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
METHODS Expenses matching a co-payment
or multiple of a co-payment
Previously approved recurring
expenses in the same amount by
the same provider in same time period
Real-time veriﬁcation at
the point of sale
Use of an Inventory Information
Approval 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 TO
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