Download flexible spending accounts

FLEXIBLE SPENDING ACCOUNTS
What is an FSA?
An FSA is an employer-sponsored tax-advantaged plan that allows employees to set aside a
portion of their earnings to pay for qualified out-of-pocket medical and dependent care
expenses. Money deducted from an employee’s pay and deposited into an FSA is not subject to
payroll taxes, resulting in a payroll tax savings. The plan year is January through December.
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By using these pre-tax dollars, employees can save up to 40% on eligible expenses.
Employees receive a debit card which they can use to pay for their qualified health
care expenses.
Who is eligible for an FSA?
 All employees are eligible to enroll.
When can employees enroll?
 New employees may enroll in their first 30 days of employment for a shortened plan
year. Information is available on your Zenefits dashboard.
 Employees may enroll / re-enroll in December for the following plan year.
Information will be available during that time on your Zenefits dashboard.
 Employees can enroll in an FSA if they undergo a qualifying life event, similar to
health insurance.
How much can be contributed to an FSA?
2015 IRS FSA Contribution Limits
Medical FSA
Dependent Care FSA
$2,550.00
Married, filing jointly
Married, filing separately
$5,000.00
$2,500.00
How often can employees change their FSA contribution?
 FSAs follow an annual enrollment cycle similar to health insurance, based on
calendar year. Employees can only change their contribution once a year when the
plan-year ends.
 An employee can make changes to their FSA if they undergo a qualifying life event
during the plan year, much like health insurance.
Abode Services offers two types of FSAs: the Medical (or Health) FSA and the Dependent Care
Assistance Program (DCAP) FSA. These programs are managed through Zenefits.
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MEDICAL FSA
 Employees determine annually how much they wish to contribute. These accounts
are pre-loaded in full at the beginning of the calendar year and may be used to pay for
qualified medical expenses incurred while participating in the plan for the employee,
their spouse, and their dependents.
 If an employee uses the entirety of the FSA amount before their monthly payroll
deductions are made, and they terminate their employment during the plan year, the
employee is not responsible for paying this back.
 Under the terms of the Affordable Care Act, a plan may permit an employee to carry
over up to $500 into the following plan year without losing funds or be given a twomonth extension to spend remaining funds. See HR for details.
Medical FSA Eligible Expenses:
 Medical FSAs can be used to pay for co-pays, deductibles, dental and vision out-ofpocket expenses, prescription drugs, and some over-the-counter health care items for
the enrollee and their dependents.
 Qualified health care expenses are defined by IRS Section 213(d). Link to the official IRS
list:
http://www.irs.gov/publications/p502/ar02.html#en_US_2013_publink1000178852
Medical FSA Ineligible Expenses:
 Any expenses that are merely beneficial to general health or aesthetic, such as vitamins,
toothpaste, cosmetic surgery, or weight loss programs.
DEPENDENT CARE FSA
 Often referred to as a Section 129 plan, these accounts are funded through payroll
deduction throughout the year to pay for the care (child care of elder care) of a
qualifying dependent, as defined by IRS regulations.
 Unlike the medical FSA, DCAP FSAs are not pre-loaded at the start of the year. IRS
guidelines dictate that DCAP funds are available only as they are accrued through
payroll deduction.
 Employees can set aside pre-tax money, up to the IRS annual contribution limits (see IRS
FSA Contributions Limits table on page 1), OR can claim these expenses for the
dependent-care credit when you file your tax return. You may not use the same
expenses for both.
 Any unclaimed DCAP funds remaining at the end of the calendar year are forfeited if not
claimed/spent down within the plan year.
 For information about claiming child care tax credits using a DCAP FSA, please speak
with a tax adviser.
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Dependent Care (DCAP) FSA Eligible Expenses:
 The cost of a babysitter or daycare provider for a dependent (as defined by the IRS)
aged 12 and under which allows for the employee and (if applicable) his or her spouse
to be gainfully employed, such as day care, after-school care, Pre-K, and day camps.
 Custodial care of an adult dependent (as defined by the IRS) who is mentally or
physically incapable of caring for himself or herself, so that the other adult(s) can work.
Please note that requirements are very specific for adult dependents and may require
medical documentation.
Dependent Care (DCAP) FSA Ineligible Expenses:
 Anything not directly related to custodial care, such as supply fees, food/meals, etc.
 Education tuition for grades Kindergarten and above.
 Overnight camps.
 Custodial care that is not for the express purpose of allowing the parent(s) to work, such
as babysitting while the parent goes to dinner, on vacation, etc.
 For adult dependents that are incapable of physically or mentally caring for themselves:
Any expenses related to medical/nursing care or food/meals are ineligible
FSA information for terminated employees
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FSAs will end on the employee's termination date.
The employee's card will be deactivated and the plan will end.
Employees have 30 days to submit reimbursement claims for any expenses that
occurred prior to the employee's termination date, while the employee's FSA was
active.
This 30-day period is called a "run-out" period.
All claims must be submitted through your plan administrator (see HR for details).
Employees can be reimbursed for their entire annual election amount.
The annual election amount can still be reimbursed, even if the entire amount has not
been deducted from the employee's paychecks.
Terminated employees must file a claim for these funds, as this process
is not automatic.
If no claim is filed during the run-out period, all unused FSA funds will be forfeited to
Abode.