![]() ![]() Matt’s contact lenses expenses are not reimbursable under the FSA because the expenses were incurred prior to his period of coverage. Matt incurs $125 in contact lenses expenses in December 2020. Matt makes a $1,000 health FSA election at open enrollment for the 2021 plan year. ![]() Matt is not enrolled in his employer’s 2020 calendar plan year health FSA. Only health expenses incurred from June through December 2020 (plus any associated grace period) are within his period of coverage for the 2020 plan year. Tim’s March 2020 glasses expenses are not reimbursable under the FSA because the expenses were incurred prior to his period of coverage. Tim enrolls in the health FSA, making a $1,000 election for coverage beginning June 2020 through the end of the plan year. The new employer maintains a calendar plan year health FSA. ![]() Tim changes jobs and is a new hire with a new employer in May 2020. Tim incurs $240 in glasses expenses in March 2020. The Section 125 regulations provide that operational failures can result in the entire Section 125 cafeteria plan being disqualified if discovered by the IRS-which would result in all cafeteria plan elections becoming taxable for all employees. This means that any expenses incurred before or after the employee’s FSA period of coverage are not reimbursable.Īllowing an expense incurred outside the period of coverage to be reimbursed by the FSA would be a plan operational failure. The period of coverage is the period of the FSA plan year in which the employee is enrolled (including any grace period for such plan year). General Rule: Expenses Must be Incurred in the Period of CoverageĪn FSA can reimburse only expenses incurred during the participant’s period of coverage. **Short Answer: **FSA expenses are considered incurred when the health care or dependent care services are actually provided. **Question: **When are FSA expenses incurred for purposes of determining whether they are reimbursable for the plan year? ![]()
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