Company Suggests Changing Rules on Medical Reimbursements Excludable From Gross Income

To Whom It May Concern:

[1] Even though Rev. Rul. 2003-43 primarily addresses gross income issues, another important clarification could be made.

[2] As an employer who sponsors an FSA our concern is Q&A- 7(b)(5) of § 1.1252, which addresses claims substantiation for health FSAs and provides that a health FSA may reimburse a medical claim "only if the participant provides a written statement from an independent third party stating that the medical expense has been incurred and the amount of such expense and the participant also provides a written statement that the medical expense has not been reimbursed or is not reimbursable under any other health plan coverage."

[3] The simplicity and potential reduction of paperwork afforded by providing plan participants debit or credit cards is eliminated when submission of full documentation as described above is required.

[4] We, and many other plan sponsors, feel that if an electronic transaction occurs, originating at an authorized health care merchant for a specified known plan co-payment, that no additional documentation or submission be required.

[5] This is an area of tremendous confusion, both for plan sponsors and FSA administrators. A clarification in favor of the above procedure would be a great step in the right direction.