Flexible Spending Accounts

You are eligible to participate in the Flexible Spending Account program on the first day of employment. Flexible Spending Accounts allow you to reduce your taxable income by setting aside pre-tax dollars to pay for un-reimbursed eligible expenses for you and your family. You can increase your disposable income while you cover out-of-pocket expenses.

There are two types of Flexible Spending Accounts (FSAs): Health Care FSAs and Dependent Care FSAs.  You can elect to participate in either or both of these accounts.

Health Care Flexible Spending Accounts

Health Care FSAs allow you to receive reimbursement for out-of-pocket health care expenses for you and your family members. Your dependents do not need to be participants of your employer's medical and dental plans nor do you need to sign specific family members up to participate in the FSA. These medical, dental or other health care-related expenses cannot be eligible for reimbursement through any insurance or other benefit program. You can elect up to $2,500 each year for your Health Care Flexible Spending Account. Your contributions will be deducted directly from your pay on a pre-tax basis. Out-of-pocket health care expenses incurred by you and your family are eligible if the service occurred during the plan year or 2 1/2 month grace period and while you were making contributions to the plan. When you submit a claim, you can be reimbursed up to your full annual election (less any previous reimbursement). Please note that health insurance premiums paid for your employer's plan or for other health insurance coverage are not eligible for reimbursement

Dependent Care Flexible Spending Accounts

Dependent Care FSAs allow you to set aside pre-tax dollars to pay for dependent care (such as licensed day care centers and in home dependent care) which allows you and your spouse to work outside your home, to look for work or to attend school full-time. Eligible expenses include day care centers, nursery and pre-school programs, before and after school care, summer day camps and babysitter expenses.  Educational expenses (including Kindergarten tuition) are not eligible for reimbursement.  Eligible expenses must be incurred during the plan year and while you are making contributions to the plan. Eligible expenses may include dependent care costs for:

1. A dependent under the age of 13 whom you can claim as a dependent on your federal income tax return, or
2. A spouse or other tax dependent who is incapable, either physically or mentally, of caring for himself or herself

Your dependent care provider must be an individual that you do not claim as a dependent on your tax return.  In addition, if your provider is your child, he/she must be 19 or older.  You can elect up to $5,000 for Dependent Care FSAs annually.  If you participate in a Dependent Care FSA, you cannot apply the same expenses for a dependent care tax credit when you file your income taxes.  If you use both a tax credit and a dependent care FSA, the tax credit is reduced by the amount you contribute to the FSA.  When you submit a claim, you can only be reimbursed up to the amount you have contributed to-date (less any previous reimbursements).

Here is an example of a Dependent Care FSA participant with $5,000 of out-of-pocket expenses.  The chart below shows that the participant would have $1,283 of additional salary to take home by using an FSA.

* Assumes federal withholding of 15%, state withholding equal to 20% of federal and social security withholding of 7.65%

Use It or Lose It

Carefully estimate your expenses when you make your Health Care or Dependent Care election.  These elections are subject to the “use it or lose it” rule.  Any funds remaining in your Health Care account after the 2 1/2 month grace period will be forfeited. Any funds remaining in your Dependent Care account at the end of the plan year will be forfeited.  You will continue to have a 120-day deadline following the end of the plan year to submit claims for health care expenses incurred during both the calendar year and 2 1/2 grace period and Dependent Care expenses incurred during that year. It is better to under-estimate your annual expenses.  You will have the opportunity to make a new FSA election for the next plan year. This will allow you to modify your election each year, based upon your individual circumstances.

Changing Your Benefit Election

You may request to change your FSA election during the plan year if you experience a Change-in-Status Event that affects your, your spouse’s or your dependent’s eligibility for coverage under this plan or another employer’s plan.