FSA Frequently Asked Questions (FAQ's)
Click on a question, to get the answer.
- 1. What is an FSA account?
A flexible spending account (FSA) is a benefit plan that allows you to set aside tax-free dollars from your pay check into a special account that can be used throughout the year to reimburse yourself for eligible out-of-pocket expenses. Since you are “paid back” out of an account that is never subject to taxes, you pay less tax on your total earnings.
- 2. What is “use it or lose it?”
If you do not use all the money that you contribute to your FSA for claims incurred by the end of the plan year, IRS rules require that the money be forfeited. Careful planning of your yearly expenses and awareness of your account balances and filing deadlines will assist you in using your FSA to its maximum potential. You have until March 31 to get your money out of your FSA account for expenses incurred during the previous plan year.
- 3. If my spouse has an FSA account through his or her employer, can I set up one, too?
Yes. If you both have FSA accounts, you cannot submit for reimbursement for the same expenses. The annual limit of $2,500 for the Health Care Account. For a Dependent Care Account, the total per household that can be elected must not exceed $5,000 ($2,500 each if married and filing separately) in accordance with IRS rules.
- 4. What is the FSA plan year?
The FSA plan year is January 1 through December 31.
- 5. Will my participation continue from plan year to plan year automatically?
No. You will need to re-enroll each plan year if you wish to continue participating in the program.
- 6. How much could I save in taxes?
Your contributions are taken out of your salary before you pay federal income, FICA and most state taxes, so you may realize a tax savings of up to 40 percent of your FSA contribution amount. This savings will depend on your individual tax bracket and where you live.
- 7. Do I have to claim any of my expenses on my year-end taxes?
Only the dependent care expenses must be reported to the IRS. This is done on the same IRS form that is used for the Dependent Care Tax Credit. Your dependent care FSA contributions will be reported by the College on your IRS W-2 form for information purposes only. The health care expenses are not reported; however, you may not claim health expenses that are run through the FSA plan on your tax form.
- 8. Is a Dependent Care FSA better than the tax credit?
We suggest you consult with your personal tax advisor because the personal circumstances of employees will vary. However, in many cases the FSA Dependent Care Account would be better. A general rule of thumb is that if your family taxable income puts you into the 28% Federal tax bracket this plan will save you more than twice what would be available through the tax credit. In addition, if you have only one child in daycare and pay more than $200 per month then the savings available to you would be greater than the credit. Again, it is recommended that you talk with your tax advisor before signing up.
- 9. If I elect to contribute to both a Health Care FSA and a Dependent Care FSA and I exhaust all of my health care money, can I use my dependent care account to pay for health care expenses?
No. The Health Care and Dependent Care FSAs are two separate accounts and money cannot be transferred between them, nor can claims be reimbursed that are not consistent with the expense eligibility requirement for each account.
- 10. Can I change my election or stop contributing money to my FSA at any time during the plan year?
You may change an election during the plan year only if 1) a qualifying event has occurred, 2) the requested change is consistent with the event and 3) you make the change within 30 days of the qualifying event. For example, your spouse now is employed and can no longer stay home with the kids. In this case, you may add a Dependent Care Account because child care allows your spouse to work. Qualifying events include changes in legal marital status, number of dependents (birth, adoption, death) and employment status. As noted, election changes must be made within 30 days of the qualifying event. Because this is an IRS regulated plan, no exceptions can be made.
- 11. Can I be reimbursed for a claim that exceeds the current amount in my FSA account?
The answer depends on the type of FSA you have. For the Health Care Account, you can receive reimbursement for claims that exceed the current amount in your account, as long as the total doesn’t exceed the total amount of your annual election. For the Dependent Care Account, you can only receive reimbursement up to the current amount in your account at the time your claim is processed.
- 12. What happens if I submit a claim for more money than I have in my Dependent Care Account?
Manley Services will reimburse you the funds that are in your account, and then hold the rest of the reimbursement until money has been deducted from your paycheck. Manley will then automatically reimburse you the remaining balance.
- 13. What are examples of eligible medical expenses?
- See FSA Expense List.
- 14. What kinds of over-the-counter medications and products can I get reimbursed for through a Health Care FSA?
Most over-the counter (OTC) medicines are no longer eligible for FSA reimbursement UNLESS you have a prescription or letter of medical necessity from a medical provider. A few OTC items do not require a prescription or letter of medical necessity, such as contact solutions and band aids. Non-prescription antacids, pain relievers, allergy medicines, cold medicines, arch and insole supports, home diagnostic tests/kits and other medicines or products purchased to alleviate or treat the personal injuries or sickness of you and/or your dependents are eligible items for reimbursement with a prescription or letter of medical necessity. Vitamins and other dietary supplements that are simply beneficial to you and/or your dependent are not eligible for reimbursement. Keep in mind that when submitting a claim for over-the-counter medicines and products, a detailed receipt naming the product will be required.
- 15. Are prescription drugs obtained from Canada or other countries outside the U.S. eligible for reimbursement?
No. The Food and Drug Administration has determined that the importation of prescription drugs from Canada and other foreign countries is illegal. As a result, the IRS does not allow reimbursement for these purchases from flexible spending accounts.
- 16. How does reimbursement for orthodontia work?
- See FSA Guidelines for Orthodontia Reimbursements.
- 17. Are insurance premiums qualified FSA expenses?
- No. Insurance premiums may not be paid from monies allotted to a Health Care Account.
- 18. What is considered a dependent care expense?
A dependent care expense refers to day care for children under age 13 or day care for a disabled spouse, dependent, or elderly parent who lives with you at least eight hours a day. Dependent care expenses must be necessary for you and your spouse (if applicable) to work.
- 19. How do I get reimbursed?
- You must submit documentation of your expenses along with the Reimbursement Request Form. Documentation can include a copy of the bill or Explanation of Benefit report from your insurance carrier. Documentation must include the cost and date of service. Canceled checks, past due notices or receipts are not acceptable information.
- 20. How long will it take to receive reimbursement?
Approximately one week from receipt of request by Manley Services for a Health Care Account reimbursement. Dependent Care Account reimbursements may take one week from pay day because the money must be in your account before you can get reimbursed.
- 21. How can I check my benefit balance?
You can go into your “MyFlex” account on the Manley Services website to obtain this information.
If you cannot find your PIN, you can call Manley Services (1-800-422-7038) to get your PIN reset.
- 22. What if I go on a period of leave without pay and incur an expense?
While on leave without pay your FSA account is frozen or suspended because you’re not making contributions to the account. During those months, services received are not eligible reimbursement from your account. Please contact a Benefits Specialist regarding your options for your FSA account during your unpaid leave.
- 23. What happens if I terminate or retire before the end of the FSA plan year?
For a Health Care Account, you may request reimbursement through March 31 of the following year, for expenses incurred while you were an active employee on the plan. For a Dependent Care Account, you may submit for reimbursement during the plan year even if the expense was incurred after your separation from the College.
You may elect to continue participation in the Health Care Account through COBRA (federal law regarding continuation of health care benefits) by making contributions on an after-tax basis. This option may be desirable for individuals who have a balance in their Health Care Account and will lose it unless he or she elects to continue participation. Please contact a Benefits Specialist if you wish to pursue this option.