I have a similar situation to the individual in the following thread, with a few differences.
My company's open enrollment period is in October. I elected to contribute $500 to a FSA account for 2013. So far this year I have been reimbursed $250 of the $500 from the spending account. We are expecting a baby in July. Of course we didn't know during the open enrollment period that we would be having a baby. We recently obtained a benefit coverage estimate and the out of pocket is $1,800 for the delivery.
My health coverage plan allows for changes due to "life changing events". The family addition will qualify as a life changing event. I have two questions:
Will the health plan modification allow for additional contributions to a FSA? Do health plan / IRS rules allow for reimbursement of events that happen prior to the funds being available?
I realize some or all of these questions may be plan specific. I'm planning to call when they are back in the office on Monday. I appreciate your help in advance.
Yes life changing allow you to make additional contribution to FSA. However those additional elections can only be used for service dates after the said life event date. That is you use it towards expense that happened before the birth of your child.
Senior Member - 1K
posted: May. 10, 2013 @ 6:40p
I can only answer as it applies to the FSA plan with my agency, but it allows you to change your contribution amount when a life change event occurs (such as a birth or death in the family). The rules and guidelines to allow you to change your contribution amount are enforced by the FSA administrator.
The IRS has nothing to do with how FSA plans are managed or run. The reimbursement guidelines for FSAs are based on the rules provided by the FSA administrator. In my particular agency plan, as long as the medical expense was incurred within the plan year, the amount of the account balance and when deposits are made during the plan year have no direct bearing as to what can be reimbursed. So, for example, if I had open heart surgery on Jan 1 and made just a $150 contribution at the start of January (expecting to contribute up to $2500 for the year), I can set aside the entire $2500 to be applied to the heart operation when I file my claim(s). I can file multiple claims over the plan year as my balance keeps adding up or wait until the end of the plan year and file one claim for $2500.
Based on the information from my agency, the full amount of your expected total plan year amount is available even if you have not contributed the full amount when an unexpected big medical expense bill is incurred.
With a FSA, you have access to the full amount of your annual allotment to your FSA, even before the entire annual allotment has been deducted from your paycheck. Once your employment is verified, you can use your full FSA to pay for eligible health care expenses from the very first day your account became effective. Examples:
Wendy elected $3,000 for her FSA for the Benefit Period. On January 15, Wendyís husband incurred $2,000 in dental expenses. Although Wendy has not yet contributed $2,000 into her health care account (as of January 15), she can still receive a reimbursement for $2,000.
Heidi enrolled in a FSA as a new participant and elected $1,000 for the Benefit Period. On New Yearís Day, Heidi slipped on the ice and fell. She later went to the emergency room where an x-ray revealed a broken wrist, which was set. Heidiís emergency room expenses are eligible for reimbursement under her FSA. Since itís so early in the Benefit Period, Heidi has not had a single allotment taken from her paycheck. She can submit her expenses, but her reimbursement may be held until her employment is verified, since that is when her election is activated for the Benefit Period.
posted: May. 11, 2013 @ 11:48a
Be careful - you cannot use the additional amount to pay for expenses that occurred prior to your life changing event. I tried this once- for the same reason (new child birth) and I was unpleasantly surprised. The FSA is a weird construct that is supposed to behave a but like insurance. Prior to the birth - you were not enrolled in the more "expensive" insurance.
posted: May. 11, 2013 @ 6:47p
Be EXTREMELY careful...I just went throught this and increased ours due to the birth of a child...and our FSA provider wouldn't reimburse me for my hospital copay (for said childbirth) because the date of my hospital admission was the day before the child was born (born at 4am)!
posted: May. 12, 2013 @ 11:13a
jrennachase said: Be EXTREMELY careful...I just went throught this and increased ours due to the birth of a child...and our FSA provider wouldn't reimburse me for my hospital copay (for said childbirth) because the date of my hospital admission was the day before the child was born (born at 4am)!
Wow this is a little surprising, since there is one (and only one) FSA account. So there really isn't a way for them to designate pre-event and post-event dollars, nor are they supposed to track balances available at any particular date (which is why all FSA dollars for the year are available at the beginning of the year). So unless the birth crosses years (e.g., your child was born in 2012 but you increased 2013 contributions), all of the FSA rules I've encountered always match the available dollars for the year against claims for the year.
For the OP, a few tidbits:
- As noted above, different plans are administered in different ways. So please ask about this situation, the timing, and what you can apply the additional funds to cover -- especially in light of the comment above.
- The FSA change is independent of the health plan change. While both are conditioned on the birth, you can do either one, or both (so make sure to do both if you want both to be updated). And it's silly to say, but worth saying anyway -- if you don't currently have family coverage you need to elect that to get the child's hospital stay covered in many cases.
- Some FSA providers limit the overall contribution to the plan for the year, while others limit the monthly (or per pay period) contribution. For example, let's say you already contribute $500 per year and the baby is born in July. You might not be able to increase your contributions until the August payroll, in which case you'll only have 5 months. While technically you could elect an additional $2,000 over your current contributions for those 5 months, some FSA administrators limit the monthly contribution to 1/12 of the FSA limit. So you may be limited to putting in $208.33/month (1/12 of the $2,500 annual maximum) for August to December.
- As always, remember FSA is use it or lose it, so don't over-contribute...
Senior Member - 3K
posted: May. 12, 2013 @ 11:46a
livedog said: Be careful - you cannot use the additional amount to pay for expenses that occurred prior to your life changing event. I tried this once- for the same reason (new child birth) and I was unpleasantly surprised. The FSA is a weird construct that is supposed to behave a but like insurance. Prior to the birth - you were not enrolled in the more "expensive" insurance.
Did the expenses come before the birth or after the birth?
I am sure many people would provide different answers to this question.
My money would be that the expenses came AFTER the birth.
I don't want to be insensitive here. But what if the process of birth is not successful? What do they do in that case? Was the baby born and died? Or was it never born.
It is never black and white. It is always grey.
posted: May. 12, 2013 @ 6:52p
Thanks all, I will reach out to the FSA administrator this week and post my findings. One point I failed to mention in the original post is that the hospital wants payment in advance of the birth.
Senior Member - 1K
posted: May. 12, 2013 @ 9:45p
talonesi said: One point I failed to mention in the original post is that the hospital wants payment in advance of the birth. I think you can and should tell the hospital to pound sand on this. Of course they want pre-payment, and they will tell you everyone else does it this way, but you do not have to do this. How do you know how much it will even cost? You have no idea what services will be used (c-section, epidural, etc). Are you 100% certain you will use this hospital for the birth? What if you ended up at another hospital? Give birth on the side of the road on the way to the hospital? First of all the FSA cannot reimburse you for any payments for services not yet rendered. So you need to pay this yourself and later get reimbursed by the FSA after you have the expense. The date you pre-paid is not relevant to the FSA, but rather the date of service. I personally would just avoid talking to the hospital any further about pre-paying. If they call you and tell you to pre-pay, just tell them that you don't have the money now. If the hospital is in-network with your insurance, more often than not the contract will stipulate that they aren't supposed to bill until after the matter is settled with the insurance. If they push for advance payment, tell the hospital you will report them to your insurance. I bet they will then tell you prepayment is voluntary. If they don't, you can remind them that the hospital is required by federal law to accept patients in active labor without regard of their ability to pay. So if you didn't pre-pay and show up in active labor the hospital still has to admit you. Tell them that you feel their request for pre-payment violates the "Emergency Medical Treatment and Active Labor Act" and report back on what they say.
posted: May. 13, 2013 @ 8:33a
I spoke to the benefits team this morning. According to them when I process the life changing event to add the child to the plan, I will also be able to increase my FSA contribution. I was able to "walk-thru" this example on the benefits website short of a final processing confirmation, to show that it appears to work as advertised. That being said the plan administrator said the "date of service" will need to be on or after the date of birth in order to process the FSA reimbursement. In the case of the hospital asking for prepayment she suggested this shouldn't be a problem as long as the hospital processes the invoice with a "date of service" that matches the birth date or later.
To HighTechnology's point, I don't know how they track the balances of the FSA account and can designate denial of payment based on post event dollars.
I appreciate the feedback from the forum. At this point, I think I will take biomedeng's advice and tell the hospital to kick rocks. I will use the excuse of lack of funds, and payment from a FSA that will need to be increased after the birth. At that point I should know the final out of pocket amount as well final confirmation that the FSA can be increased. I will try and remember to post my results later this summer for the forum to use as a data point.
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