Maximizing the use of the Flexible Spending Accounts Program. Valencia Bellfield Benefits and Work Life Program Manager

Transcription

1 Maximizing the use of the Flexible Spending Accounts Program Valencia Bellfield Benefits and Work Life Program Manager

2 Objectives Describe the Flexible Spending Accounts (FSA) and provide information on each Provide information on contribution limitations Identify eligible expenses of the three flexible spending accounts Explain how FSA works in conjunction with the Federal Employees Health Benefits Program (FEHB) (2)

3 What Is The Federal Flexible Spending Account? Began July 1, 2003 Based on guidelines of Internal Revenue Code (IRC) Sections 105, 125 and 129 It is a cafeteria styled plan --- meaning that employees have the opportunity of choosing between one or more benefits Allows employees to pay for out-of-pocket expenses with pre-tax dollars. There are no governments contributions Three accounts: Healthcare Flexible Spending Account (HCFSA), Limited Expense Healthcare Flexible Spending Account (LEX HCFSA) and Dependent Care Flexible Spending Account (DCFSA) It does not replace FEHB, but it is an account that pays for eligible out-of-pocket health care expenses that are not covered by insurance. (3)

4 What Rules Determine Eligibility? Appointed in a position that conveys Federal Employee Health Benefits program eligibility Enrolled in a Federal Employee Health Benefits program Enrolled in a High Deductible Health Plan with a Health Savings Account or a Health Reimbursement Account HCFSA LEX HCFSA DCFSA N/A N/A N/A N/A N/A Intermittent employees N/A N/A (4)

5 What Is The Health Care Flexible Spending Account? Healthcare Flexible Spending Account (HCFSA) provides reimbursement of out-of-pocket expenses used to pay for eligible medical, dental, and vision care expenses that are not covered by your health care plan. Cannot be used to pay for health insurance, life insurance, long term care insurance or any other insurance premiums, or costs for temporary continuation of coverage (TCC). (5)

6 Examples of Eligible Healthcare Expenses Prescriptions Deductible & copayments Office visits Lab tests Ambulance Transportation Orthodontics First Aid Kits Diabetes Testing Supplies Blood Pressure Monitors Prescription sunglasses Contact Lenses Laser Eye Surgery Eyeglasses Birth control pills In vitro fertilization Massage therapy Sunblock Hand Sanitizer Over the Counter (OTC)* * certain OTC items are not eligible (6)

7 Are there Contribution Limits/Spousal Limits for HCFSA? For 2018, the maximum amount you can allot to an HCFSA is $2,650 (per individual) and the minimum is $100. The total election amount is available on January 1 st of the FSA plan year or the 1 st day of becoming eligible if not enrolling during open season. If you and your spouse are both active employees of an Executive Branch agency, an agency, commission, or other federal entity that has adopted the HCFSA and are eligible for FEHB coverage, both individuals may enroll in an HCFSA and contribute up to the maximum of $2,650 each ($5,300 total). Source: Note: 7

8 What does only if medically necessary mean? A Physicians certification is required and must indicate the specific medical disorder, the specific treatment needed, the length of treatment required and explain how this treatment will aid in alleviating the medical condition. Examples of such items are: air conditioners, heaters and humidifiers for allergy relief, cosmetic surgery following an accident, home medical equipment, hydrotherapy, water fluoridation units, weight loss program for treatment, wigs Source: Note: 8

9 Are Flexible Spending Accounts Tax Deductible? Allotments (FSA contributions) are deducted from your pay before taxes are taken out, so it's considered pre-tax. The money you allot to an FSA is also exempt from FICA (Social Security and Medicare) taxes, a deduction that is not available on your federal income tax return. Source: Note: 9

10 What Is A Limited Expense Health Care FSA? A flexible spending account option only if you are enrolled in a Federal Employees Health Benefits (FEHB) high-deductible health plan (HDHP) and have a Health Savings Account (HSA). High Deductible Health Plan (HDHP) is a plan with a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but you pay more health care costs yourself before the insurance company starts to pay its share (your deductible). Health Savings Accounts (HSA) are savings accounts that allows tax-free contributions and for health care expenses. Source: Note: 10

11 Can I Save Money Using A HSA along with a LEX HCFSA? Participating in both a HSA and a LEX HCFSA plan allows you to maximize your savings and tax benefits. The money you contribute to a LEX HCFSA is not subject to payroll taxes, so you pay less in taxes and take home more of your paycheck. Source: Note: 11

12 How much can I contribute my LEX HCFSA? With a LEX HCFSA, you can set aside anywhere from a minimum of $100 up to $2,650 per benefit period (plan year). As with a Health Care FSA (HCFSA), the maximum annual allotment for a LEX HCFSA is $2,650 per covered employee, or $5,300 for a "federal couple," where both spouses are covered under the FSAFEDS Program. Under IRS rules, you are not eligible to contribute to an HSA and be enrolled in a FSAFEDS at the same time. And, if your spouse is covered separately under a non-hsa plan, his or her expenses are not eligible under your LEX HCFSA, and your expenses are not eligible under your spouse's general-purpose FSA. Source: Note: 12

13 What is a Dependent Care Flexible Spending Account? A pre-tax benefit account used to pay for dependent care services, such as preschool, summer day camp, before or after-school programs for children under age 13, and child or adult daycare for those that are mentally or physically incapable of self care. The money you contribute to a DCFSA is not subject to payroll taxes, so you end up paying less in taxes and taking home more of your paycheck. You decide how much to contribute and funds are withdrawn automatically from each paycheck for deposit into your account before taxes are deducted. As soon as your account is funded, you can use your balance to pay for eligible child care expenses. 13

14 What Expenses Are Not Eligible for Reimbursement? Tuition Expenses for children older than age 13 Late Payment fees Overnight Camps Field trips Transportation to/from dependent care (14)

15 Is There A Maximum Allowed Deduction? Certain situations may allow you to be able to take advantage of both the DCFSA and the Child and Dependent Care Tax Credit. If you have two or more qualifying individuals as dependents, the IRS allows you to apply up to $6,000 of dependent care expenses to your taxes. The maximum allowable under a DCFSA is $5,000, so you may apply the $1,000 incremental difference between the DCFSA maximum and the Child and Dependent Care Tax Credit if you have two or more dependents and your expenses exceed $5,

16 May I Collect A DCFSA and a Child Care Subsidy? Yes, but any combination of DCFSA contributions and child care subsidies cannot exceed $5,000 for the year. Example: Marlene is a federal employee who has one child, age 3. She receives a $3,000 child care subsidy from her agency. She also elects a $2,000 DCFSA through her agency. $3,000 + $2,000 = $5,000 Marlene is OK. She did not exceed the $5,000 limit. 16

17 Can Husband and Wife Both Receive a Child Care Subsidy? Mary is a federal employee, married to Rick who works for ABC Company. They have two children, ages 4 and 8. Mary receives an annual subsidy of $1,500 and has a $3,000 DCFSA through her agency. Rick receives an annual subsidy of $1,000 from his employer. $1,500 (Mary) + $3,000 (DCFSA) + $1,000 (Rick) = $5,500 - exceeding the $5,000 limit by $500 Mary and Rick must reconcile any additional taxes owed on the $500 that exceeded the limit, when they file their annual tax return (17)

18 Midway through the year, can I change my FSA election amount? No, your FSA elections are irrevocable unless you experience a Qualifying Life Event (QLE). While you and your spouse will have your total household salary reduced by the amount of your combined elections, you will also probably receive that full amount in reimbursements. Possible QLEs: change in marital status, number of dependents, dependents eligibility, cost or coverage (example: daycare fee increase), or change in employment status or residence status, (18)

19 Is A Babysitter Considered An Eligible Expense? Yes. You can include expenses paid to a babysitter if the services are necessary in order for you and your spouse, if married, to work, look for work, or for your spouse to attend school full-time. However, if you did not find a job and have no earned income for the year, your dependent care costs are not eligible. (19)

20 What happens if I leave the Federal government? HCFSA LEXFSA DCFSA Terminates at separation Terminates at separation Terminates at separation If expenses paid exceeded balance in account, employee is not held responsible If expenses paid exceeded balance in account, employee is not held responsible Balance available for expenses incurred until the end of the Benefit Period or until account balance is depleted If employee returns within 60 days after separation, but before the end of the same tax calendar year, previous election reinstated Make up of missed allotments required Election amount can be changed within the 60 days, if the employee has a QLE If employee returns during another Benefit Period, employee has 60 days to make a new election (20)

21 What happens if I get Lasik surgery early in the year and leave the Federal government before the end of the plan year? Janice elects FSA Allotment for the 2017 of $2,000 with deductions are $100 per pay period. At pay period 8, Janice s contribution is $800 into her FSA account.. Janice had laser eye surgery in pay period 5 which totaled $2,000. So, she submitted claims to FSAFEDS for reimbursement and was reimbursed for the full amount ($2,000). Now if Janice separates at the end of pay period 8, she will not have to repay FSAFEDS for the overpayment and FSAFEDS cannot seek reimbursement from the employee for the payment. (21)

22 FSA Carry Over Funds There's less risk of losing funds. The Health Care FSA allows you to carry over up to $500 of unused funds into the following year and the Dependent Care FSA provides an extra 2 ½ months to spend your balance. Example: If you have $1,000 in your account and use $800 and do not submit your claim before April 30, you lose the $200. If you have $1,000 in your account and you re-enroll for FSA the next year, you carry over the $200. There is an appeal process for a claim or request for reimbursement that is not paid in full. Benefit Period runs from January 01 through December 31 Unlike FEHB and FEDVIP elections, FSA elections do not continue to the following year. You must re-elect/re-enroll each year. (22)

23 Where Can I Locate More Information? BAL , The Federal Flexible Spending Accounts (FSA) Program Open Season BAL , Dependent Care FSA and other Child Care Subsidies BAL , The Federal FSA Program (FSAFEDS) Changes: Adopting Carryover and Reducing Minimum Election for 2015 (23)

24 Summary Explained all three FSA accounts Benefit Period Contribution and Spousal Limitations Qualified Life Events Separation from the Federal Government Identified eligible expenses (24)