| An employee employed by multiple unrelated employers may elect an amount up to the limit under each employer's plan. There are two major different flexible spending accounts focused on medical and dependent care expenses and participation in one type of FSA does not affect participation in another type of FSA, but funds cannot be transferred from one FSA to another. |
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Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage. You must be able to receive the maximum amount of reimbursement (the amount you have elected to contribute for the year) at any time during the coverage period, regardless of the amount you have actually contributed. The maximum amount you can receive tax free is the total amount you elected to contribute to the health FSA for the year.
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| You must provide the health FSA with a written statement from an independent third party stating that the medical expense has been incurred and the amount of the expense. |
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| You cannot receive distributions from your FSA for the following expenses. |
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- Amounts paid for health insurance premiums;
- Amounts paid for long-term care coverage or expenses;
- Amounts that are covered under another health plan.
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You must provide a written statement that the expense hasn’t been paid or reimbursed under any other health plan coverage. The FSA can’t make advance reimbursements of future or projected expenses.
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Debit cards, credit cards, and stored value cards given to you by your employer can be used to reimburse participants in a health FSA. If the use of these cards meets certain substantiation methods, you may not have to provide additional information to the health FSA.
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It is interesting to mention that the participating employee's entire annual contribution is available at the start of the plan year, commonly January 1, or after the first contribution to the FSA is received by the FSA vendor, depending on the plan.
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| Therefore, if the employee experiences a qualifying event during the first period, the entire amount of the annual contribution can be claimed against the FSA benefits. If the employee is terminated, quits, or is unable to return to work, he or she does not have to repay the money to the employer. |
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| Flexible spending accounts are generally “use-it-or-lose-it” plans. This means that amounts in the account at the end of the plan year generally can’t be carried over to the next year. However, the plan can provide for either a grace period or a carryover. |
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The plan can provide for a grace period of up to 21⁄2 months after the end of the plan year. If there is a grace period, any qualified medical expenses incurred in that period can be paid from any amounts left in the account at the end of the previous year. Your employer isn’t permitted to refund any part of the balance to you.
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| Plans may allow up to $500 of unused amounts remaining at the end of the plan year to be paid or reimbursed for qualified medical expenses you incur in the following plan year. The plan may specify a lower dollar amount as the maximum carryover amount. If the plan permits a carryover, any unused amounts in excess of the carryover amount are forfeited. The carryover doesn’t affect the maximum amount of salary reduction contributions that you are permitted to make. |
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A plan may allow either the grace period or a carryover, but it may not allow both.
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| Although we will constantly keep you up-to-date with any new IRS rules and regulations with an impact on your taxes and finances, with regard to your FSA, make sure you check with your employer and/or the FSA administering firm to find out all the details of the plan you’re being offered. |
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