How do FSAs work?
• FSAs operate by the employer setting a maximum amount available in the FSA fund. • The IRS Uniform Coverage Rule requires that the full amount of funds be available from the start of the plan. This structure is similar to an insurance plan rather than a mere reimbursement account. • Employees make their “benefit elections” prior to the beginning of each plan year (before benefits become available). • The employer may also contribute to the account as long as it is specified to the employee in the written plan document. The amounts employees may elect to contribute should be also detailed in the plan document. • Once the elections are made they may not be changed unless there is a “change of status”. • During the plan year, employees submit written proof of expenses for reimbursement. • Employees must use their total amount set aside for their FSA account within the plan year or within an employer’s discretionary 2 1/2 month extension otherwise the balance is forfeited to the employer
