Flexible Spending Accounts

What is a FSA?
A Flexible Spending Account (FSA) is an employee benefit program that allows you to set aside money on a pre-tax basis for certain kinds of common expenses. With an FSA, you can reduce your taxes while paying for necessary services or expenses. The two types of accounts available are Medical Care Reimbursement and Dependent Care Reimbursement.

The Medical Care Reimbursement Account covers eligible health care expenses not reimbursed by any medical, dental or vision care plan you or your dependents may incur during the plan year. This includes deductibles, co-payments, and other non-covered expenses. You can deposit a maximum of $3,900 for the plan year into a medical reimbursement account.

The Dependent Care Reimbursement Account covers eligible dependent care expenses incurred so you and your spouse, if married, can work, look for work, or your spouse can attend school full-time. You can deposit a maximum of $5,000 if married filing a joint return ($2,500 for single tax filing) for the plan year into a dependent care reimbursement account.

Who Is Eligible?
All regular, full-time employees may participate in the FSA plan. Qualifying medical expenses include expenses incurred for yourself and anyone you claim as a dependent on your federal income tax return. Qualifying dependent care expenses include expenses for your dependent children under age 13 and a person of any age whom you claim as a dependent on your federal income tax return and who is physically or mentally incapable of caring for himself or herself.

When can I enroll?
An open enrollment period is held once each year (approximately from mid November to mid December) for the following plan year. Payroll deductions begin with the January paycheck and are deducted from 26 paychecks. New employees have 30 days from their first day of employment to enroll. If new employees do not enroll during this 30 day period, they will be given the opportunity to enroll at the Open Enrollment period each year. Once enrolled, changes in contributions can NOT be made unless you have a change in status such as marriage, divorce, birth of a child, spouse employment change, or death of a spouse or dependent.

What are the Advantages?
Under Section 125 of the Internal Revenue Code, amounts contributed to an FSA are NOT subject to federal and state income taxes or social security taxes. Employees who participate benefit by reducing their taxable income in order to increase their level of "take-home" pay.

How do I submit a claim?
You can submit a claim for an eligible expense at any time during the plan year. For 2009 the plan year will begin January 1, 2009, and end December 31, 2009. You have 90 days after the end of the plan year to submit claims. You should include appropriate documentation to support your claims, such as itemized receipts or an explanation of benefits from your insurance company. Claims can be mailed or faxed to Blue Cross at 1-877-889-3610.

What happens at termination?
If you terminate employment, your participation in the plan will end and no further salary reduction contributions can be made for medical reimbursement or for dependent care reimbursement. If you still have money in your flexible spending accounts, you have access to these monies for any expenses you incurred prior to your termination date. Note the warning below on unused money in a FSA.

Other Important Information!

• Warning! Be Conservative! If you have any money left in your account at the end of the year and have no outstanding claims for eligible expenses incurred during the plan year, the unreimbursed balance is forfeited. This is known as the "USE IT OR LOSE IT RULE."
• Any claims you make for reimbursement under the plan cannot also be claimed as deductions or credits on your tax return.
• Taxes do not apply to reimbursement checks you receive under the plan; therefore you do not report these as income on your tax returns.
• If the combined income of you and your spouse is under $18,000 per year, it may be to your advantage to use the child care credit on your income tax return instead of utilizing the flexible benefit plan for dependent care.