What documentation is required for LSA expenses?

Documentation requirements are determined by your employer. Please check with Surency to see what documentation is required. Surency could require proof of documentation to ensure that purchases meet the list defined by your employer.

Are there any tax implications with an LSA?

Since your employer funds an LSA with post-tax dollars, the dollars you spend is considered taxable income.

What is a Lifestyle Spending Account (LSA)?

A Lifestyle Spending Account (LSA) is a spending account for your well-being. It is a post-tax spending account, funded by your employer, with eligible expenses that will depend on your particular plan. Eligible expenses for LSAs will differ from plan to plan, but in general, eligible expenses are purchases that promote a healthy lifestyle.

Why do I need to submit receipts/documentation for my FSA claims?

The IRS requires that FSA funds are only used on eligible expenses and that there is documentation to support that. It is Surency’s job as an FSA administrator to make sure you and your employer are compliant with the IRS rules. Learn more here.

Who is eligible for a QSEHRA?

A QSEHRA must be offered on the same terms to all eligible employees. However, a QSEHRA may disregard employees who have not completed 90 days of service, employees under age twenty-five (25), part-time or seasonal employees, employees covered by a collective bargaining agreement unless the collective bargaining agreement has a provision allowing for this coverage, and nonresident aliens who receive no United States-source income.

What is the impact of QSEHRAs on subsidized coverage?

Generally, an individual may not receive health care premium tax credit for purchasing health insurance through a Health Insurance Marketplace if the individual has affordable coverage provided by his/her employer. However, an employee who enrolls in a qualified health plan on the Health Insurance Marketplace, his/her health care premium tax credit may be reduced or eliminated by the benefit available under the QSEHRA.

What is the tax treatment of QSEHRA reimbursements?

Although reimbursements of qualified medical expenses from a QSEHRA are generally excluded from the income of the employee, employers should maintain some form of certification from employees certifying that the employee has minimum essential health coverage (MEC) for tax purposes.

An additional requirement is the employee must have MEC during the month in which the qualified medical expense is incurred. Reimbursement of health insurance premiums should be excluded from tax as long as the reimbursement is for insurance that was MEC. Reimbursement of other qualified medical expenses would only be excluded from tax if the employee had insurance that is MEC at the time the expense was incurred.

If any reimbursement from a QSEHRA is taxable, the employer would be responsible for the tax reporting and withholding. The taxable amount of the reimbursement would be reported on the employee’s Form W-2.

What are the restrictions on QSEHRA reimbursements?

Reimbursements can be made only to those employees who provide “proof of coverage” that qualify as MEC.

What is generally required to comply with QSEHRA reimbursement rules?

Reimbursements can only be made for qualified medical expenses under IRC Section 213(d) of the eligible employee and his/her family members (as determined under the plan). QSEHRA assets may also be used to reimburse health insurance premiums.

Each qualified medical expense submitted for reimbursement must be substantiated with documented proof as a qualified medical expense by Surency prior to reimbursement from the QSEHRA account.

Reimbursements can be made for expenses incurred as of the effective date of the QSEHRA or the date the eligible employee first became eligible for the QSEHRA (not before). Reimbursements are not permitted for expenses for which a deduction was allowed on any prior year tax returns.