IT’S INELIGIBLE, NOW WHAT?A Health Flexible Spending Account (FSA) debit card has been shown to increase participation and provide quicker access to funds for payment of eligible expenses. A Health FSA debit card has several advantages such as reduced taxes, direct access to funds, auto-substantiation and reduced paperwork.

You’ve covered your bases and told your employees what the Health FSA covers and how to use the debit card.

You’ve even provided information on eligible expenses, approved merchants and websites such as the FSAstore.com for point of sale adjudication, making it easy to pay for needed items.

Your Health FSA debit card program has been working well and your workforce enjoys the benefits of using a debit card to pay for eliglble expenses.

However, you must remember one all-important rule related to Health FSAs and debit cards:

ALL REIMBURSED EXPENSES MUST BE SUBSTANTIATED, EITHER AUTOMATICALLY OR BY PROVIDING A RECEIPT

AUTOSUBSTANTIATIONMETHODS Expenses matching a co-payment

or multiple of a co-paymentPreviously approved recurring

expenses in the same amount by the same provider in same time period

Real-time verification atthe point of sale

Use of an Inventory InformationApproval System (IIAS)

If the expense is not verified by one of these means, an employee must provide a paper receipt, otherwise it’s inelgible. Now what?

WHAT STEPS CAN YOU TAKE?When claims for ineligible expenses have been paid through a debit card, they become subject to the pay-and-chase procedures, effectively removing them from tax-free reimbursement. Without question, your plan should have established procedures for substantiating eligible medical expenses and rejecting and recouping any reimbursement of ineligible medical expenses.

5 WAYS TOHANDLEINELIGIBLE EXPENSES

Deactivate the card until debit is repaid in full

Withhold from wages or other compensation, typically with written authorization from the employee

Demand repayment from the employee with after-tax dollars

Treat the payment as any other business indebtedness, consistent with your business practice

Offset the expense against other eligible expenses

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