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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4186
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Company was purchased, forced to switch insurance coverage

Resolved Question:

Company was purchased, forced to switch insurance coverage to purchasing company's insurance in May 2013 (and started FSA in May 2013). I had medical expenses in Jan. 2013 that I want to pay for with the FSA funds. Allowed? I know IRS states that FSA money can only be used for covered plan year, but can't the calendar year be counted as the plan year even if I started the FSA in May 2013?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

HI,

NPVAdvisor :

Did the company already have the FSA in place, and you just joined the plan? - or was the company's FSA plan just installed in MAY?

Customer: Installed in May (to the PURCHASED company). The PURCHASING company had it in place previously.
NPVAdvisor :

Here's the IRS guidnce:

NPVAdvisor :

FSAs have a start date and an end date, and the time in between is called the plan year.
Expenses must be incurred during the FSA plan year. As noted in IRS guidelines, "expenses are incurred when
the employee (or the employee’s spouse or dependents) is provided with the medical care that gives rise to the
medical expenses, and not when the employee is formally billed, charged for, or pays for the medical care.” This
means the date of service must be within the current plan year and not when you pay for the service.

NPVAdvisor :

However, here's the part that will disqualify those: expenses

NPVAdvisor :

Services that take place before or after your coverage period, are not covered

NPVAdvisor :

Coverage period and plan year are two different items

NPVAdvisor :

So sorry to be the bearer of bad news. ... hopefully you will rate my answer based on the accuracy and toroughness of the answer, rather than any good news/bad news content

NPVAdvisor :

Hopefully having all th facts will help youi "see around some corners."

Customer:

there's no exception to the "must take place in coverage period" rule... even though the tax year is the same?

Customer:

would the answer be different if the FSA was in place and I just joined the fsa?

NPVAdvisor :

I'm so sorry, but the coverage period (specific to the person) and plan year (specific to the employee benefit plan)

NPVAdvisor :

The coverage period is ALWAYS the time for which are an "enrolled employee" or "plan participant" in ERISA terms

NPVAdvisor :

THe plan year is the plan year chose u the company when the plan is installed

NPVAdvisor :

sorry for the typo ( ... plan year is the plan year chosen by the company when it was installed)

NPVAdvisor :

would the answer be different if the FSA was in place and I just joined the fsa? . No, again you were not covered by the plan in January

Customer:

ok, thanks.

NPVAdvisor :

Sorry.. you could always TRY by calling the administrator, the company is the one on the hook... they may gran some sort of exception

NPVAdvisor :

but quite honestly, that could jeopardize the qualified status of the plan

Customer:

I should contact 1) the company I work for or 2) the company administering the plan? This exception is a new idea... what flexibility can they offer?

NPVAdvisor :

your company will have a designated administrator, and depending on the nature of the setup (some plans are unbundled and a person in HR is very hands on, and some are "bundled" in such a was that ALL the day to day questions, sibkission of expenses, go through the outside company) .... but the person/department you want to talk to is the administrator of the plan

NPVAdvisor :

In reading the IRS guidelines, I don't see any ... however, because of your being "forced ot opt in maybe it's possible that they have yur coverage period as beginning on 1-1

NPVAdvisor :

The administrator (again, that can be a designated person or it could the the plan provider) may be willing to work with you in some fashion ... but I wouldn't be doing my job if I didn't say ... hope for the best but be prepared for that "covered period" isue to come up

NPVAdvisor :

If you have a web site of something to look at regarding the plan you might look for "enrollment date" or "active since"

NPVAdvisor :

One final thought ... the company is supposed to provide something to you called the SPD (Summary Plan Description), you might as the company where you can find that ... then go from there. They have to provide that by law (Title 29 Labor)

NPVAdvisor :

I hope I've helped

NPVAdvisor :

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4186
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.


Thanks so much for the rating.

Let me know if I can help further

Lane

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