The Flexible Spending Account (FSA) is an outstanding benefit that allows a participant to set aside pre-tax money for out-of-pocket costs associated with medical, dental, optical, over-the-counter medications, and other covered expenses.  Keep in mind that any payroll deductions that can be pre-taxed will actually reduce your overall taxable wages during the year.    

The maximum amount you can elect for the plan year is currently $1,500.  You can elect any amount up to the annual maximum and you should take the time to determine what you think you out-of-pocket covered expenses would be for the calendar year in which you use the plan.  You can also elect up to $5,000 for Child Care expenses if you elect that option under the FSA.

The FSA is a “use-or-lose” benefit.  As defined by the IRS, it means that should you elect (for example) to participate for $1,000 and you only use $800 during the year in expenses, you would lose $200.  However, in most cases you will know your balance by the month of December and with the new guidelines now in place for over-the-counter purchases, you should have no problem using the remainder of your account balance for out-of-pocket expenses.

Another benefit of the FSA is that once you enroll in the plan, your elected benefit amount is immediately available for use, up to your maximum elected amount.  Again, as an example, if you elect $1,000 for your annual amount and you have to spend $1,000 out-of-pocket for a surgical procedure, then you can immediately submit your claim for the full covered reimbursement – even if you haven’t paid in enough to cover the reimbursement.  You will have a negative balance at that point which will eventually be paid in full at the end of the year.  However, should you terminate your employment prior to repaying any negative balance in your account; you will be asked to repay any negative balance.  This could include receiving a zero final check.

The Child Care benefit under the FSA is a little different.  You will normally pay into the FSA at least two to three weeks ahead of your claims that you would submit when paying for weekly childcare.  You can never draw more from the Child Care benefit plan than what you have paid in.  Also keep in mind that you cannot normally use BOTH the Child Care benefit under the FSA and claim the Child Care Credit on your federal income taxes.

If you terminate and you actually have a balance in your FSA account, you can still submit claims for the paid-in balance (not the annual election amount) up through December 31st with an additional 90-day extension into the next year to file your claims.

All claims and deferrals are handled through Eflexgroup, our administrator for the Flexible Spending Account.  You will need to complete an enrollment application to start your FSA deductions.

Please contact the Simple HR Benefits Department for further information.