Normally when an employee contributes some of his or her pay to an employer sponsored health care flexible spending account (“FSA”), the contribution is irrevocable and must be used for unpaid medical expenses or it will be forfeited. However, if permitted by an employer’s health care FSA, certain reservists and active duty military personnel may elect to receive a “qualified reservist distribution” (“QRD”). A QRD is a distribution to a participant in the health care FSA of all or a portion of the participant’s health care FSA if:
- the participant is a reservist, ordered or called to active duty for a total period of at least 180 days or for an indefinite period, and
- the request for a distribution is made between the period beginning with the order or call to active duty and ending the last day of the plan year that includes the date of the order or call to active duty.
An eligible reservist includes a reservist in the Army National Guard of the United States, the Army Reserve, the Navy Reserve, the Marine Corps Reserve, the Air National Guard of the United States, the Air Force Reserve, the Coast Guard Reserve, or the Reserve Corps of the Public Health Service.
For purposes of making QRDs, the amount distributable is the amount contributed to the health care FSA as of the date of the QRD request minus all health care FSA reimbursements issued to the participant as of the date of the QRD request. A participant may submit health care FSA claims for reimbursement for eligible expenses that were incurred before the date the QRD is requested and a participant is no longer eligible to receive health care FSA reimbursements with respect to eligible expenses incurred after the date a QRD is requested. A QRD will be included in the participant’s gross income is subject to employment taxes, and will be reported on a Form W-2 for the year in which the QRD is paid.
For more information, contact Jordan Schreier in Ann Arbor at 734-623-1945.