How FSAs Work

When an employee decides to enroll in either or both FSA accounts, contributions are deducted from his/her pay-check before he/she pays any federal, state, city, or Medicare taxes.  Because the employee's taxes are calculated on a lower income, he/she should pay less tax.

During the year, employees pay eligible health care and dependent day care expenses, then request reimbursement from his/her account.  The eligibility of an expense is determined by the date on which the health care or day care service was provided; not by the date the employee paid the bill.

Example

If an employee incurred an eligible medical expense in December 2012, but paid the bill in January 2013, that expense is considered a 2012 expense.  Therefore, the employee can be reimbursed under his/her 2012 Health Care Account.

Employees have until March 15, 2013 to request reimbursement for eligible expenses with a date of service from January 1, 2012 through December 31, 2012.  Employees forfeit any remaining account balance if 2011 claims are not submitted by March 15, 2013.

Grace Period

Employees will be able to carry over any unused account balance from 2012 to 2013 for the Health Care and Dependent Daycare Accounts.  Employees have from January 1, 2013 to February 28, 2013 (the grace period) to incur expenses with a date of service within the grace period to use up their 2012 account balance.

NOTE: Eligible claims for 2013 incurred within the grace period and submitted by March 15, 2013 will reduce the unused account balance carry-over from 2012.  If an employee submits eligible 2013 claims, before submitting any remaining 2012 claim, and they reduce the balance carry-over to zero the 2012 claims will not be reimbursed.

Changes to Health Care FSA beginning 2011

As a result of the Health Reform legislation, use of a Health Care Flexible Spending Account will change on January 1, 2012.  Many types of over-the-counter items will require a prescription in order to be eligible for FSA reimbursement.  In addition, employees will not be able to use the Chard Snyder Benny debit card to purchase over-the-counter medications that require a prescription.  A copy of the prescriptions will be required once each year (by Chard Snyder) for claims payment.

A partial list of items that will require a prescription:

• Asthma medications                
• Cold, flu, and allergy medications
• Sinus medications
• Pain relievers, aspirin, and non-aspirin
• Cough syrup or drops
• Flu relief tablets or liquid

A current list of eligible items can be found at www.chard-snyder.com.

Employees will continue to be able to use their FSA money to purchase over-the-counter items that are not considered a drug or medicine such as bandages, blood pressure monitors, contact lens solution, etc.

Dependent Daycare Account Eligibility

Employees may participate in the Dependent Daycare Account if they have a qualified dependent, are actively at work, and one of the following applies:

• employee is single,
• employee has a spouse who also works or goes to school full-time at least five months during the year while the employee is at work,
• employee has a disabled spouse who cannot care for himself/herself, or
• employee is a divorced or legally separated parent who has custody most of the time, even though the other parent may claim the dependent for tax purposes.

Qualified Dependent

A qualified dependent is:

• any person under age 13 whom the employee claims as a tax exemption (unless employee is a divorced parent who has custody and the other parent claims the child as a dependent for tax purposes), or
• a spouse or any other dependent who is unable to care for himself/herself and who spends at least eight hours per day in your home.

Another Daycare Tax Credit Option

As an alternative to the Dependent Daycare Account, IRS regulations offer another option:  the federal tax credit for dependent care.

Federal Tax Credit:  An employee cannot claim a federal tax credit for dependent care and request reimbursement from the Dependent Daycare Account for the same expenses.  In addition, expenses reimbursed from the account reduce, dollar for dollar, the amount of dependent care expenses you may apply to the federal tax credit.  Therefore, an employee must choose one method or the other.  Employees should consult their financial advisor to determine which is better for them to use.  If an employee and his/her spouse file taxes separately, they may not use the federal tax credit.

Eligible Expenses

Getting Reimbursed

 Dependent Daycare Account

• To request reimbursement, employees may submit claims electronically as an e-mail attachment, or use the claim form available online or from the Chard-Snyder website (www.chard-snyder.com). 
• Receipts or some other proof that an eligible expense incurred and was paid must be submitted.
• The taxpayer identification number (TIN) of any day care center or any person who provides dependent care must be provided if requesting reimbursement for those services.

Health Care Account

• To request reimbursement, employees may submit claims electronically as an e-mail attachment, or use the claim form available online or from the Chard-Snyder website (www.chard-snyder.com).
• Receipts or some other proof that an eligible expense incurred and was paid must be submitted.
• Alternatively, employees can request a BENNY debit card from the FSA Administrator, Chard-Snyder.

How to use the debit card: (Available with the health care FSA only)

• The debit card is used like a credit card when paying for eligible expenses at the point-of-service using funds from the qualified reimbursement account. 
• The funds are automatically deducted from the reimbursement account balance and the employee will not need to submit substantiation for the expense unless he/she receives and email from Chard-Snyder requesting it.
• The advantage is the employee receives the money at the point-of-service instead of waiting for a reimbursement check or direct deposit.

Note: Employees cannot use the debit card to purchase over-the-counter medications that require a prescription.

Examples of merchants accepting the debit card include:

• Drug stores and in-store pharmacies (i.e. supermarkets, retail stores, discount stores)
• Hospitals including emergency rooms
• Medical clinics
• Medical and dental physicians
• Medical facilities
• Vision care providers
• And more!

IRS Rules

Because FSAs offer such a significant tax break, the Internal Revenue Service (IRS) applies these strict rules to their use:

• If an employee terminates employment or becomes ineligible for Choice Benefits, he/she may be reimbursed only for expenses he/she incurred before termination or ineligibility date.  An employee may, however, continue participating in the Health Care Account (on an after-tax basis) through COBRA.
• An employee cannot transfer money from one account to another.
• An employee cannot change the amount of his/her contributions during the year unless he/she has a qualified status change.  Then if the employee increases his/her contribution amount, the increase is available only for expenses incurred after the date of the qualified status change.
• Because the plan is subject to IRS rules, an employee may be subject to certain eligibility requirements.

Medical Practice Retainers and/or Access Fees*

UC’s flex plan administrator, Chard Snyder, is required to follow IRS Code Section 213(d) to determine medical expenses that are eligible for reimbursement under the Health Care Flexible Spending Account. Medical practice retainers or access fees are not eligible for reimbursement under the Health Care Flexible Spending Account.

Additional Tax Information

• Under current federal tax law, domestic partners (other than those who qualify as tax dependents of employees) may NOT participate in the University's Dependent Care and Health Care Flexible Spending Account Programs.  In other words, medical and dependent care expenses incurred by or on behalf of a domestic partner who is not a tax dependent are NOT eligible for reimbursement under the spending account programs.
• Employees may NOT claim a tax deduction or tax credit for any expenses reimbursed through the flexible spending accounts.