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Key IRS Rules to Play By

The IRS has strict rules about using a flexible spending account plan:

  • Flexible spending plans are a great way to s-t-r-e-t-c-h your paycheck and save on the cost of unreimbursed medical, dental and child or eldercare expenses for you and your family. So… anticipate your expenses carefully to avoid leaving money in your account.
  • Dependent children who are in daycare, after school care or day camps must be under the age of thirteen (13).
  • In order to participate in a Dependent Care program, parent(s) must be gainfully employed, seeking gainful employment or be full time students.
  • Expenses submitted for claim reimbursement must be incurred during the plan year.

If you have additional questions about IRS rules consult Publication 502 “Medical and Dental Expenses;” and 503 “Child and Dependent Care Expenses.”

Please read these guidelines carefully to learn how to take full advantage of a flexible spending plan. Feel free to call ABS or your benefits point person should you have any questions!

SAVE ALL Receipts for qualified expenses!

Save all your receipts in one place, perhaps in a file or envelope to help you stay organized throughout the plan year.

Receipts must show:

  1. Name and address of the service provider
  2. Date service/expense was incurred
  3. Name of person for whom service/expense was provided
  4. Detailed description of the service/expense provided
  5. Amount charged for the service

The IRS does not consider credit card receipts, cancelled checks or balance forward statements as acceptable forms of receipts. For over-the-counter (OTC) items; include a doctor’s note and clarify the specific item or include a photocopy of the package.

Examples of receipts include:

  • Doctor office co-payments
  • Prescriptions
  • Receipts from daycare or qualified eldercare facilities or copies of receipts you pay to in-home providers
  • Explanation of Benefit (EOB) statements from your insurance provider which shows the amount or percentage of a medical or dental charge your insurance company paid and how much you owe (i.e. deductibles, co-insurance payments, out of pocket expenses, etc.)
  • Orthodontia, a copy of the contract
Submit your qualified receipts with ABS’s Reimbursement Request form.

Receipts are required to verify that you are spending money from your account on qualified expenses. You can submit your receipts once or as often as you like. However, processing of reimbursement checks require a minimum of $20.00 of receipts. You may access your personal account online or call ABS to confirm account balances.

Watch for quick reimbursements from ABS!
ABS is committed to sending your reimbursement checks quickly. We process payments weekly after receiving your signed Reimbursement Request form and receipts.
Spend all your money — you cannot get back what you do not spend.
When you enrolled, you told the IRS you were reducing your taxable salary by a specific amount for the flexible spending plan year. According to the IRS, you will forfeit any unspent money. HOWEVER, your company does not want you to lose this money! It is up to you to plan wisely and when you enroll, ask questions. ABS and your employer benefits point person are more than willing to help you make the most of this benefit work for you!
It is easy and simple to anticipate expenses.
When estimating how much you, your spouse and dependents will have in medical and dental expenses, think about your past expenses. Avoid thinking about the “worst case scenario” because you cannot predict those kind of extra expenses (and hopefully you will not have them!) Avoid overestimating. It’s easy to save money with this benefit as long as you plan properly.
You cannot change or stop deductions during the plan year unless a qualified life status change occurs consistent with IRS guidelines.
Such as:
  • The birth or adoption of a child
  • Marriage, divorce or legal separation
  • Spouse employment changes
  • Death
You can only sign up once a year during re-enrollment for the upcoming plan year (unless you are a new employee in which case you will have a limited enrollment period).
Flexible spending plans work on a 12-month “plan year”. The dates depend upon how your company has set up the benefit period, therefore it MAY NOT always be January 1–December 31. The plan year is renewed every 12 months. At this time, you may change, sign up or waive participation.
Everyone must complete an enrollment form whether or not you wish to participate.
This must be done before the new plan year starts. Just like medical and dental benefits, your company must document that you are aware of this benefit and that you have elected to sign up or waive it.
If you terminate your employment, only expenses incurred up to the date of termination are eligible.
You have 60 days after you leave the company to submit your receipts to ABS for reimbursement. Expenses will only be reimbursed for services incurred prior to the date of termination. (See your benefits department to discuss possible COBRA options.)