What is a Flexible Spending Account?
Flexible Spending Accounts allow employees to pay for certain child care or out-of-pocket medical expenses with pre-tax rather than after-tax dollars. Employees determine the amount they want to contribute pre-tax on an annual basis – up to the $5000 per calendar year cap set by the IRS. Employees who want to participate in this program must reenroll every calendar year during Open Enrollment. New employees cannot open an FSA for medical expenses during their first year of employment.
• A Flexible Spending Account (FSA) provides a tax-advantaged way to pay for eligible out-of-pocket healthcare expenses and work-related dependent day care expenses. Authorized by Internal Revenue Code Section 125, an FSA allows you to pay for eligible expenses with “pre-tax” dollars, thereby lowering your taxable income. Employers have the option of offering a healthcare spending account, a dependent day care account or both. A healthcare spending account allows you to set aside money on a pre-tax basis to pay for qualifying out-of-pocket health care, dental, vision or hearing expenses. Out-of-pocket expenses are those that are not covered by your existing insurance plans. These expenses include deductibles, coinsurance and co-pays and certain over-the-counter (OTC) expenses. A dependent day care spending account allows you to set aside money on a pre-tax basis to pay for child or adult day care expenses so that you and, if married, your spouse can work. These expenses include day car
A Flexible Spending Account, also known as HACC Plan, is a fund that is to be used for reimbursement of actual medical expenses utilizing a combination of employer (College) funds and redirected employee earnings to reimburse employees who shall qualify for reimbursement of their qualified medical expenses (per IRS guidelines) as well as those of their dependents. Full-time employees become eligible for HACC Plan funding after twelve continuous months of employment.
The State offers two types of Flexible Spending Accounts. The first is for unreimbursed medical expenses. The second type is for dependent care expenses. The purpose of the Flexible Spending Account program is to allow employees to decrease their taxable income by paying for certain medical and dependent care expense on a pretax basis. Certain rules and provisions apply so it is important to fully understand the program prior to electing to participate.
A flexible spending account or flexible spending arrangement (FSA) refers to a number of programs in place in the United States, in which employees and employers may participate. Through FSAs, employees can make pre-tax contributions to pay for certain types of qualified expenses. This money is not taxed and usually comes right out of an employee’s paycheck. These contributions, within certain guidelines, may then be used to pay for certain medical, dependent care, and other qualifying expenses. Employees can use their flexible spending account to pay for related medical care costs. This can include paying for things like insurance copayments, prescriptions, and over the counter drugs. Many plans now come with an ATM card that can be used to make reimbursements easier. Otherwise, employees must file receipts with FSA companies in order to get repaid for costs. Usually, a person can’t use the FSA amounts to purchase health insurance or to pay for optional medical care expenses like plas
