QUESTION: For 2023, an worker elected $2,400 of well being FSA protection below our calendar-year cafeteria plan, which is funded solely by worker wage reductions and doesn’t present for carryovers or embrace a grace interval. The worker has already incurred medical bills equal to this quantity in 2023 and needs to be reimbursed for the bills now, regardless that she has solely made well being FSA wage reductions of $400 up to now. Do we now have to reimburse all of those bills instantly, or can we restrict reimbursements to the quantity our worker has already contributed and ask her to resubmit the remaining bills as extra contributions are made?

ANSWER: Your worker have to be reimbursed for all of her bills now, assuming that the bills are in any other case eligible for reimbursement (e.g., they’re for medical care incurred in the course of the present interval of protection, and acceptable substantiation has been offered). That’s as a result of IRS necessities for well being FSAs embrace a “uniform protection” rule below which the utmost quantity of reimbursement have to be out there always in the course of the plan 12 months (or different interval of protection), lowered just for any prior reimbursements for a similar interval. Reimbursement is deemed “out there” below the uniform protection rule if claims are paid not less than month-to-month, or when an worker’s submitted claims attain an affordable plan minimal (e.g., $50). Thus, reimbursements can’t be restricted to the quantity of the worker’s contributions.

The uniform protection rule additionally prohibits accelerating an worker’s wage reductions based mostly on well being FSA claims submitted or paid. Notice that the uniform protection rule doesn’t apply to DCAPs, so reimbursements below a DCAP may be restricted to the quantity that has been contributed, much less bills already reimbursed.

For extra info, see EBIA’s Cafeteria Plans handbook at Sections XIX.D (“Well being FSAs: There Should Be Uniform Protection All through the Protection Interval”), XXIII.G (“Chart Evaluating Well being FSAs and DCAPs”), and XXIV.J (“DCAPs: Reimbursements Should Comply With FSA Guidelines (Besides Uniform Protection)”).

Contributing Editors: EBIA Employees.