ADP COBRA / FSA Services - Health Care FAQ

A Health Care Flexible Spending Account (FSA) is an employer-sponsored benefit that allows you to pay for certain non-covered medical expenses with pre-tax income for a benefit plan year. Examples of such non-covered expenses may include: physician co-pays, prescription co-pays, vision exams, glasses, contacts, saline solution, dental exams, teeth cleanings, orthodontia and many more.

How the Health Care FSA Works

When you elect to participate in the FSA plan, you decide to have an amount of your choice (goal amount) to be deducted incrementally from your paycheck. These contributions to your personal flexible spending account are made before any taxes (payroll or income) are taken from your earnings. You then file claims against your FSA for reimbursement of eligible expenses you have incurred during the plan year. It is the opportunity to pay for eligible medical, dental, pharmacy and vision expenses with earnings that have not been taxed that provides the great value of an FSA. You may be reimbursed for eligible expenses up to the annual goal you have elected to contribute.

Planning your FSA Contributions

The best way to plan your FSA contributions is to review your out-of-pocket medical expenses from last year for you and your eligible dependents. Visit the Eligible Expenses link in the left menu for a comprehensive list of eligible expenses. Then use the Contribution Planning link under the Tools & Forms page of this website to calculate your anticipated expenses.

Making Election Changes

Typically, you may only enroll or make election changes during your benefits enrollment period. The IRS sets strict guidelines on how and when you may change your FSA elections during a plan year. Per these regulations, FSA election changes can only be made if you experience a qualified life status change. These types of status changes include marriage, divorce, birth of a child, adoption of a child, death of a spouse, etc. In addition, the changes made to your FSA election must be directly related to the type of status change you have experienced. For example, a marriage or birth of a child would only allow you to increase your election while a divorce or death of a spouse would only allow you to decrease your election.

Unused Account Balances

Unused contribution balances for FSA accounts cannot be refunded or carried over to a subsequent plan year election. You must use your entire Health Care FSA election prior to your employer’s designated plan year end or you will forfeit the unused account balance. For this reason, you should be careful when determining your election amount and check your balance often to ensure you will spend your entire election amount.

Eligibility to Participate in the FSA Plan

As with most benefit plans, your employer has defined eligibility criteria for participating in the FSA plan. However, it is important to note that it is not necessary for you to enroll in your employer’s medical insurance plan to participate in the FSA plan. Even if you receive your medical insurance through your spouse’s employer, you may still be eligible to participant in your employer’s FSA plan. For complete information on eligibility criteria, please see your employer’s Summary Plan Description (SPD) or contact your benefits services department.

Covering Your Eligible Dependents

You may submit eligible expenses for any individual that you claim as a dependent on your Federal Income Tax Return.

Claim Submission Deadline

Typically, there is a grace period (run-out period) after the plan year ends to allow you to submit claims incurred during the plan year. All expenses submitted must be incurred during the applicable plan year to be eligible for reimbursement. You will need to refer to your employer's Summary Plan Description (SPD) document for your employer’s designated plan end and specific grace period. All claims submitted via US Postal Service must be postmarked by your employer's run-out date to be eligible for reimbursement.

Appealing Claim Denials

If you receive a notice that your claim has been denied, you should carefully review the information in the claim denial letter. Most often, claims are denied because you neglected to include required information on the Claim Form, the supporting documentation you provided was insufficient or you just forgot to provide the necessary supporting documentation. When a claim is denied for these reasons, it is not necessary to appeal the denial. Simply resubmit your claim with the information requested in the denial letter.

If your claim is denied because the item or service is deemed ineligible under the Plan, you have the right to appeal the decision and request the eligibility of your claim be reviewed again. You may review the standard appeals process by accessing the link below. Be sure to also review your employer’s Summary Plan Description to determine if your Plan designates additional rights and/or restrictions for formal claims appeals.

Please click here to review the Notice of Rights to Appeal.

ADP verifies claims eligibility based on IRS regulations and any additional limitations outlined by your employer’s Summary Plan Description. To review a comprehensive list of IRS-approved expenses, please visit the Eligible Expenses link in the left menu. You should also review your employer’s Summary Plan Description for any expenses that may be excluded under your Plan.

Eligible Expense Types

In general, IRS-approved Health Care expenses that are not reimbursed by another benefit plan are eligible for reimbursement through an FSA. For a comprehensive listing of eligible expenses, please visit the Eligible Expenses link in the left menu. If you are uncertain about the eligibility of a specific item, it is always best to confirm eligibility prior to making the purchase.

Retirement or Termination of Employment

Under IRS regulations, you may only submit claims for reimbursement of eligible expenses incurred prior to your retirement or termination date. Your employer has established a grace period during which you may file any unreimbursed expenses incurred prior to your retirement or termination. You may be reimbursed up to your full election amount for eligible expenses that were incurred prior to leaving your employer. Health Care expenses incurred after you leave your employer are not eligible for reimbursement and you will forfeit any unused account balance unless you elect to continue making contributions under COBRA. To determine the termination grace period for your employer, please refer to your employer’s Summary Plan Description (SPD) or contact your benefits services department.

Transferring Funds Between FSA Plans

IRS regulations do not allow funds to be transferred between FSA accounts or plan types. This means that funds from a Health Care FSA cannot be transferred to a Dependent Care FSA and vice versa. You also cannot be reimbursed for Health Care expenses from a Dependent Care account or vice versa.

Annual Contribution Limits

Each FSA has its own separate limits. The minimum or maximum amount that you may contribute to your Health Care FSA is determined by your company's plan and may change from plan year to plan year. Please review your employer's Summary Plan Description (SPD) for your Health Care FSA limits.

Providing Proof of Purchase Eligibility

IRS regulations require that each reimbursement request (claim) be supported by detailed purchase receipts or an Explanation of Benefits (EOB) from your insurance provider. When submitting your claim, be sure to include a receipt or EOB that clearly shows the merchant or provider name, the item or service that was purchased, the cost of the item or service and the purchase date. Additional information on receipt requirements and claim submissions is provided with the Health Care FSA Claim Form package located under the Tools & Forms section of this website.

Purchasing Over-the-Counter (OTC) Items

Over-the-counter (OTC) items used to alleviate or treat personal injury or sickness are usually eligible under the Health Care FSA, provided your employer’s plan allows these types of items. To determine if your plan allows reimbursement for OTC items, please review your employer’s Summary Plan Description (SPD). A comprehensive list of eligible expenses, including OTC items, is available by visiting the Eligible Expenses link in the left menu.