State of California

M E M O R A N D U M


          Date:  June 15, 1992
To:       PERSONNEL MANAGEMENT LIAISIONS
          Reference Code:  92-71

         THIS MEMORANDUM SHOULD BE DISTRIBUTED TO:
                     PERSONNEL OFFICERS


From:     Department of Personnel Administration
          Benefits Division


Subject:  1993 FlexElect Change in Acceptable Substantiation
          for Incurred
          Costs in Reimbursement Accounts

The purpose of this memo is to provide advance information
concerning a change in what will be considered acceptable
substantiation for incurred costs when employees request
reimbursement from their Medical Reimbursement Accounts and
Dependent Care Reimbursement Accounts for the 1993 FlexElect
Plan Year.

Effective January 1, 1993, for the 1993 FlexElect Plan Year,
copies of checks will no longer be accepted as
substantiation for incurred costs when submitting claims for
a Medical Reimbursement Account and/or a Dependent Care
Reimbursement Account.  The following will be considered
acceptable substantiation for incurred costs:

o  A receipt marked "paid".
o  A doctor's statement.
o  An itemized bill for services signed by the person
providing the service.

This change is the result of a ruling received from our tax
attorneys stating that copies of checks including cancelled
checks, are not acceptable substantiation under the Internal
Revenue Code 125 (IRC 125) which requires a written
statement from an independent third party as substantiation
for incurred costs.

Enclosed is a notification letter which is being sent to all
participants in the 1992 FlexElect Dependent Care
Reimbursement Account and/or a Medical Reimbursement
Account.  While this change does not go into effect until
January 1, 1993, the purpose of the letter is to advise
current participants of this change before they make their
1993 FlexElect elections.  This change will not impact the
1992 FlexElect participants, and they may continue to submit
checks as evidence for costs incurred in the 1992 FlexElect
Plan Year.

If you have any questions regarding this information, please
contact Janice Yates, Statewide FlexElect Coordinator at
(916) 324-0535 or ATSS 454-0535.




Patricia Pavone, Chief
Benefits and Training Division

Enclosure