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What is a FSA Reimbursement?

By Deneatra Harmon
Updated May 17, 2024
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An employee receives a flexible spending account (FSA) reimbursement through an employer-sponsored expense account. To receive the reimbursement, the person must have accrued qualified medical or dependent care expenses, according to the U.S. Internal Revenue Service (IRS) rules. Generally, employers offer two types of flexible spending accounts, and employees must enroll in either program to receive coverage in any given year. An employee can obtain an FSA reimbursement by submitting to the employer written proof of expenses paid.

To qualify for an FSA reimbursement, the employee must "elect" annually to participate in an employer-sponsored FSA. The FSA, which comes as part of most benefits packages offered by some companies every year, is an expense account that allows the employee to set aside a specified amount of money tax-free. The funds for the FSA are usually deducted from the employee's salary. The health care and a dependent care options are two FSA types.

A health care flexible spending account can be used to pay for medical insurance co-payments and prescription drugs among other expenses. A dependent care FSA may be used for child or elder care expenses, for example. Maximum expense account amounts may vary depending on the employer, the FSA type, as well as the plan year. All monies placed into the FSA must be used by the end of the year or they are forfeited, also referred to as the "use-it-or-lose-it" rule.

In addition to co-payments and prescription drugs, health-related expenses that are eligible for an FSA reimbursement include insurance deductibles, dental and vision expenses, and psychiatric and chiropractic services. Expenses that are eligible under a dependent care FSA include daycare or other services for children under age 13. Other allowable expenses include those for disabled or ill dependents who are unable to care for themselves. The qualifying person must also be in the employee's home for at least eight hours a day.

An employee must submit a claim to the employer to receive an FSA reimbursement for health or dependent care expenses. To get an FSA reimbursement under the health care option, the employee must provide a written statement from a third party that shows the amount of the expense, proof that it has been paid out of pocket, and that the amount has not already been reimbursed. For example, a payment receipt or a doctor's bill can be submitted as part of a claim. The employee may also be required to sign a statement certifying that the expense is ineligible for reimbursement under any other coverage.

To be reimbursed for a dependent care FSA, the employee must also provide the employer with a written statement that notes the expense amount and proof of payment. The expense must not have been previously reimbursed or be eligible for reimbursement under another plan. An example of proof includes an invoice from a daycare provider. FSA reimbursement amounts vary depending on the expenses the employee accrued during the plan year.

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