The rules that decide whether an FSA or HRA works are set on day one, not at year end.
Substantiation, run-out and forfeiture are written into the plan before the first dollar is contributed, and they are hard to change afterward. We set them up deliberately, run the accounts through our platform and manage the vendors behind them, including Section 105 HRA arrangements for small-business and farm ownership structures.
Every health FSA has to answer one question: what happens to money left over?
A health FSA can forfeit unused money, carry some of it into the next year or allow a grace period after year end, but it cannot offer both a carryover and a grace period. Each choice changes employee behavior and your exposure.
Carryover
For plan years beginning in 2026, employees can elect up to $3,400 and the plan may carry over up to $680 of unused money. Carryover calms year-end spending, but it keeps the employee in a general-purpose FSA, which matters if they move to an HSA plan.
Grace Period
A grace period lets employees spend last year’s money until the fifteenth day of the third month after the plan year ends. It is generous, but an unspent balance during the grace period can block HSA contributions, so we check it against your whole plan lineup.
Run-Out Period
Run-out is the time to submit claims for expenses already incurred, separate from the time to spend. We set it long enough for real receipts to arrive and short enough to close the year, because an open-ended run-out leaves forfeitures undecided.
Uniform Coverage
A health FSA must make the full annual election available from the first day of coverage. That exposes you when someone spends early and leaves, so we explain the risk plainly when you set the election limit. Uniform coverage risk is part of FSA design.
For a family business or farm, the right HRA depends on how the business is owned.
Owners are often not treated as employees for tax purposes, which limits whether they can benefit from an HRA directly. An arrangement built around a spouse genuinely employed in the business can change that, but only when the facts support it.
Ownership Structure
Sole proprietors, partners and certain S corporation shareholders are each treated differently. We map the ownership structure first, because the same arrangement can work for one entity and fail for another. Ownership structure drives Section 105 HRA design, so it is the first question we ask.
Genuine Employment
A spouse on payroll has to do real work for reasonable pay, documented like any other employee. We set up the plan and the records it depends on, and the judgment on your specific facts belongs to your CPA. Documentation protects a spousal HRA.
Market Reform Rules
An HRA covering more than one current employee generally has to be integrated with group coverage or built as a QSEHRA or ICHRA. We check which rules apply before the plan is written, and counsel decides the close cases. Market reform rules shape every HRA design.
Substantiation is designed in, not added after the first denied claim.
IRS rules require every reimbursement to be substantiated, card swipes included. We decide at setup how that happens, so employees know what to keep and when.
The Card and Receipts
Card transactions verified at the point of sale need nothing further; others need a receipt. We configure the card and tell employees in advance, so a receipt request is expected rather than resented. Clear receipt rules reduce FSA card frustration.
Plan Documents
Every FSA and HRA needs a written plan, and a health FSA needs a cafeteria plan document behind it. We make sure both exist and match what the platform is actually configured to do. Matching plan documents to platform settings is a core FSA and HRA setup step.
Dependent Care Accounts
For 2026 the dependent care exclusion is $7,500 per year, or $3,750 for a married person filing separately. If you want to offer the higher amount, we check the plan document and enrollment materials, because the plan, not the statute, sets what employees may elect.
What employers ask when setting up an FSA or HRA.
Who keeps forfeited FSA money?
The employer, within the plan’s terms. It can offset plan costs or be returned to participants on a uniform basis, but not to individuals based on what each one forfeited. Your counsel confirms the approach. A written forfeiture policy keeps health FSA administration consistent from one plan year to the next.
Can an HRA reimburse individual premiums?
Only through an arrangement built for it, such as a QSEHRA or ICHRA. A standard HRA paired with individual coverage does not meet the market reform rules, which is why the structure is chosen before the plan is written. Choosing the right HRA structure up front avoids costly corrections.
Do we need a separate vendor for each account?
No. We run the accounts through our platform with a single card and portal and manage the vendors behind it, so HR has one place to go. One card and one portal make FSA and HRA accounts simpler for employees and for HR.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
Cafeteria Plans (26 U.S.C. 125)
The tax code section that lets employees pay certain benefit premiums before tax.
Health Savings Accounts (26 U.S.C. 223)
Tax rules for health savings accounts paired with qualifying high-deductible health plans.
Excepted Benefit HRA
An annual reimbursement account added on top of a group health plan.
Medicare HRA
Reimbursing Medicare premiums for retirees.
Spousal Incentive HRA
Paying employees who use a spouse’s plan instead of yours.
Section 105 Plans for Owners and Farm Families
Running a business owner’s family medical costs through the business.
Medical Credit and Loan Accounts
Help with health bills after FSA and HSA money runs out.
Small Office Benefit Account Package
A short set of FSA and HSA accounts for a small office.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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