FSA Requests for Substantiation

Posted by BAS - 02 June, 2016


In a recent information letter, the IRS explained that if a health FSA administrator’s request for additional documentation to substantiate a FSA claim is reasonable, the employee must provide the requested information in order to be reimbursed for the expense. A copy of the letter can be accessed here.  

A health flexible spending account plan participant wrote to his congressman questioning the actions of his employer’s FSA administrator.  The participant did not think the administrator had the right to request substantiation of his claim for supplements "related to a medical condition".

The FSA administrator had denied the reimbursement request and asked the participant to document the medical expense with his physician’s signature, identification number and an explanation of how the supplements related to the medical condition.   

The IRS supported the administrator’s request for additional documentation.

The IRS confirmed that under a health FSA, an employer may pay or reimburse only those medical expenses that are substantiated by the employee.  The reimbursement of unsubstantiated claims would put the nontaxable status of the plan at risk.  If the third party administrator’s request for documentation is reasonable in relation to the substantiation rules (which in this case it was), it is the employee’s responsibility to submit the requested documentation in order to receive reimbursement. 

This recent guidance may be useful for employers to share with employees when they or their third party FSA administrator request additional information before a claim is reimbursed.

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