Flexible Spending Accounts
Health Reimbursement Arrangements
Parking & Transit Expense Reimbursement
Plans
Flexible Spending Accounts
What is a Flexible Spending Account (FSA)?
A Flexible Spending Account (FSA) is an employee benefit program that
enables pre-tax dollars to be used to pay for eligible health care
and dependent care expenses.
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How will an FSA save me money?
With an FSA, every dollar you set aside decreases taxes and may increase
your spendable income. You elect to have your annual contribution
deducted from your paycheck each pay period, in equal installments
throughout the year – BEFORE federal income, state income (in
most cases) and Social Security taxes are taken out. Results ……
you may keep more of the money you earn!
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How much can I save?
The average family of four in the U.S. can expect to pay close to
$1,600 each year on out-of-pocket expenses like doctor visits, prescription
co-pays, dental work and new glasses. If that $1,600 goes into a Health
Care FSA, a family can save over $400 in taxes. You can save on Federal
and state income taxes (most states), and social security taxes. Federal
taxes are generally 15% - 28%, with social security taxes at 7.65%.
With the additional amount from your state taxes, you could save up
to 30% or more.
*Sample tax savings. Actual savings will vary based on your individual
tax situation. Please consult a tax professional for more information.
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Will my participation in the FSA impact my
Social Security benefits?
Social Security benefits will be based upon your adjusted gross pay
after your cash compensation is reduced by the amount of your FSA
contributions. Since Social Security is based upon your career earnings,
this may have only a small effect on your final benefit.
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What expenses are covered under the Health
FSA?
A Health Care FSA covers many expenses. Your tax-free FSA dollars
are ready to pay for eligible health care expense such as:
- Covered prescription and doctor co-pays and deductibles
- Health plan deductibles and coinsurance
- Eligible over-the-counter (OTC) items
- Lasik surgery and eyeglasses
- Out-of-pocket dentist or other provider fees
- Orthodontics
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If I use the Health Care FSA, can I also
deduct healthcare expenses on my tax return?
Yes (subject to applicable tax deduction requirements), but you cannot
deduct the same expenses for which you have already been reimbursed
from your FSA and vice-versa.
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How are orthodontia expenses reimbursed under
the Health FSA?
If payment is made in full for the orthodontic treatment, and proof
of payment is included with the completed claim form, the full payment
amount will be reimbursed up to your Health Care election amount.
If payment is made on a contractual basis, the initial evaluation
fees are eligible for reimbursement when incurred. The monthly payments
for orthodontic treatment are reimbursable with acceptable forms of
documentation. Acceptable forms of documentation for orthodontic services
include: receipt indicating payment date; monthly statement indicating
monthly payment amount; copy of provider contract/treatment plan that
lists the total charge and dates of initial service, banding date,
and estimated length of treatment.
Services must have been incurred during the Plan Benefit Period.
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Is there a limit to the amount of over-the-counter
(OTC) drugs I may submit for reimbursement?
Yes. Stockpiling of eligible over-the-counter and prescription items,
including drugs and supplies, is generally prohibited.
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Are over-the-counter (OTC) vitamins and supplements
eligible for reimbursement?
They may be eligible for reimbursement if the vitamins and/or supplements
are for medical care for a specific medical condition and not just
for an individual’s personal hygiene or general well-being.
A letter of medical necessity is required.
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What is a Letter of Medical Necessity?
The IRS requires that expenses for medical procedures and services
reimbursed through a Health Care FSA must be primarily for the diagnosis,
treatment or prevention of a disease or for treatment affecting any
part or function of the body. Items such as OTC vitamins and/or supplements
generally promote well-being. If your provider prescribes them for
a specific medical condition, a Letter of Medical Necessity should
accompany your request for reimbursement.
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What dependent care expenses may be eligible
for reimbursement under the Dependent Care FSA?
- Expenses for pre-school and after-school care (separate from
tuition expenses)
- Care for a child under 13 at a day care, day camp or nursery
school, or by a private sitter for a child that lives in your home
for at least eight hours a day
- Elder care for an incapacitated adult who lives with you at least
eight hours a day
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What types of dependent care expenses are
not eligible for reimbursement under the Dependent Care FSA?
- Care provided by a spouse
- Care provided by your dependent child under 19
- Care not necessary to allow you and your spouse to work
- Sports lessons, field trips, clothing, food
- Late payment fees
- Expenses for overnight camps
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If I use the dependent care account, can I
also use the federal tax credit for dependent care expenses?
Any expenses that you fund through the Dependent Care FSA cannot be
used toward a credit on your federal income tax. Work-related expenses
eligible for the child and dependent-care credit ($2,500 for one qualifying
person and $5,000 for two or more qualifying persons) must be reduced
dollar for dollar by any reimbursement you receive under the Dependent
Care FSA.
Every situation is different. You should contact your tax advisor
to determine which choice is best for you. Or you may wish to refer
to IRS Form 2441 to calculate your estimated federal tax credit and
make your comparison. Please keep in mind that state income taxes
and state child care tax credits may affect your figures. In addition,
whether seeking reimbursement under the Dependent Care FSA or utilizing
the child and dependent care credit you must include on your tax return
the name, address and tax ID number of the care provider.
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How much money can I set aside in my FSA?
The healthcare spending account maximum is set by your employer. Please
contact your employer or refer to your plan document for your company's
maximum.
The dependent care maximum is set by the IRS and is the lesser of:
$5000 (or $2,500 if married, filing separately) or; your or your spouse's
earned income, whichever is lower. If your spouse is a full-time student,
or incapable of self-care, the spouse's earned income will be deemed
$200/month with one eligible dependent; $400/month if more than one.
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Can I transfer money between my Health Care
FSA and my Dependent Care FSA?
Any amounts allocated to the Health Care FSA may only be used for
eligible medical expenses. Any amounts allocated to the Dependent
Care FSA must be used only for eligible dependent care expenses. You
may not transfer money between accounts.
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Can I change the amount of money I elect
to set aside in my account(s) at any time during the plan year?
IRS regulations require you to make elections for an entire plan year.
But if you have change in family status, such as change in your spouse's
employment, the birth of a child, adoption, or a change in marital
status you may change your election mid-year. Otherwise, an election
may only be changed for the next year. You'll be able to make changes
by enrolling in your Employer's plan during the designated open enrollment
period. Check with your employer or refer to your plan document.
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When can I enroll in the plan?
Your employer will notify you of the annual benefits open enrollment
period.
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What happens if I terminate employment?
Health FSA - Your deductions will cease when you
terminate employment. You may send in claims for expenses incurred
before your termination date to use up any available balance in your
account. The deadline for submitting claims for processing is the
end of your company's claims submission deadline (typically 90 days
after the end of the plan year - check your account online for details
on your plan or contact our Customer Service Center @ 888-829-7287).
Your FSA may be eligible for continuation coverage under COBRA. You
may elect or decline COBRA. Please consult with your employer.
Dependent Care FSA - Your deductions will cease
when you terminate employment. You may send in claims incurred before
and after your termination date for qualified dependent care expenses.
Claims should be submitted to TaxSaver by the end of your company's
claims submission deadline (typically 90 days after the end of the
plan year - check your account online for details on your plan or
contact our Customer Service Center @ 888-829-7287).
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What records should I keep for tax purposes?
The amount deducted will be reflected on your W-2 form. You should
keep receipts and other documentation for reimbursement and tax purposes.
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What happens to my account balance if I
don’t use all the money deposited for the current Plan Year?
Under current IRS regulations, any amounts left in either your Health
Care FSA or Dependent Care FSA and not used by the end of the year
will generally be forfeited. You must "use it or lose it" unless your
plan allows for a one time rollover of Health FSA funds to a Health
Savings Account. See your employer or plan document for details.
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What is the deadline for incurring expenses?
Expenses must be incurred by the end of the plan year. If your employer
has adopted the Grace Period Extension, you may have an additional
2 ½ months beyond the current plan year to use any remaining funds.
Check with your employer to see if the Grace Period Extension is available
for your plan.
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What is the grace period extension?
The IRS issued Notice 2005-42 in an effort to ease the burden of the
"use it or lose it" rule. The change means that you may now use the
money left in your account at the end of the plan year for expenses
incurred within the first two and a half months of the following plan
year.
If your plan year runs from January 1 through December 31, eligible
expenses incurred from the following January 1 through March 15 can
be reimbursed from the previous plan year. If expenses incurred in
the first two and a half months of the new plan year are less than
the amount remaining from the previous year, the left-over dollars
will be forfeited.
Claims still need to be submitted within your 90 day run-out period
or the period designated by your employer.
IMPORTANT INFORMATION: Not all plans have adopted the grace
period extension. Check with your employer or contact TaxSaver for
details regarding your plan.
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How long after the end of the plan year
can I file claims?
Submit your completed reimbursement request form along with the appropriate
receipts or claim substantiation at any time during the plan year
in which you incur the expense and no later than by the end of your
company's claims submission deadline (typically 90 days after the
end of the plan year - check your account online for details on your
plan or contact our Customer Service Center @ 888-829-7287). Claims
received after that time will not be eligible for reimbursement.
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My plan is a calendar plan year (1/1 –
12/31). If I have services provided in December but wait to pay for
those services until January, will this be a December expense or a
January expense (prior benefit plan year or current benefit plan year)?
Which plan year will the claim be processed from?
Claims are processed based on the date the service is provided. The
claim would be a December claim and would be processed from the prior
plan year. To be considered for reimbursement, the claim would need
to be filed within the appropriate run out period for your plan.
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What is an incurred expense?
Incurred expense means an expense for care received during the plan
year. Only incurred expenses are eligible for reimbursement.
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How do I submit a claim?
Complete the FSA
claim form. Send the completed form (toll-free fax or mail),
along with your documentation (itemized receipts or Explanation of
Benefits) to TaxSaver. Be sure to sign the form and keep the originals
for your records.
Toll-free fax: 1-800-974-5190
Mail: PO Box 4539, Iowa City, IA 52244-4539
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What is an itemized receipt?
An itemized receipt must include the merchant or provider name, service
received or item purchased, date of service and amount of expense.
Cancelled checks, handwritten receipts, credit/debit card transaction
receipts or previous balance receipts cannot be used to verify an
expense. Receipts for dependent-care expenses must include a written
statement from the provider stating that the dependent-care expense
has been incurred, the amount of the expense and the tax ID number
of the provider. If a receipt is not provided, please be sure to have
your provider sign the front of the claim form.
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How can I check on the status of my reimbursement?
You may check the status of your request by logging onto your TaxSaver
participant
account or by calling our Customer Service Center @ 888-829-7287.
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I submitted a claim to TaxSaver. When will
I see it on the website? When will I receive my reimbursement?
Claims are reviewed and entered into the TaxSaver system within 72
hours of receipt. The website provides real time access. Your claim
will be available for viewing immediately upon approval and data entry.
Reimbursements are processed at the agreed upon intervals as determined
by your employer.
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What can I do if my claim has been denied?
Review the denial letter. The reason for denial is stated in the letter.
If the expense is eligible for reimbursement under your plan, please
complete the necessary action as stated in the letter, and then submit
the letter along with the required documentation to TaxSaver for review
and processing. In lieu of submitting the denial letter, you may also
complete a new claim form and send it to TaxSaver along with your
documentation.
You also have the right to formally appeal a claim for benefits that
has been denied by writing to TaxSaver and requesting reconsideration.
Submit your written appeal to TaxSaver, PO Box 4540 Iowa City, IA
52244-4540.
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Health Reimbursement
Arrangements
What is a Health Reimbursement Arrangement
(HRA)?
A Health Reimbursement Arrangement, also known as "health reimbursement
account" or "personal care account," is a employer
sponsored benefit plan that reimburses employees for qualified medical
expenses.
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How does an HRA work?
In a nutshell, employers reimburse participants for a portion of certain
qualified medical expenses. Eligible expenses may be limited by your
employer or can include all eligible expenses allowed by the IRS.
If you do not use all of the funds set aside for you in your HRA,
your employer may have made provisions for rolling over unused funds
to the new plan year. In some cases, former employees, including retirees,
can have continued access to unused reimbursement accounts.
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Important Information:
The IRS allows for a great deal of flexibility in the HRA plan design.
You should consult with your employer to understand the specifics
of your plan.
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Parking & Transit
Expense Reimbursement Plans
What is a Parking & Transit Benefit
Plan?
Your employer provides you with the opportunity to pay for Parking
and Transit benefits on a pre-tax basis. The benefits you elect are
non-taxable. You may save Social Security and income taxes on the
amount of your compensation reduction!
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What expenses are eligible?
Transit Pass: Expenses incurred or paid
for any pass, token, farecard, voucher or similar item (including
an item exchanged for fare media) that entitles a person to transportation
or transportation at a reduced price if such transportation is:
1) on any mass transit facilities, or
2) provided by any person in the business of transporting persons
for compensation or hire in a commuter highway vehicle with a seating
capacity of at least six adults (excluding the driver).
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Qualified Parking: Expenses incurred or paid for
parking provided at or near your regular place of work, or at or near
where an employee may park in combination with mass transit or commuter
highway vehicles (such as a "park-n-ride" lot).
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Commuter Highway Vehicle (Van Pool):
Expenses incurred or paid for transportation in a Commuter Highway
Vehicle for transportation between your residence and place of employment.
Commuter Highway Vehicle means any highway vehicle that has a seating
capacity of at least six adults (excluding the driver); and at least
80 percent of the mileage for a year is reasonably expected to be
used:
- for purposes of transporting employees between their residence
and place of employment; and
- on trips during which the number of employees transported for
such purposes is at least one- half of the adult seating capacity
of such vehicle (excluding the driver).
(Eligible expenses may be subject to plan exclusions.)
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What expenses are not eligible?
Expenses that are not eligible include, but are not limited to:
- Commuting or parking expenses that are partially or fully subsidized
or reimbursed by your company
- Expenses incurred for parking at your spouse’s workplace
- Fuel
- Mileage or other costs you incur in operating a vehicle
- Parking at a mall or similar location where you stop on your drive
to or from work
- Parking on or near property where you live
- Payments to fellow participants in a car¬pool or to a friend
who drives you to work
- Taxis
- Tolls
- Traffic tickets
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What are the dollar limits that
I can set aside for transit and/or parking expenses?
For 2008, you can set aside up to $220 each month for qualified parking
benefits. You can set aside up to $115 each month for transit pass
expenses and commuter highway vehicle expenses combined. The monthly
election limits are set by the Internal Revenue Service (IRS) and
may be adjusted annually.
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When are transportation expenses “incurred”
or “paid”?
For transportation expenses to be reimbursed, they must have been
incurred or paid during the monthly coverage period for the election
period. A transportation expense is incurred when the service that
gives rise to the expense is provided. A transportation expense is
paid when you formally pay for the service; it is not paid when you
are formally billed for or charged for the service. You may not be
reimbursed for any transportation expenses arising before the Plan
became effective, before your election form became effective, or for
any expenses incurred or paid after a separation from service.
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Who can participate in the Plan?
All employees who are offered the Plan by their employer can participate
in the Plan. Eligible employees with an account balance who are no
longer making compensation reductions for benefits may also receive
benefits. Spouses and dependents are not eligible.
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When would my participation in the plan
end?
Participation ends when:
1) You are no longer an eligible employee (due to retirement, termination
of employment, layoffs, etc.); or
2) You revoke your election for the next Period of Coverage as permitted
by the Company; or
3) The Plan terminates.
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My commuting plans may change from month
to month. There may be times when I need to change or stop my participation
in the plan. What can I do?
Elections are administered on a monthly basis. You may change your
election for the upcoming one-month period of coverage provided you
make a timely request to your employer. Your election under the plan
may not be revoked or changed during the one-month of the period of
coverage to which it relates.
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What happens to my Reimbursement election
if I do not use all the money deposited into my Commuter Spending
Account for the current month?
Excess balances will be carried over to the following month. However,
you can only spend the amount of the monthly IRS limits ($110 for
transit and $215 for parking). Example: You have a balance of $300
in your parking account at the beginning of July. You can only submit
$215 for expenses incurred or paid in July. You have the ability to
adjust future contributions to avoid having an excess balance.
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How do I get reimbursed for my expenses?
Complete the Parking
& Transit reimbursement request form. Send the completed
form (toll-free fax or mail), along with your documentation (itemized
receipts or other supporting documents) to TaxSaver. If proof of expense
is not available in the ordinary course of business, an explanation
will need to be provided. Be sure to sign the form and keep the originals
for your records.
Toll-free fax: 1-800-974-5190
Mail: PO Box 4539, Iowa City, IA 52244-4539
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My provider does not give me a receipt.
What should I do?
Some providers don’t provide receipts. If proof of expense is
not available in the ordinary course of business, simply provide an
explanation in the space provided on the Parking
& Transit reimbursement request form.
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When would I risk forfeiting my parking
&/or transportation benefits?
If you have any funds in your Parking &/or Transportation Account
at the time you terminate employment or stop being eligible for the
Plan, any amounts not claimed prior to the termination will generally
be forfeited to the employer.
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