QUESTION: Our company has a calendar-year cafeteria plan with a health FSA and a DCAP. One of our health FSA participants was hired in June. He enrolled in the health FSA at that time and has now asked whether he can be reimbursed for some dental services that took place in March. Can our health FSA reimburse services that were provided before the participant enrolled in our health FSA?
ANSWER: No. Under IRS rules, a participant must be covered by a health FSA when an expense is incurred for the expense to be eligible for reimbursement. (Of course, all other requirements for reimbursement under the health FSA rules and the plan document must also be met.) Expenses that are incurred before the date of an employee’s enrollment in the plan are not considered to be incurred when the employee is covered by the plan. IRS rules further provide that expenses are incurred when the medical care is provided that gives rise to the medical expenses, and not when the participant is formally billed, charged, or makes payment for the medical care. The expenses your participant has asked about involve services that were provided in March, when he was not covered by the health FSA, so they are not eligible for reimbursement.
Note also that the same rules apply to DCAPs. Thus, your company’s DCAP could not reimburse a claim for dependent care services that were provided before the participant enrolled in the DCAP.
For more information, see EBIA’s Cafeteria Plans manual at Sections XX.G (“Health FSA Expenses: Expense Must Have Been Incurred During the Period of Coverage”) and XXIV.K.3 (“DCAP Expenses: Cannot Reimburse Prior to Plan Adoption or Participant’s Enrollment”).
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