What is an FSA?

A Flexible Spending Account, or FSA program, allows benefit eligible employees to contribute pre-tax dollars into an account to pay for qualified medical and dependent care expenses.  The advantage of a Flexible Spending Account program is every dollar contributed into the account is pre-tax, no State*, Federal, or FICA withholdings. Depending upon your tax status you might be saving as much as 30% on every purchase.
*state tax is not exempt in all states

Health Care Spending Account
Under a Health Care FSA, medically necessary expenses that qualify as a deduction under the Internal Revenue Code (IRS) for income tax purposes and are not covered by your medical, dental or vision insurance are reimbursable.  These are expenses incurred by you, your spouse and your dependents.  Expenses include insurance deductible, co-payment and coinsurance amounts, as well as items such as eligible over-the-counter medications and supplies, orthodontia and laser eye surgery.  Items not eligible for reimbursement are insurance premiums and cosmetic procedures aimed at improving your general appearance.  You cannot take a deduction from your personal income taxes for amounts reimbursed through a Health Care FSA.

Your employer will establish the plan parameters, including the maximum amount that employees can withhold from their paycheck pre-tax. To maximize the benefit of the FSA program, employees should calculate their known out of pocket medical expenses. Your FSA plan year election should total your annual out of pocket cost. This amount divided by the number of times you are paid in a year, will be withheld from your paycheck every pay period.

Employees considering participation in a Flexible Spending Account program should review the following rules:

• Your Healthcare Account is a prefunded account, the total plan year election is available for use on the first day of the plan. 
  
• The election you make at the beginning of the plan year will remain in effect until the end of the plan year.  Changes to elections will only be permitted if there is a qualifying event.  A qualifying event is generally defined as a birth or death of a dependent, marriage or divorce, a change in cost or provider (Dependent Care Account only), or if you or your spouse experience a change in employment.  Please contact your employer or CareFlex Benefit Solutions for additional information. 
  
• At the conclusion of the plan year, any remaining funds in the FSA account will be subject to the IRS “use it or lose it” rule. Employers will designate a specific amount of time to submit a request for reimbursement once the plan year has ended.  All remaining funds will be forfeited after this “run-out” period.  With careful planning, participants can eliminate the possibility of the "use it or lose it" provision.