FLEXIBLE SPENDING FLEXIBLE SPENDING ACCOUNTSACCOUNTS

Open EnrollmentOpen Enrollment

ENROLLMENT

• Open Enrollment is usually held late October and includes the first week in November with an effective date of January 1, the following year.

• All enrollment forms must be submitted to the Benefits Coordinator by the end of open enrollment.

Contributions to Flexible Spending Accounts

Are Pre-tax

Tax elimination – not tax deferral

Taxes

What are these benefits?• Flexible Spending Accounts,

governed by the IRS, allow employees to have income withheld from their paychecks before taxes for eventual reimbursement of certain expenses. PASSHE offers two types of FSA’s – a medical reimbursement account and a dependent care reimbursement account.

Dependent Definition

Dependents include all family members whose health care expenses would be an allowable deduction on the employee’s federal income tax return.

Medical Reimbursement Account

Employees designate the amount to be deducted from their pay to

cover out-of-pocket medical expenses for self and dependents.

$3,500 annual maximum

• Federal – Approximately 15% to 30%

• State – 3.07%• Local – % varies • FICA (Social Security) - 7.65%

Medical Reimbursement Account Tax Savings

Eligible Medical Expenses

• Major Medical deductibles• PPO/HMO office visit co-pays• Prescription co-pays and deductibles• Dental and vision expenses• Lasik eye surgery• Hearing Aids• Many over-the-counter items & more

Ineligible Medical Expenses

• Expenses not allowed on income tax return• Cosmetic surgery• Expenses paid through other sources• Insurance premiums

Example WITHOUT a Medical Reimbursement Account: Married, claiming 2 exemptions & who incurs $2000 of annual medical expenses not covered on health insurance

Gross Bi-weekly Salary $1,342.00Bi-weekly contribution (0)Taxable Income $1,274.90Total Tax Withheld $240.30_____________________________

Bi-weekly Tax Savings (0)Annual Tax Savings (0)

Same Example WITH a Medical Reimbursement Account:

Gross Bi-weekly Salary $1,342.00Bi-weekly Contribution $76.92Taxable Income $1,197.98Total Tax Withheld $219.74______________________________

Bi-weekly Tax Savings $20.56Annual Tax Savings $534.56

Dependent Care Reimbursement Account

Employees designate amount to be deducted from pay to cover

dependent care expenses

$5,000 annual maximum per family

Dependent Care Reimbursement Account:SAVINGS

• Federal – Approximately 15% to 30%

• FICA (Social Security) - 7.65%

Dependent Care Definition

A dependent is defined as an individual under age 13 or a spouse or other individual who is physically

or mentally unable to take care of themselves and who qualifies as a

dependent for income tax purposes.

Eligible Dependent Expenses• Eligible expenses are those that enable you & your spouse (if married) to work or look for work

• Child care centers with 6+ children (must meet IRS qualification definition)

• Caregivers for disabled spouse or dependent living with you

• Babysitters

• Nursery Schools

• Before & After school care

Ineligible Dependent Expenses

• Babysitting for social events

• Charges for overnight camp

• Educational expenses (kindergarten and beyond)

• Expenses taken as child care credit on income tax return

Employee Estimates Annual

Expenses & Enrolls in Plan

Equal AmountsDeducted

FromPaycheck

Employee/Dependent

IncursExpenses

EmployeeFiles Claim forReimbursement

Eligible ExpensesProcessed

Eligible ExpensesReimbursed

Through BiweeklyPaycheck HOW IT

WORKS

Filing Claims for Reimbursement

• Claims must total more than $25.00 per submittal, except for claims filed after the plan year ends.

• After this time, and before March 31, claims may be submitted for any amount, not to exceed enrolled plan allowance.

FSA Enrollment

• Plan Year January 1 – December 31

• Annual Open Enrollment period

• Mid-year changes to elections only if “Status Change” defined by IRS(i.e. marriage, divorce, additional dependent)

• Must re-enroll each year to stay in medical/dependent care accounts

All claims are processed in Harrisburg for

confidentiality purposes.

PRIVACY

Estimate Expenses Carefully!

Funds not spent through reimbursement accounts are forfeited and used to fund plan administration.

QUESTIONS?