If you decide to contribute to the Health Care Reimbursement FSA or the Dependent Care FSA, you must carefully determine your annual election amount and monitor your spending during the flex plan year. According to current IRS regulations, the money you set aside must be used for expenses incurred during the plan year in which you make the election. Any funds left in the account at the end of the year will be forfeited.
Essentially, the Internal Revenue Service set up FSAs as a means to provide a tax break to employees and their employers. As an employee, you agree to set aside a portion of your pre-tax salary in an account, and that money is deducted from your paycheck over the course of the year. The amount you contribute to the FSA is not subject to Social Security (FICA), federal, state, or local income taxes — effectively adjusting your annual taxable salary. The taxes you pay each paycheck and collectively each plan year can be reduced significantly, depending on your tax bracket. And, as a result of the personal tax savings you realize, your spendable income will increase.
The example below illustrates how a flexible spending account can save you money.
Bob and Jane’s combined gross income is $30,000. They have two children and file their income taxes jointly. Since Bob and Jane expect to spend $2,000 in adult orthodontia and $3,300 for daycare next plan year, they decide to direct a total of $5,300 into their FSAs.
|
Without FSAs | With FSAs |
| Gross income: | $30,000 | $30,000 |
| FSA contributions: | 0 | -5,300 |
| Gross income: | 30,000 | 24,700 |
| Estimated taxes: | ||
| Federal | -2,550* | -1,755* |
| State | -900** | -741** |
| FICA | -2,295 | -1,890 |
| After-tax earnings: | 24,255 | 20,314 |
| Eligible out-of-pocket | ||
| Medical and dependent care expenses: | -5,300 | 0 |
| Remaining spendable income: | $18,955 | $20,314 |
| Spendable income increase: | $1,359 |
*Assumes standard deductions and four exemptions.
** Varies, assume 3%.
The example above is for illustrative purposes only.
Every situation varies and we recommend that you consult a tax advisor for all tax advice.
Health Care Reimbursement FSA
This flex account lets you pay for certain IRS-approved medical care expenses not covered by your (or your spouse’s) medical, dental, or vision plans with pre-tax dollars. For example, cash that you now spend on deductibles, copayments, or other out-of-pocket medical expenses can instead be placed in the Health Care Reimbursement FSA pre-tax, to pay for these expenses. The annual maximum contribution to the Health Care Reimbursement FSA is $3,900.
Eligible Expenses
Eligible health care expenses for the Health Care Reimbursement FSA include more than just your deductible and copayments. Generally, any medically necessary health care expense that you can deduct on your tax return is considered an eligible expense. Please see our additional material on eligible expenses later in this folder. You may also go to IRS Publication 502, Medical and Dental Expenses available at http://www.irs.gov/publications/p502/index.html.
Ineligible Expenses
The items listed below are examples of products and services that are NOT eligible for reimbursement under your Health Care Reimbursement FSA, according to the IRS. Typically, expenses for items that promote general health are not eligible expenses. Please note that this list is not all-inclusive, and is subject to change.
- Babysitting and Child Care, Diaper Service
- Cosmetic Surgery
- Electrolysis or Hair Removal, Hair Transplant
- Health Club Dues
- Health Coverage Tax Credit
- Medicines and Drugs from Other Countries
- Nutritional Supplements – (unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician)
- Swimming Lessons
- Teeth Whitening
- Veterinary Fees – except for the care of seeing- or hearing-impaired animals
- Weight-Loss Program
The Dependent Care FSA lets you use pre-tax dollars towards qualified dependent care. The annual maximum amount you may contribute to the Dependent Care FSA is $5,000 (or $2,500 if married and filing separately) per calendar year.
If you elect to contribute to the Dependent Care FSA, you may be reimbursed for:
- The cost of child or adult dependent care
- The cost for an individual to provide care either in or out of your house
- Nursery schools and preschools (excluding kindergarten)
Eligible Expenses
In order for dependent care services to be eligible, they must be for the care of a tax dependent child under age 13 who lives with you, or a tax dependent parent, spouse, or child who lives with you and is incapable of caring for himself or herself. The care must be needed so that you and your spouse (if applicable) can go to work. Care must be given during normal working hours — Saturday night babysitting does not qualify — and cannot be provided by another of your dependents.
General FSA Plan Provisions
1. Is the FSA Program Right for Me?The School District’s Flexible Spending Accounts are beneficial for anyone who has out-of-pocket medical, dental, vision, hearing, or dependent care expenses beyond what his or her insurance plan covers.
It’s easy to determine if a FSA will save you money. At enrollment time, you will need to determine your annual election amount. Estimate the expenses that you know will occur during the year. These include out-of-pocket expenses for yourself and anyone claimed as a dependent on your taxes. If you had $100 or more in recurring or predictable expenses, the accounts can help you stretch your dollars.
2. How Do the Accounts Work?If you decide to enroll in one or both of the accounts, your contributions are taken out of each paycheck — before taxes — in equal installments throughout the plan year. These dollars are then placed into your FSA. When you have an eligible health care or dependent care expense, you must submit a claim form along with an itemized receipt to be reimbursed from your account.
The Health Care Reimbursement FSA will reimburse you for the full amount of your annual election (less any reimbursement already received), at any time during the plan year, regardless of the amount actually in your account.
The Dependent Care FSA will only reimburse you for the amount that is in your account at the time you make a claim.
3. Your Flex Plan Year
Your flex plan runs from July 1 to June 30. To be eligible for reimbursement, your eligible expenses must be incurred within the plan year.
4. All employees must complete an enrollment form, and submit it to Denise Moore.
Whether you are enrolling into the FSA plan, or waiving out of it, all employees must indicate their flex plan elections for the upcoming flex year. You may make your elections at the bottom of the Insurance Selection Form. Be sure to indicate the amount you wish to defer into both the Health Care Reimbursement account, and the Dependent Daycare account. If you do not wish to participate in one or both accounts, simply put a $0 in the respective areas.
With TASC processing reimbursement requests every day, Monday through Friday, your reimbursement will be in your bank account within 48 – 72 hours of making the request.
If you already have signed up for the automatic deposit, you do not need to re-sign up for it now. Those employees who do not have automatic deposit today may complete the attached FlexSystem Direct Deposit Election form. Mail or fax the form into TASC.
Questions?Feel free to call our new administrator, TASC, at 800-422-4661; or, you may call Sandy Ely at 515-957-3430; or, our insurance agency representatives from Holmes Murphy & Associates at 515-223-6800.