6 Year-End Pre-Tax Health Benefit Tips Your Employees Need

Steve Jackson November 12, 2018


Are you aware of the perks pre-tax benefit accounts, like FSAs, offer?  Generally, federal guidelines provide clear direction on medical expenses, but we’ll go over some of the general ground rules for making a smooth year-end for employees (and you)!

It’s no secret that your employees probably need some extra help to reduce the burden of potential out-of-pocket medical expenses. One way to ease the burden is to ensure your employees have a solid grasp on the types of benefits you offer in the first place.

Are you aware of the perks pre-tax benefit accounts, like flexible spending accounts (FSAs), offer?  For FSAs, many plan years will be ending in December. It is important that participants have a clear understanding of their account balances and how to best spend-down those balances to not forfeit any dollars. 

Let’s focus on one key phrase: qualified medical expenses. What determines whether an expense is qualified or not? Generally, federal guidelines provide clear direction on these medical expenses, but we’ll go over some of the general ground rules for submitting claims for reimbursement from these accounts.    

You’ll want to share these tips with your employees!

1. What is substantiation?

For participants to receive tax-favored treatment on these medical expenses, they must be qualified under IRS rules and generally reviewed by a third party. These administrators will review each claim and decide if the expense qualifies for this special tax treatment or not.

2. What are the substantiation requirements for pre-tax claims?

Does your medical expense meet the standard definition: “treating or alleviating a specific disease or condition”?  Your substantiation material should be clear in outlining your incurred service or expense so that the administrator can quickly and accurately approve your claim. 

Proper substantiation material can include the following: 

  • Explanation of Benefits (EOB).
  • Statements from insurance carrier and a receipt.
  • Doctor’s note.
  • Rx slip stating: date of service, dollar amount, and brief description of the service. 

Voided checks, credit card statements, and balance due statements are generally not valid forms of substantiation.  

3. Are there requirements for substantiation at year-end?

Most health FSA accounts follow general guidelines; however it is encouraged to speak to your HR administrator for details on your plan. It is important for you to know the last day of your plan year to submit expenses. 

Health FSAs have two potential options:  a $500 rollover or a Grace Period. Here’s the difference between the two that you can explain to your employees.

  • Rollover Option
    • If your employer has adopted the rollover option, then you may rollover up to $500 of unused Health FSA funds into the next plan year.  Check your balance to see if you will have more than $500 leftover in this account.  If so, you will want to plan accordingly to spend down those dollars to below $500 prior to year-end.
  • Grace Period Option
    • If your employer has adopted the Grace Period, then you will be given an additional time (generally 2.5 months after the plan year ends) to incur expenses and be reimbursed from your account.  Any previous year’s balance can be rolled into the Grace Period. 
  • RunOut Period
    • Consider this your last chance to submit claims from the previous year.  Following the last day of the Plan Year or Grace Period, your employer may allow a run-out period for additional time to submit claims incurred from the previous Plan Year.  Once the Run-Out Period has ended, you will not be able to submit any additional claims from the prior year.      

4. What items should be considered for year-end prep for pre-tax benefits?

Two things are very important for your employees to consider: 

  1. Review your current account balance.
  2. Check your deadlines for the last day to submit claims. 

With open enrollment likely beginning soon, have your employees start their planning process to determine how much they spent this year in expenses and if they might expect the same for next year. Participation in these accounts makes it much easier to project expenses in the coming year.

5. Minimize forfeiting unused money.

If your employees still have a large balance in their account, use these easy steps to minimize forfeiting unused amounts:

  1. Log in to your insurance carrier’s portal and review previously posted EOB statements to ensure that you have submitted all for reimbursement
  2. Pour through your previous medical provider’s statements to see if you missed a submission
  3. Your pharmacy keeps records of your filled prescriptions – have you submitted all that you can? 
  4. Were you putting off that teeth cleaning or maybe that eye exam?  Get it scheduled and take advantage of those pre-tax savings now. 

6. How can PrimePay help?

The claims substantiation and submission process can be cumbersome. PrimePay makes it easy for participants with the following features:

  • Debit Cards are included so that many of the medical expenses can be paid for directly with the card. Over 70 percent of our participant’s card transactions result in no additional claims submissions.
  • ClaimsFlow technology – employees can sign up for this new service where their individual EOBs are sent to PrimePay automatically for reimbursement.  The EOB claims submission process if removed entirely.
  • Faster claims reimbursement is granted through our mobile application and several online tools that make claim submission a breeze.   To learn more, contact Angela Cervio at Premier Insurance Corp. 239-542-7101 X208

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