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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.

Learn why HRAs may work better than HSAs for public sector employers.

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. As your Senior Account Representative, Adam will be on hand to walk you through your group's plans, conduct employee and retiree meetings, and be your advocate when a problem arises. Adam first joined National Insurance Services (NIS) in 2013 as an intern in the Marketing Department. He enjoyed NIS’ company culture and team values so much that he later applied and was hired as a Retirement Income Account Representative for NIS and MidAmerica Administrative & Retirement Solutions. Adam specializes in Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and 403(b) Special Pay Plans (SPP) for clients in Minnesota, Michigan, Pennsylvania, and Oklahoma. He is a licensed Health and Life insurance agent.