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Human Resources

Flexible Spending Accounts

Flexible Spending Accounts (FSAs) allow employees to save money on taxes while paying for certain kinds of eligible expenses.  Under a FSA, employees set aside money from their pay to cover eligible expenses before taxes are calculated and withheld.  This money can be used to reimburse employees for these eligible expenses.  FSAs are optional and the university offers two types of FSA accounts. 

  • Health Care FSA - The health care account lets employees set aside tax-free money to pay for certain health care expenses not covered by health care plans.
  • Dependent Daycare FSA - The dependent daycare account offers employees a tax break on daycare expenses for eligible dependents.  The IRS offers another option that provides a tax break on these kinds of expenses.  For details, see Another Daycare Tax Credit Option.

FSA enrollment does NOT carry over from year to year.  Employees MUST re-enroll online each year to contribute to an FSA.


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 2013, but paid the bill in January 2014, that expense is considered a 2013 expense.  Therefore, the employee can be reimbursed under his/her 2013 Health Care Account.

Employees have until March 15, 2014 to request reimbursement for eligible expenses with a date of service from January 1, 2013 through December 31, 2013.  Employees forfeit any remaining account balance if 2013 claims are not submitted by March 15, 2014.

Grace Period

Employees will be able to carry over any unused account balance from 2013 to 2014 for the Health Care and Dependent Daycare Accounts.  Employees have from January 1, 2014 to February 28, 2014 (the grace period) to incur expenses with a date of service within the grace period to use up their 2013 account balance.

NOTE: Eligible claims for 2013 incurred within the grace period and submitted by March 15, 2014 will reduce the unused account balance carry-over from 2013.  If an employee submits eligible 2014 claims, before submitting any remaining 2013 claim, and they reduce the balance carry-over to zero the 2013 claims will not be reimbursed.

Health Care FSA Reminder – Coverage for Over-the-Counter Items

As a result of the Health Reform legislation many types of over-the-counter items will require a prescription in order to be eligible for Healthcare Flexible Spending Account.  In addition, employees cannot 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 are 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

  Health Care Flexible Spending Accounts Dependent Care Flexible Spending Acocunt
Eligible Expenses

Generally, any health care expenses that are eligible for an income tax deduction under IRS regulations. Some expenses that might be eligible include:

- medical and dental deductibles and copayments
- orthodontia expenses not covered by dental plan
- hearing aids and batteries
- eye glasses
- contact lenses and solution
- weight loss
- LASIK eye surgery
- over-the-counter drugs such as: asprin, acetaminophen, and ibuprofen (SEE 2011 CHANGES)

You must meet the certain requirements to be eligible for this account. See Dependent Daycare Account Eligbility for details.

Daycare for your qualified dependent includes services provided in the home or in a licensed dependent care center. The center must be licensed by the state if there are more than six people that are cared for.

Ineligible Expenses - non-prescription drugs except as noted above
- mileage and parking
- health care plan premiums
- cosmetic surgery (unless it is necessary to correct a deformity resulting from a congential abnormality, injury or disfiguring disease, or to restore bodily function)
- medical practice retainers and/or access fees*
- are provided while you are on a leave of absence
- overnight expenses for summer camp
- are provided by the employee's spouse, child under age 19, or anyone claimed as a tax exemption by the employee
Minimum Annual Contribution $120 $120
Maximum Annual Contribution $2,400 The tax filing status determines the maximum contribution amount.
Reimbursement Limits An employee can be reimbursed the full amount of his/her account at any time during the year. An employee can be reimbursed up to the amount he/she has contributed by the date he/she requests reimbursement.

Getting Reimbursed

FSA Reimbursement

All FSA reimbursements are made via direct deposit and are directed by Chard Snyder to the primary direct deposit account you established for your UC pay.  If you have not elected direct deposit for your UC pay, you must complete Chard Snyder’s Direct Deposit Authorization form.  The completed Direct Deposit Authorization form should be returned to Chard Snyder fax, email or mail.  You can add direct deposit information by accessing your FSA account online. To do this, go to www.chard-snyder.com and click on the red “My Account Login” box in the right upper corner. Select the first option, “FSA, HRA, TRP & HSA Advantage”. The login screen will appear. Once logged into your account please  go to the Profile tab and select Bank Accounts.

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.