DepCare & Health Flexible Spending Accounts (a.k.a. Reimbursement Accounts)
Flexible Spending Accounts (FSAs) are administered by Conexis and allow eligible employees to contribute pre-tax dollars to reimburse themselves for eligible dependent care or health care expenses. By using these FSAs, employees reduce their taxable income. For example, Josephine Bruin spends $5,000/year in day care costs for her child, and $1,200/year in health care deductibles and co-pays. Her gross pay is $3,100/month and her tax filing is Single with 2 exemptions. How much money can she save by using FSAs?
|With FSA||Without FSA|
|Gross Monthly Earnings||$3,100.00/month||$3,100.00/month|
|Federal and Social Security Taxes||$450.67||$572.16|
|Monthly day care and health care charges||$516.67||$516.67|
|Final Effect (after charges/reimbursements) on income||$2,132.66||$2,011.17|
Net Tax Savings using FSAs = $121.49/month ($1,465.00/year)
IRS regulations require forfeiture of any unused funds in Flexible Spending Accounts after the closing date for the plan year. Therefore, FSAs are appropriate for predictable expenses.
Figure out how an FSA can save you money by visiting the related link.
DepCare Flexible Spending Account (DepCare FSA)
The DepCare program allows UC employees to pay for certain dependent care expenses on a pretax, salary reduction basis. You specify the amount to be taken and deposited in your DepCare FSA. After incurring an eligible dependent care expense, submit a claim form with receipt to Conexis. Conexis then reimburses you from the funds in your DepCare FSA. You may use DepCare FSA for the following eligible tax-dependent family members:
- A child under age 13 in your custody;
- A spouse who is physically or mentally incapable of self-care;
- A family member who lives with you — such as a child over age 13, parent, sibling, or in-law — who is physically or mentally incapable of self-care. Also,
- If care is provided outside the home, the family member must live in your home at least eight hours each day.
- In order to be eligible, the dependent care must be necessary so that you, or you and your spouse, can work or look for work. In addition, dependent care expenses must meet the statutory requirements of the Internal Revenue Code.
Generally, the maximum annual contribution is $5,000 per household. Be sure to estimate your annual dependent care expenses carefully when you enroll! Any unclaimed funds will be forfeited.
Note: Both DepCare FSA and the federal tax credit allow you to reduce your income taxes if you pay someone to care for your child or other dependent. DepCare FSA reduces your taxable (federal, state and FICA) income; the federal tax credit reduces the total federal income tax. You cannot use DepCare FSA and the federal tax credit for the same eligible expense. For a complete discussion of DepCare FSA and the federal tax credit, see the DepCare FSA Summary Plan Description. Because DepCare FSA contributions are not subject to FICA taxes, future Social Security benefits could be slightly reduced as a result of participation.
Note: The IRS requires you to forfeit any unclaimed funds in your DepCare FSA for which an expense was not incurred before December 31st of the calendar year. However, you have until April 15th of the following year to file a claim for reimbursement.
Health Flexible Spending Account (Health FSA)
The Health FSA allows UC employees to pay for certain, eligible health care expenses on a pretax, salary reduction basis. Conexis administers the Health FSA program. You specify an amount to be taken from your monthly paycheck and deposited in your Health FSA. After incurring an eligible health care expense, you submit a claim form and appropriate documentation [i.e. Explanation of Benefits (EOB), receipts] of the expense to Conexis. Conexis then reimburses you from the funds in your Health FSA account, up to your annual election, making the reimbursed, health expense tax-free. Because Health FSA contributions are deducted from your paycheck before taxes, your taxable income is reduced, and you save money on taxes.
You may use your Health FSA account for expenses not covered by your insurance (see Eligible and Ineligible Expenses related links), in excess of your insurance limits, co-pays, orthodontics, prescription eyeglasses, almost everything pertaining to health care, even band aids!
Expenses must be incurred during the Health FSA plan year. If you enroll midyear, expenses incurred before your effective date are not eligible. You incur expenses when the care is provided rather than when you are billed or when you pay for the care. Expenses incurred after your participation ends are not eligible.
Expenses can be incurred by you, your legal spouse, dependent child(ren) — anyone you claim as a tax dependent. The maximum annual contribution is $2,500; the minimum is $180. Be sure to estimate your annual health care expenses carefully when you enroll! Any unclaimed monies will be forfeited.
Note: Health FSA reduces your taxable income; your Health FSA contributions are not subject to FICA tax so your future Social Security benefits could be slightly reduced as a result of your participation. For complete details, please see the Health FSA Summary Plan Description.
Note: The IRS requires you to forfeit any unclaimed funds in your Health FSA for which an expense was not incurred before March 15th of the following calendar year. However, you have until April 15th of the following year to file a claim for reimbursement.