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Flexible Spending Accounts (FSAs)
FSAs are voluntary accounts that help you pay for expenses not covered
by the other benefit programs. You can participate in one or both of the
following accounts:
* Health care expenses
* Dependent (day) care expenses
Effective with the plan year ending December 31, 2007, the University
is amending the Flexible Spending Accounts Plan to include a 2½ month
grace period extending through March 15 of the following year. This means
that a participant may submit expenses incurred in the two and one-half
month grace period for reimbursement from either the prior year (if funds
still remain) or the current year. Expenses incurred during the grace
period will be first paid by any balance remaining from the prior year's
election; then, if applicable, expenses will be reimbursed under the current
plan year's elected amount (example).
Any remaining balance from the prior plan year will be forfeited at the
end of the grace period.
Re-enrollment is held once a year in late November. All other flexible benefits
are effective July 1. The date services are provided determines eligibility
of an expense for reimbursement from your FSA, not when you are
formally billed or charged or when you pay for the services.
When you set up an account, you use before tax payroll contributions to
pay for your eligible expenses on a tax-free basis.
Under FSA regulations, you may cover more dependents than under the other
medical and dental plans. For the health care account, an eligible
dependent can also include a dependent parent, as long as you provide
more than one half of the individual's support.
For the dependent (day) care account, an eligible dependent includes
your children (but only under age 13), your spouse (but only if he or
she is disabled), and your parents or in-laws who depend on you and your
spouse for more than one half of their support and who spend at least
eight hours a day in your home.
Note: FSA reimbursements are not automatic. You must complete
and submit claim forms to receive reimbursement. Claims may
be submitted through April 30 for expenses incurred between January 1
(or the actual period you were enrolled, if enrolled after January 1)
and the end of the grace period.
When you're deciding how much to contribute to an FSA, you should estimate
your expenses carefully. Once you contribute money to your FSA, you:
- cannot transfer money from one account to another.
- cannot withdraw money except to be reimbursed for a covered expense.
- must use the money in the account only for expenses incurred during
the period enrolled, upto and including the 2½ month grace period.
If you do not spend all the money, you will forfeit any unused balance.
- cannot change the amount you contribute during the year unless you
have a change in family status and apply within 30 days of the event.
These restrictions are required by the federal government.
FSA Reimbursement procedures
- Health care FSA claims are processed each week by the Office of
Human Resources. Regardless of whether there is enough money in
your account to cover the entire claim, you will receive reimbursement
for the entire health care claim up to the maximum of your annual FSA
contribution. The moneys you receive are non-taxable to you.
- Dependent (day) care FSA claims are also processed each week. If
enough money is in your dependent (day) care account to cover the entire
claim, you'll receive reimbursement for the full amount. If not, you'll
receive a partial amount up to the account balance. Reimbursements will
continue until the claim balance is fully paid. The moneys you
receive are non-taxable to you.
- Contribution limits are as follows:
| FSA |
Minimum |
Maximum |
| Health Care |
$5/pay ($120) |
$125.00/pay ($3,000) |
| Dependent (Day) Care |
$5/pay ($120) |
$208.33/pay ($5,000) |
- FSA reimbursements are processed on a weekly basis. When your claim is fully processed you will receive an email and written notification of the direct deposit or check. With the exception of peak periods, such as the end of the plan year, FSA claims are typically processed within 2 - 3 weeks of receipt.
* You have 3 1/2 months (until April 15) after the close of the plan
year to submit all claims for reimbursement.
Eligible health care expenses
PLEASE REMEMBER THAT THIS IS NOT A COMPLETE LIST. For
more detail regarding eligible expenses for reimbursement please refer to
IRS
Publication 502 (Medical & Dental Expenses). MOST, BUT NOT
ALL of the health care expenses that may be deducted on an employee's
federal income tax return are eligible for reimbursement under medical
FSA's. Any determinations as to qualification of an allowable
expense are subject to IRS regulations and review.
You can use
your FSA to pay for these health care expenses:
- Expenses not paid by your medical or dental plan, such as:
- Deductibles
- Co-payments
- Amounts in excess of reasonable and customary charges
- Amounts in excess of scheduled or annual maximums
- Services and supplies not covered, such as doctors' office visits
if you choose the Basic Plan
- Hearing expenses, including examinations and hearing aids
- Other health care expenses qualifying as deductions for federal
income tax purposes, some of which are:
- Professional services and fees
* Doctors', dentists'
and other hospital services
* Practical or other nonprofessional
nursing for medical servicesonly (but not for the care of a healthy
person or a small child who is not ill). This includes medical care of
an elderly person who is unable to get about or a person subject to
fainting spells
* Opticians' services
- Equipment and supplies
* Air conditioner, where
necessary for relief from an allergy or for relieving difficulty in
breathing * Back supports * Contact lenses, eyeglasses
- Medical treatments
* Acupuncture * Sterilization
and/or vasectomy
-
Medicine
* Insulin, medicines and drugs that require a
prescription as well as over-the-counter medicines such as antacids,
allergy medicines, pain relievers, and cold medicines. Note: for
purposes of itemized medical expenses on your income tax return, the
cost of over-the-counter drugs continues to be non-deductible.
- Miscellaneous
* Birth control pills or other birth
control prescribed by your doctor * Convalescent home--for medical
treatment only
Please note that you cannot deduct
any of these expenses on your federal tax return if they are paid through
your FSA. (Federal tax law allows you to deduct medical expenses that
exceed 7.5% of your adjusted gross income.)
Ineligible
health care expenses
You cannot use your FSA for the
following expenses. These are deemed NOT DEDUCTIBLE, either for
income tax or FSA purposes.
- Antiseptic diaper service
- Athletic club expenses to keep physically fit
- Baby sitting fees to enable you to make doctor visits
- Cosmetic surgery; unless the surgery or procedure is necessary to
ameliorate a deformity arising from, or directly related to, a
congenital abnormality, a personal injury resulting from an accident or
trauma, or disfiguring disease.
- Cost of trips for a "change of environment" to boost morale of
ailing person--even if a doctor prescribed the trip
- Domestic help--even if recommended by doctor because of spouse's
illness (but the part of the cost attributed to nursing duties performed
by the domestic is deductible)
- Illegal operations and drugs
- Long-term Care Insurance
- Marriage counseling fees
- Maternity clothes
- Patent medicines
- Scientology fees
- Special food or beverage substitutes
- Toiletries (including toothpaste), cosmetics and sundry items
- Vitamins, tonics, dietary supplements and herbal remedies.
- Weight reduction programs undertaken for general health, not for
specific ailments
- Your divorced spouse's medical bills; you may be able to deduct
these as alimony
In addition, you cannot use the FSA for:
- Reimbursements for premiums paid for other health plan coverage by a
spouse or for a dependent
Dependent (day)
care You can set up the dependent (day) care account if you
are single or if both you and your spouse are employed. You can use the
account to pay for household and dependent care services that enable
you (and your spouse) to be gainfully employed, including:
- Licensed nursery schools, day care centers and kindergartens (only
if the cost of schooling cannot be separated from the cost of the
child's care)
- Day camps
- Dependent care centers that provide day care (not residential care)
for dependent adults
- Individuals (other than a dependent child under age 19) who provide
care for your dependents inside or outside of your home
- Expenses for household services related to the care of a dependent
- Social Security taxes or other taxes that you pay on behalf of the
person providing the day care
You also must meet these
contribution guidelines for the dependent (day) care account:
- If you or your spouse earns less than $5,000 a year, your
contributions to the day care account are limited to the income of the
lower paid spouse
- If your spouse has a similar type of spending account with his or
her employer, the combined maximum contribution cannot exceed $5,000 in
a calendar year. If you and your spouse file your taxes separately,
however, the maximum that each of you can contribute is $2,500 a year
- If your spouse is not employed, a full time student or disabled, you
cannot make any contributions
If you are considering the
dependent (day) care account, you may know that the IRS permits you to
claim an income tax credit for dependent care expenses. For most people,
this tax credit is an alternative to the day care account. Here's how it
can work
You can claim a tax credit between 25% and 35% of your
eligible dependent care expenses up to a maximum of:
* $3,000 for
one dependent * $6,000 for 2 or more dependents
The amount of
the tax credit depends upon your adjusted gross income as shown here:
| If your adjusted gross income is: |
Your maximum rate is: |
| $15,000 or less |
35% |
| $15,000 - $33,000 |
35% less 1% for each $2,000 between $15,000 & $33,000 |
| Greater than $33,000 |
25% | The dependent (day) care FSA
generally results in greater federal income and Social Security tax
savings. The more advantageous method depends on the exact amount of gross
income, the number of eligible dependents and the tax filing situation.
If you are planning to use both the dependent care FSA and the
dependent care tax credit, you should be aware that the IRS requires that
the maximum amount of eligible day care expenses considered for the
federal income tax credit must be reduced--dollar for dollar--by any
reimbursements you receive under the dependent FSA.
Example 1: If you have one dependent and are
reimbursed $3,000 or more from the dependent care FSA, you will not be
able to use the child care tax credit.
Example
2: If you have more than one dependent and receive $3,000 from
your dependent care FSA, you will be eligible to apply a maximum of $3,000
($6,000 - $3,000) in expenses toward the child care tax credit.
To
use the dependent (day) care account (or the tax credit), the federal
government requires that you provide the name, address and taxpayer
identification number of your care or service provider on your individual
tax return. If the provider is a charitable organization, it is not
necessary to provide the organization's taxpayer identification
number.
If you are an FSA participant, Form 2441 must also be filed
with the Internal Revenue Service along with your annual tax return
(contact your tax advisor).
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