Flexible Spending Accounts (FSAs)
Why Choose An FSA?
On the federal income tax form, healthcare expenses can be deducted, but must exceed 7.5 percent of adjusted gross income to do so. With the FSA, participants save taxes on all qualifying healthcare expenses immediately because those expenses are paid for with tax-free dollars. The only restriction is that participants cannot use these healthcare expenses for both the FSA and for a federal tax deduction.
What Expenses Are Covered?
An FSA is used to pay for unreimbursed healthcare expenses as defined by IRS Code Section 213(d), such as:
- Medical plan deductibles and co-payments
- Well-baby care
- Dental care expenses not covered by your dental plan
- Therapy
- Prescription medication
- Vision care
- Orthodontia
- Annual physicals
- Psychiatry (if medically necessary; excludes marriage counseling)
How Do Reimbursements Work?
Participants are reimbursed with tax-free dollars from their FSA after they submit a completed reimbursement form for an eligible expense. They also must submit a copy of the bill from the provider or an Explanation of Benefits. Reimbursement checks are issued twice a month. The employer can determine a grace period after the plan year ends for participants to submit claims for expenses incurred during this plan year.
Change in Status
Participants can change their plan elections if they experience a change in status, including marriage, divorce, birth of a child, death of a child or spouse, adoption, or change of employment by spouse. Any change in election must reflect the status.