Kushner & Company For Your Benefit Newsletter

Kushner & Company: For Your Benefit

Summer 2021

IRS REITERATES FSA DEBIT CARD SUBSTANTIATION RULES

In IRS Information Letter 2021-13, the agency reiterates that Flexible Spending Account (FSA) claims paid on an FSA debit card must have the required substantiation, containing all of the information normally required for a claim submitted for reimbursement through other means such as mail, e-mail, or fax. The only exception to those rules are for those expenses received at certain providers (pharmacies, for example) that can be auto-substantiated by both the Merchant Category Code (MCC) of the provider’s debit card machine as well as the actual item or service received as identified by an Inventory Information Approval System (IIAS) from any non-health care provider.

PCORI FILINGS AND FEES – THE SEQUEL (THE NEXT TEN YEARS)

As we explained last year, funding for the Patient-Centered Outcomes Research Institute (PCORI) was supposed to end with filings and fees for plan years that began before October 1, 2019. In the words of the great philosopher Emily Litella, “Never mind.”

As part of the the Bipartisan Budget Act of 2019, the PCORI annual filing and fees were reinstated for an additional 10 years, through 2029. That means that all employers (or their insurers in fully insured group health plans) must file the annual IRS Form 720 by July 31st of each year (August 2, 2021 since July 31st is a Saturday), regardless of their plan year.

IRS PROVIDES FAVORABLE TAX RULING ON INCREASED DEPENDENT CARE REIMBURSEMENT ACCOUNTS

Last year’s year-end Consolidated Appropriations Act (CAA) provided that, at the employer’s discretion, a Dependent Care Reimbursement Account (DCRA) could allow unused funds from a plan year ending in 2020 to be rolled over to a plan year ending in 2021, and for unused funds from a plan year ending in 2021 to be rolled over to a plan year ending in 2022. Then, the American Rescue Plan Act of 2021 (ARPA) allowed an employer to temporarily increase the limit for a DCRA from $5,000 to $10,500 for 2021 and 2022. That is, if an employer so allowed, a plan participant in a flexible spending account with a DCRA could be reimbursed up to $10,500 for both 2021 and 2022 plus possibly more if unused funds were carried over from the prior plan year. But a potential tax hurdle remained.