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FSA Claims Substantiation Requirement

FSA Claims Substantiation Requirement

1 minute read

The IRS released a Chief Counsel Advice Memorandum regarding important reminders about claims substantiation requirements for flexible spending accounts (FSAs). The requirements apply to both health and dependent care FSAs.

 

Compliance Reminders

FSAs are not considered properly substantiated if employees self-certify expenses, if the plan uses sampling, if only amounts over a certain level are substantiated, or if charges from favored providers are not substantiated. Also, dependent care expenses must be incurred before they are eligible for reimbursement.

 

Tax Consequences

FSA reimbursements that aren’t fully substantiated must be included in the employee’s gross income. Also, if a Section 125 cafeteria plan doesn’t comply with these requirements, the plan will no longer qualify for favorable tax benefits. To avoid tax consequences, employers with FSAs may want to review their substantiation procedures to make sure they are complying with IRS rules. Download the bulletin for more details.

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National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.

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Adam Kuck

Adam Kuck

The first things you will notice about Adam Kuck are how personable and organized he is. Adam started his career at National Insurance Services as a marketing intern and was so impressed by their company culture and team values, that he joined the Retirement Income service team in 2016. Now as an Account Manager, Adam assists clients with their employee benefits, benefit communication, and wellness plans. He helps employees and employers answer policy-related questions, resolve employee claim issues with carriers, and assists with employee or insurance committee meetings. Adam works with Minnesota and Wisconsin schools, cities, and counties. He’s a licensed insurance agent.