Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Health InsuranceHard
A Florida employer offers a Flexible Spending Account (FSA) to its employees. An employee contributes $2,000 to their healthcare FSA for the year. In October, they incur $1,500 in eligible medical expenses. In December, they incur another $1,000 in eligible medical expenses. What is the maximum amount the employee can be reimbursed from their FSA for the year, assuming no grace period or carryover provision?
- A$2,500
- B$1,500
- C$2,000
- D$3,000
Show answer & explanationAnswer & explanation
Correct answer: C. $2,000
The employee contributed $2,000 to their FSA. While they incurred $2,500 in total expenses ($1,500 + $1,000), an FSA is limited to the amount contributed for the plan year. Therefore, the maximum they can be reimbursed is their contributed amount, which is $2,000.
Why the other options are wrong
- A. Incorrect. This is the total expenses incurred, but it exceeds the contributed amount for the FSA.
- B. Incorrect. This only accounts for the first expense, not the total allowed by contributions.
- D. Incorrect. This amount is higher than both contributions and incurred expenses that can be reimbursed.
FSA Reimbursement Limit
Flexible Spending Account (FSA) reimbursements are limited to the amount contributed by the employee for that plan year, even if total eligible expenses exceed contributions.
- Reimbursement cannot exceed annual contribution.
- Funds are 'use-it-or-lose-it' (with exceptions for grace period/carryover).
- Employer owns the funds until reimbursed.
- Contributions are pre-tax.
Memory trick: Your FSA fund is your limit, don't spend more than you commit!