Deadline to Enroll in the Flex Spending Account is Friday, December 9

Posted by DStayman on 6th December 2011

money_mess_o_billsDeadline to Enroll in the Flex Spending Account is Friday, December 9

The Flex Spending Account (FSA) is a program PEF offers to help staff save money on their taxes. The FSA has two benefits, the Health Care Flexible Spending Account (HCFSA) and the Dependent Care Benefit Account (DCBA)–that help you pay for health care or dependent care with pre-tax dollars. Even if you enrolled last year you must enroll again this year. The deadline to enroll is December 9, 2011.

Enrolling in either benefit is voluntary. Savings will vary depending on your annual income, the number of dependents you claim on your taxes, and the amount of money you contribute through payroll deductions to your HCFSA and/or DCBA.

How does the Health Care Flexible Spending Account work?

If eligible, you may contribute any amount up to $1,500 annually [1] in pre-tax dollars to pay for out-of-pocket medical, dental or vision costs not reimbursed by health insurance. Some examples of allowable costs are prescription drug copayments, dental charges and orthodontia fees paid to non-participating providers, deductibles, laser eye surgery, and contact lenses.

Recent changes in federal law limit OTC drug reimbursement. Effective January 1, 2011, OTC drugs will require a doctor’s prescription to be eligible for reimbursement under the HCFSA.  As a result, the debit card will no longer work for most over-the-counter drugs. Other OTC products (e.g. hearing aid batteries, band-aids, contact lens solution, etc.) are not affected by the new law.

The following are examples of OTC medications that will require prescriptions for reimbursement:

Acid controllers

Allergy & sinus medicines

Antibiotic products

Anti-diarrheal medicines

Anti-gas products

Anti-itch & insect bite  products

Cold sore remedies

Cough, cold & flu medicines

Diaper rash ointments/creams

Digestive aids

Feminine anti-fungal/anti-itch

Hemorrhoid treatment

Laxatives

Motion sickness medicines

Pain relief medicines

Respiratory treatments

Sleep aids & sedatives

Stomach remedies

Vitamins

Effective January 1, 2013, the IRS will limit medical Flexible Spending Account annual contributions to $2,500. If you have a big medical expense coming up such as orthodontia, then plan ahead for 2012 to get the tax benefit.

How does the Dependent Care Benefit Account work?

If you pay a caregiver to care for your child, elderly parent, or disabled spouse in order to work, you can set aside up to $5,000 in pre-tax salary through payroll deduction to help pay for these expenses. Examples of expenses eligible for DCBA reimbursement include child care expenses (through age 12), summer day camp, before/after school programs and adult day care.

To enroll in the HCFSA for either Health Care or Dependent Care Accounts or both, you must estimate your annual out-of-pocket costs, and then decide how much money to have withheld from your paycheck. It’s important to estimate conservatively because if you don’t file claims for reimbursement of the entire amount, you will lose any remaining funds.

How do I file a claim?

Once enrolled you can fill out an electronic claim form online, mail or fax claims, then receive reimbursement by check or direct deposit. If you use the debit card, you may be asked to submit a copy of a receipt to verify that a card transaction was for a qualified expense. You can choose reimbursement by check or direct deposit into your bank account. The Take Care plan website http://www.takecareplans.com/cbp/home.asp gives you 24 hour access to your plan expense and reimbursement information.

Does the money have to be in my Health Care Flexible Spending Account before I use the debit card or file a claim?

No, the entire annual amount you elect for the HCFSA is available on the first day and throughout the plan year.

Does the money have to be in my Dependent Care Benefit Account before I file a claim?

Yes, only amounts contributed to date are available for reimbursement of dependent care. This is a requirement of the Internal Revenue Service.

Tax savings example

A single employee earns $53,000, declares 2 dependents and files as head of household. The annual HCFSA contribution is $1,300 and the employee incurs $1,300 in reimbursable health care expenses.

With HCFSA

Without HCFSA

Savings with HCFSA

Annual income

$53,000

$53,000

Expenses paid through HCFSA

-1,300

0

Adjusted gross income

$51,700

$53,000

Federal income tax

-4,701

-4,896

$195

NYS income tax

-2,124

-2,213

89

Social security tax

-3,955

-4,055

100

After-tax cost of health care expenses

0

-1,300

Your spendable income (assuming there are no other payroll deductions)

$40,920

$40,536

$384

This employee could save $384 in taxes by using the Health Care Flexible Spending Account.

PEF requested Blue Shield and informedRx send all staff letters with their out-of-pocket expenses for the past year, to assist with calculating out-of-pocket expenses for 2012. The deadline to enroll is December 9, 2011. If you have questions about the Flexible Spending Account contact Deborah Stayman at x286 or dstayman@pef.org.


[1] PEF will consider a higher amount if requested. Contact Cliff Merchant for details.

Categories: Health Benefits
12Dec