UpDate - Vol. 13, No. 29, Page FB-3
April 28, 1994
Flexible Benefits '94-'95
Consider the benefits of a Flexible Spending Account

What is a Flexible Spending Account (FSA)?
     FSAs are voluntary accounts that help you set aside money to pay for
expenses not covered by other benefit programs. The University allows you
to participate in the following flexible spending accounts: Health Care
Account and Dependent (Day) Care Account.
     You can contribute to one or both of these accounts. However, you
cannot transfer contributions from one account to another.

How do FSAs work?
     When you enroll in an FSA, you decide, within plan limits, how much
money to contribute each year to your account(s). That amount is divided
equally among the number of pay periods from July 1 through June 30. Each
pay your FSA deduction is withheld on a pre-tax basis. When you incur
eligible health or dependent care expenses, you submit a claim form and
supporting documentation to the Benefits Office and receive reimbursement
from your FSA account(s). Health care expenses are reimbursed in full up to
the maximum of your ANNUAL FSA contribution, regardless of whether there is
enough money in your account to cover the entire claim when it is
submitted. Dependent care expenses are reimbursed up to the maximum
accumulated amount in your account.

What are the benefits of participating in FSAs?
     FSAs contain your payroll contributions; the University does not
contribute to FSAs. The advantage of FSAs is that all contributions are
made on a "before-tax" basis. So you save income taxes and Social Security
taxes on your contributions. In effect, you pay for your health and/or
dependent care expenses with tax-free dollars.

What expenses are eligible to be reimbursed from my FSA?
     Health Care: Generally, you can be reimbursed for expenses not covered
by your medical or dental plan.
     Examples of items that fall into this category include deductibles,
copayments, amounts exceeding annual plan maximums, eligible services not
covered by your plan such as eyeglasses and contact lenses.
     Dependent Care: You may use the Dependent Care Account to reimburse
yourself for eligible household and dependent care expenses that enable you
and your spouse to be gainfully employed. However, you may not claim a
dependent care credit on your tax return for the SAME expenses.

What is the maximum amount I can contribute to my FSA?
     The maximum annual amount you can contribute to a Health Care Account
is $1,500.
     The Dependent Care Account is limited to an annual amount of $5,000,
assuming you and your spouse file joint tax returns and each of you earns
more then $5,000 per year.
     If you file separate income tax returns, your Dependent Care maximum
is $2,500.

Are there any risks to participating in a Flexible Spending Account?
     It is very important that you be conservative in estimating the annual
amount for your FSA. Federal regulations prohibit you from changing that
amount during the course of the plan year unless you experience a life
event (e.g., marriage, divorce, birth of a child). In addition, there is
the risk of forfeiture if you fail to incur enough eligible health or
dependent care expenses for reimbursement.
     Consequently, you should be accurate and conservative in estimating
your annual FSA contribution.
     If you have questions or need additional information about Flexible
Spending Accounts, call the Benefits Office at 831-8156.