Different benefits have different policies that dictate what happens when the account owner passes away.
HSAs
Upon death, the HSA transfers to the listed beneficiary (or beneficiaries). The beneficiary should reach out to Forma support and provide the death certificate. Our team will then work with our banking-as-a-service partner Unit to determine next steps for the beneficiary, as the requirements differ based on the case and federal jurisdiction of the state the deceased and HSA owner were from.
If the beneficiary is a legal spouse, it becomes the spouse's account and isn’t taxed. Once the account is transferred to the beneficiary, they can use the HSA to reimburse medical expenses of the deceased.
If the account transfers to a non-spouse beneficiary, the HSA ceases to to be an HSA and the beneficiary is taxed on the fair market value of the account. However, they can reduce the includible amount by the amount of any payments made from the HSA for qualified medical expenses incurred by the deceased account owner before death, but only if the payments are made within one year after the death.
Healthcare FSAs
For Healthcare FSA, coverage terminates when the account owner passes away. If any covered spouse or dependent is eligible for COBRA, they could elect to continue Healthcare FSA coverage under COBRA in order to continue to have access.
The decedent's spouse, dependent, or estate could submit claims for expenses incurred prior to death. The proper way to handle this is to have them complete a participant death notification that lists the decedent's executor or their estate, then make payment to the estate.
Each FSA claim submitted to Forma must include a completed Participant Death Notification form.
DCFSAs and Commuter benefits
There is no continuation of Commuter or DCFSA coverage after the death, although claims could be submitted by the estate during any run-out period for expenses incurred prior to death, in the same manner as the Healthcare FSA.
The beneficiary should reach out to Forma Support at support@joinforma.com to request access to the deceased's Forma account to submit claims.