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What is Flexible Spending Account Administration?

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  • Written By: Jeri Sullivan
  • Edited By: Heather Bailey
  • Last Modified Date: 26 March 2020
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Flexible spending account administration refers to the group that handles the processing and payment of claims from an individual's spending account. A flexible spending account (FSA) is an account set aside to pay for medical charges. The medical charges approved for use under a medical savings account include prescriptions, doctor's office visits, therapy, surgery, and most other medically necessary procedures.

Many companies offer a health savings account as part of an employee's health care benefits. This option is a voluntary benefit and employees have the option of taking part. Each year the US government will review the current health care laws and determine the maximum amount an employee may contribute to these types of accounts. The flexible spending account administration, along with the employer, is responsible for ensuring that no more than the maximum limit is put into the medical savings account.

The employee can choose how much to contribute based on his expected out-of-pocket medical bills for the coming year and opt-in during his company's open medical enrollment period. Once the amount has been established, payroll deductions will occur. The determined amount is deducted in equal payments throughout the year and put in a separate savings account. When a medical bill is incurred, the employee can file a claim with flexible spending account administration who will then reimburse the employee from his savings account.

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The benefit of this type of flexible spending account is that the contributions are tax-free because they are deducted from the employee's paycheck before taxes are calculated. This method reduces the overall taxes paid since all the money deposited into the medical savings account is later reimbursed but not claimed as income. The only drawback with these types of accounts is that if the employee does not incur enough medical expenses during a calendar year to use all of the money that was deposited, he does not get the unused portion back but instead loses it.

The flexible spending account administration will review all incoming claims to determine if they were medically necessary. If the bill is for recurring prescriptions, the flexible spending account administration may only require proof of receipts the first time and then automatically approve each subsequent refill. For doctor's visits or medical procedures, the administration may require a detailed listing of what was done such as a copy of the explanation of benefits (EOB) from the health insurance company.

The EOB will clearly define by medical code what procedure was performed and whether it was covered by insurance. Since many health care savings account plans require the procedure to be medically necessary before they will reimburse the costs, the employee should always check his health care plan before paying for a procedure to ensure it will be covered. This will prevent an issue with getting payment after the fact.

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