Flexible Spending Accounts
A great way to plan ahead and save money over the course of a year is to participate in our Flexible Spending Account (FSA) programs.
These accounts allow you to put a portion of your salary, on a pretax basis, into reimbursement accounts. Pretax means the dollars you use for eligible expenses are not subject to Social Security tax, federal income tax and, in most cases, state and local income taxes. The money you would have paid in taxes can then be used to pay qualified expenses. When you enroll, you must decide how much to set aside for each account and you will need to estimate your expenses conservatively as the law requires that you use your expenses during the plan year and the applicable grace period (the “use it or lose it” rule).
Health Care Flexible Spending Account
A Health Care Flexible Spending Account enables you to take control of your out-of-pocket health expenses by contributing pretax money to your account to pay for everyday eligible expenses. The result can be savings of up to 40 percent on hundreds of products and services not covered by your medical, dental or vision plan such as co-payments, co-insurance deductibles, prescription expenses, lab exams and tests, contact lenses, eyeglasses and more.
A complete list of qualified expenses can be found in publication 502 on the IRS website.
How FSAs Work
- Estimate what you’ll need for eligible out-of-pocket health care and/or dependent care expenses for the calendar year (1/1 – 12/31), or portion thereof depending upon your effective date of coverage. Estimate carefully and contribute only as much as you think you’ll need, subject to the plan limit.
- Divide your total estimated expenses by the number of paychecks you receive yearly, or portion thereof depending on your effective date of coverage. This is the amount that will be deducted from each paycheck and deposited into your non-interest-bearing account(s).
- Anytime you have an eligible expense, submit your receipt to IGOE Administrative Services, along with a Reimbursement Request Form, or use your FSA Debit Card. You’ll then be reimbursed with funds from your account.
- NEW! Important: If you elect both the Health Care FSA and the CDHP medical plan during the same year, you will be unable to use your FSA Debit Card for medical expenses; only Dental, Vision, and other eligible expenses. You will, however, be able to submit eligible medical expenses with a Reimbursement Request Form after your HRA fund has been exhausted.
Dependent Care Flexible Spending Account
Dependent Care Accounts help pay for day-care expenses associated with caring for elder or child dependents that are necessary for you or your spouse to work or attend school full-time. The dependent must be a child under age 13 and claimed as a dependent on your federal income tax return, or a disabled dependent, of any age, incapable of caring for him- or herself and who spends at least eight hours a day in your home.
Unlike the Health Care FSA, reimbursement from your Dependent Care FSA is limited to the total amount that is deposited in your account at that time. In order to be reimbursed, you must provide the tax identification number or Social Security number of the party providing. care and that provider cannot be anyone considered your dependent for income tax purposes.
| Account Type | Eligible Expenses | Annual Contribution Limits | Benefit |
|---|---|---|---|
| Health Care Flexible Spending Account | Most medical, dental and vision care expenses that are not covered by your health plan (such as co-payments, co-insurance, deductibles, eyeglasses and doctorprescribed over-the-counter medications | Maximum contribution is $2,550per year | Saves on eligible expenses not covered by insurance, reduces your taxable income |
| Dependent Care Flexible Spending Account | Dependent care expenses (such as day care, after-school programs or elder-care programs) so you and your spouse can work or attend school full-time | Maximum contribution is $5,000 per year ($2,500 if married and filing separate tax returns | Reduces your taxable income |
FSAs Let You Save on Your Taxes
Here is an example of how much you can save when you use the FSAs to pay for your predictable health care and dependent care expenses.
| Account Type | With FSA | Without FSA |
|---|---|---|
| Your taxable income | $50,000 | $50,000 |
| Pretax contribution to Health Care and Dependent Care FSA | $2,000 | $0 |
| Federal and Social Security taxes | $11,701 | $12,355 |
| After-tax dollars spent on eligible expenses | $0 | $2,000 |
| Spendable income after expenses and taxes | $36,299 | $35,645 |
| Tax savings with the Medical and Dependent Care FSA | $654 | N/A |