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DOL releases new guideance on reservists called to duty
"I am being called to active duty and have questions about my employer provided pension and health benefits. Where can I get more information about my benefits?"
In Notice 2006-69, the IRS expands (1) the automatic substantiation procedures for the payment of expenses under Health FSAs and HRAs by a debit card, credit card or stored value card and (2) the use of such cards to pay expenses under dependent care assistance programs. The following is a summary of the important provisions:
Copayment Amounts: If an employer's health plan has copayments in specific dollar amounts ($5 or $10) and the dollar amount of the transaction at the health provider equals an exact multiple of not more than five times the dollar amount of the copayment for specific service (drug or office visit), the charge is fully substantiated without the need for submission of a receipt or for further review. In addition, if the employer's health plan has multiple copayments for the same benefit (tiered copayments for drugs), exact matches of multiples or combinations of the copayments (but not more than the exact multiple of five time the maximum copayment) will similarly be fully substantiated without the need for submission of a receipt or further review.
Example: Fred is a participant in his employer's health FSA. The employer's health plan has a $5 copayment for generic drugs and a $10 copayment for all drugs. He uses a debit card at a pharmacy to purchase five non-generic drugs for a total card transaction of $50. Because the amount of transaction is the exact multiple not in excess of five times the maximum copayment for drugs under Fred's coverage and the transaction is at a pharmacy, the transaction is substantiated without further review or documentation.
If Fred would have presented his card to purchase six non-generic drugs for a total card transaction of $60, the entire transaction must be further substantiated through the submission of receipt indicating that Fred purchased drugs, the date of the purchase and the amount of the purchase.
Inventory Information Approval System: An employer may adopt a system that may automatically substantiate claims using a system that checks inventory control information for the items purchased against a list of qualified medical expenses. An employer using the system may expand the use of the debit card, credit or stored value card to include merchants or service-providers that do not have health care related merchant category codes, provided that only the non-health related merchants or service-providers where the card can be used are those that use the system. This means that if a participant purchases prescriptions at a pharmacy along with nonprescription medications and other items, the store's system can only permit the debit card, credit card or store value card to be used to purchase qualified medical expenses. The individual would have to use other means to purchase the other items and the debit card can not be used.
Direct Third-Party Substantiation: If an employer is provided with information from an independent third party (EOB), the claim will be treated as being fully substantiated without the need for submission of a receipt by the employee or further review. This means that if an employer coordinates with the medical plan and the Health FSA or HRA to provide an EOB from the plan indicating the amount the employee is responsible for and what the expenses is and the date of the expense, the claim is treated as being substantiated without the need for the employee to submit additional information regarding the expense.
Prohibition Against Self-Certification: IRS indicates that if a plan's copayment matching system relies on an employee to provide a copayment amount without independent verification of the amount, claims will be treated as not being substantiated and all amounts paid from the plan are included in the employee's income, including amounts paid for medical care whether or not substantiated.
Dependent Care Assistance Programs: An employer may allow employees to pay for a dependent care expense with a debit card, credit card or stored value card only after the services have been incurred and such amount has been substantiated.
