1. Maximum Amount of Reimbursement Must Be Available at All Times

The uniform coverage rule stated under Prop. Treas. Reg. § 1.125-2, Q/A-7 (b)(2) requires that “the maximum amount of reimbursement under a health FSA must be available at all times during the period of coverage (properly reduced as of any particular time for prior reimbursements for the same period of coverage).”  The maximum amount of reimbursement at any particular time during the period of coverage cannot be related to the amount of premiums paid by the participant for coverage under the health FSA for the applicable period.

The uniform coverage rule embodies the following two key administrative points.

1. Reimbursements Cannot Be Limited According to How Much the Employee Has Contributed to the Plan
   The maximum amount of reimbursement under a health FSA must be available at all times during the period of coverage (generally the 12 month plan year), reduced only for any prior reimbursements for the same period.

2. If the Employee Stops Paying the Premium, Coverage Stops
   Health FSA coverage is like insurance.  If the employee stops making contributions (that is, paying the premium), then coverage stops.  COBRA rights may apply if there is a qualifying event.  The administrator should only reimburse claims incurred while the health FSA coverage is actively in force.

2. Reducing Risk to the Employer Caused by Uniform Coverage Rule

The following are some plan designs that will reduce the risk to employer.

1. Lower the Maximum reimbursement amount
2. Extend the eligibility waiting period
3. Limit the categories of medical expenses that the plan will reimburse
4. Accelerate contributions
5. Limit health FSA eligibility to those covered under primary plan
6. Narrow the change in election rules (e.g., no election changes for changes in status)
7. Combine voluntary pre-tax final paycheck option with COBRA waiver

Cafeteria Plan Chart Section 213 (Reimbursed Medical Expenses) "Uniform Coverage" Rule Use-It-or-Lose-It Rule