How to Clear Outstanding Flex Card Claims
As the 2016 pre-tax benefit plan year comes to a close, it is a good time to review the plan year and remember that end of year reporting is extremely important for pre-tax plans that offer a flex card.
The IRS has outlined the steps that should be taken to clear outstanding flex card claims. As employees use the flex card to pay for expenses, they should also maintain the itemized statements for their own records. It is very important that the plan administrator make their best effort to clear the claims and decide how they would like to proceed with unsubstantiated claims moving forward.
If a paid claim is still unsubstantiated at the end of the plan year the IRS allows the following correction methods:
- Process after tax payroll deductions
- Amend W-2’s to include the unsubstantiated amount as taxable
- Write off the outstanding amount
- Treat the unsubstantiated claim as you would other business indebtedness
The amount is generally reported in the year in which the debt is forgiven.
During the plan year, participants can:
- Send in Documentation – participants can submit documentation from the provider or an explanation of benefits from the insurance company that shows the expense is eligible
- Repay the Plan – participants can repay the plan directly with a personal check, or if the employer chooses and state wage withholding laws allow, an after-tax payroll deduction may be taken to clear the claim
- Offset – participants may submit substitute documentation to clear the outstanding claim
Plan documents should be reviewed to ensure any correction methods already established for the plan are being followed. Performing audits periodically throughout the plan year and clearing claims as they remain outstanding for an extended period of time can help make the end of plan year wrap up a much smoother process.
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.