Flexible Spending Accounts
An FSA is an employer-sponsored plan that allows to you to deduct dollars from your paycheck and deposit them into a special account that’s protected from taxes. FSAs are exempt from federal taxes, Social Security (FICA) taxes and, in most cases, state income taxes. Your FSA dollars can be used to pay for a variety of out-of-pocket health care expenses. For a complete list of eligible expenses, you may review Publication 502 at irs.gov.
Your FSA becomes effective the first of the month following enrollment. Contributions to your account begin as soon as administratively possible after you enroll.
If you’re a new employee, check with your HR department to see when you’re eligible to enroll. Existing employees may elect to participate during annual Open Enrollment. If you have a life event change (for example, birth or adoption of a child), you may be able to enroll without waiting for the annual Open Enrollment if you enroll within 30 days of the change.
• Health Care FSA: Covers medical, prescription, dental and vision expenses
• Dependent Care FSA: Covers dependent care expenses including daycare, nursery school and day camp for children, and services for adult dependents who cannot care for themselves
• Limited Health Care FSA: Covers dental and vision expenses only (for compliance with a health savings account)
Generally the IRS announces FSA annual limits in October. Visit irs.gov for information about FSA limits and updates.
Generally, contributions you make to your FSA are not subject to federal or Social Security taxes. In most instances, there are no state taxes taken out either. The amount you may save depends on the amount you put into your FSA and the tax percentage you would normally pay on that money (tax bracket).
Let’s say you want $2,000 taken out of your paycheck this year to put into your FSA. The money you direct to your FSA is taken out of your check before taxes are taken out. That reduces your taxable income by $2,000. If you normally pay 30 percent in federal, Social Security and state taxes on your income, you would enjoy a tax savings of 30 percent of the $2,000. In other words, you could get a $600 tax savings on the $2,000 you directed to your FSA. Plus, the rollover feature assures that any unused balance in the Health FSA of up to $500 will still be there for you in the next plan year. (Note: the rollover feature doesn’t apply to the Dependent Care FSA.)
Federal regulations state that once you enroll in an FSA, you can’t change your election amount unless you have a qualifying life event. You may visit irs.gov for more information about qualifying life events.
The IRS considers expenses to be “incurred” at the time you receive medical care or dependent care–not when you are formally billed or actually pay for services. Only eligible expenses you incur within the plan year are eligible for reimbursement.
You may request reimbursements as often as qualified expenses are incurred. Expenses must be incurred during the plan year and the reimbursement must be requested before the end of the run-out period.
Under the “uniform coverage rule” created by the IRS, you’ll have access to the full amount of your annual election to your Health FSA, even if you don’t yet have the entire amount in your FSA. Your payroll deductions will continue throughout the plan year, even though you’ve already spent the funds. Under the Dependent Care FSA, however, you’re only eligible to spend funds that are actually accrued in your account up to your maximum annual election. The uniform coverage rule doesn’t apply to dependent care.
You may rollover up to $500 of remaining funds into your next plan year. This rollover option gives you more flexibility to spend your FSA money when you need it. You may use it for necessary out-of-pocket healthcare expenses, rather than feeling pressured to engage in last-minute and potentially unnecessary spending at the end of the year. (Note: the rollover feature doesn’t apply to the Dependent Care FSA.)
When you enroll in the FSA, you’ll receive a pre-paid Benefit Card. It’s a quick and easy no-cost way to access your FSA funds. Using the card to pay for eligible expenses lets you keep cash in your wallet. It works just like a credit or debit card. When you use it at the doctor’s office or pharmacy, funds are automatically pulled from your FSA and paid directly to the healthcare provider. No more writing checks or paying cash.
No. Simply swipe the card as you would for any purchase with a credit card. You’ll likely be asked for a signature. You may, however, request a PIN by calling 1-866-898-9795.
Many major retail outlets are now required to code their registers to identify and approve FSA-eligible items at the point of purchase. In most cases, we won’t ask for receipts for eligible purchases as long as you shop at an approved location. Please visit www.sig-is.org for the most current IIAS list of participating stores. There will be times, however, when we’ll require a receipt to comply with the IRS guidelines even for debit card purchases. If we do need a receipt for a Benefit Card purchase, we’ll send out three notices. If we don’t receive the receipt/documentation, we’ll have to temporarily deactivate your Card until we receive the complete substantiation required by the IRS. If you’ve lost documentation for a Card purchase, you can contact the vendor for a reprint of your receipt.
Sometimes the bill from your doctor or dentist doesn’t provide us with enough information to determine whether the services you received are eligible for reimbursement under IRS rules. For example, you may purchase cosmetic services, like teeth whitening from your dentist or liposuction from your doctor that aren’t covered under your FSA. It’s best to send an itemized statement complies with the IRS rules. According to IRS rules, an itemized receipt must include the merchant or provider name, patient name, description of the services received or item purchased, date of service, and amount charged. Canceled checks, handwritten receipts, card transaction receipts, or previous balance statements aren’t considered itemized receipts.
1. On the Home Page at bpas.com, under the Profile tab, click Banking/Cards from the menu on the left.
2. Under the Debit Cards column, click Report Lost/Stolen or Order Replacement and follow instructions.
Other Questions? See your FSA Enrollment Guide or call us at: 1-866-401-5272