The Flexible Spending Accounts (FSAs) allows you to re-direct a portion of your salary on a pre-tax basis into reimbursement accounts. Money from these accounts may be used to pay medical expenses which are not reimbursed by your medical plan or dependent care expenses.
Please note that the Open Enrollment for this benefit is held in the Fall, and elections are effective Jan 1. New hires are eligible to enroll on the same date they become eligible for all other benefits.
Pre-tax means the dollars you use for eligible expenses are not subject to social security tax, federal income tax and, in most cases, state and local income taxes. Money you would have paid in taxes can be used to pay qualified expenses.
You may contribute up to a maximum of $2,750 per calendar year.
You are eligible to roll over up to $500 of the plan year’s remaining balance.
You must decide how much pre-tax salary to set aside for eligible un-reimbursed medical care expenses:
You may contribute up to a maximum of $5,000 per year, or up to $2,500 per year if you are married and file separate tax returns, per calendar year. Eligible dependent care expenses are used for the care of children under the age of 13, or dependents of any age that are unable to care for themselves due to a mental or physical handicap. The dependent care services must be necessary to allow you, and your spouse, if you are married, to work or attend school full-time.
This is an illustration and does not show your actual savings.
| WITHOUT FSA | WITH FSA | |
|---|---|---|
| Employees Annual Pay | $30,000 | $30,000 |
| Contribution to FSA | $0 | $2,400 |
| Taxable Pay | $30,000 | $27,600 |
| “Estimated Taxes (FICA, Federal and State) – 25%.” |
$7,500 | $6,900 |
| After Tax Cost of Health/Dependent care | $2,500 | $0; |
| Spendable Income | $20,000 | $20,700 |
| Take Home Savings | $700 |
In exchange for the tax advantages, the IRS HSA strict rules regarding these accounts. You may not stop or change your contribution amount until the next Open Enrollment, unless you have an IRS-qualified family status change. You are eligible to roll over up to $500 of the plan year’s remaining balance. Expenses for the plan year must occur within the plan year. The Health Care Reimbursement Account and the Dependent Care Reimbursement Accounts, are separate accounts and funds may not be transferred from one account to the other. If you or a spouse/domestic partner are covered under a PPO HSA plan, you are not eligible to participate in the Flexible Spending Account.