligible expenses.
The IRS has indicated charges made with a flex card can be automatically approved as eligible, without any further documentation from the participant, in the following scenarios:
- the amount charged matches a co-pay with the employer’s medical, dental, vision or prescription insurance plan
- the card is used at a participating Inventory Information Approval System (IIAS) merchant where the expense is validated as eligible at the point of sale
- the amount charged is a recurring expense of a previously approved charge for the same amount at the same provider
Any other charge requires additional documentation to be submitted by the participant to confirm the FSA or HRA funds can be used to pay for the expense. Participants should be aware of the rules for their plan and submit documentation in a timely manner to avoid any possible interruption in using the card.
BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such. Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.