March Question of the Month: Why did an FSA claim get denied for stockpiling?

Q:  An FSA participant had an end-of-year claim largely denied by SBA. The reason given was that the purchase was considered “stockpiling.”  What is considered stockpiling and why is it a problem?


A:  FSA funds are meant to be spent on items to be utilized in the plan year. In this case, the participant submitted a claim on December 28th for nine boxes of disposable contacts. The IRS doesn’t have any official rules about what constitutes “stockpiling” but officials have issued guidance to TPA’s that, in reviewing claims for large quantities of items purchased towards the end of a plan year, we should ask if it is probable that the items can be used during that plan year. As the participant only had three more days of your plan year remaining, we allowed the purchase of one box of contacts because they could be used in December but denied the other eight boxes. In the same way, a FSA participant cannot go out at the end of a plan year and buy large quantities of over-the-counter medications and items. It is important to remind participants who do not have the ability to carryover FSA funds to track their account and spend throughout the year to avoid either losing their funds or having their claim denied for stockpiling.

-Gina