IRS issues memo on correction procedures for improper health FSA payments

The Internal Revenue Service's Office of Chief Counsel recently issued a memo "Correction Procedures For Improper Health Flexible Spending Arrangement Payments". The memo includes the following issues:

"Whether the correction procedures for debit cards provided in the proposed cafeteria plan regulations may be applied to improper payments from a health flexible spending arrangements (health FSA).

Whether an employer may alter the order of correction procedures provided in the proposed cafeteria plans regulations.

In cases in which all other correction procedures have been exhausted and the employer treats the improper payment as business indebtedness, whether the amount of a forgiven improper payment is reported by the employer to the employee on Form W-2 or Form 1099."

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