Types of Flexible Spending Accounts
Limited Purpose FSA: Eligible to reimburse only dental and vision expenses. Reimburses dental and vision expenses only, until the IRS statutory deductibles are met where it converts to a full FSA, able to reimburse all FSA eligible expenses. Combination Limited Post-Deductible FSA: Reimburses dental and vision expenses; after the IRS statutory deductibles are met, eligible to reimburse all FSA expenses.
Flexible Spending Account
FSA allows your employees to use pre-tax deductions from their paychecks, or employer funding, to pay for any qualified health expense. Participant elections are made once per year, during the open enrollment, or when a qualifying life event is met. Unused amounts at the end of the plan year are forfeited to the plan – the infamous Use-It-or-Lose-It rule. Qualified expenses include medical, dental, vision, and prescription costs. Other expenses, like over-the-counter drugs, can be eligible with a doctor’s approval.
Contributions are deducted each pay period. With an FSA, you elect to have contributions deducted from your paycheck in equal installments until you reach the yearly maximum that has been specified.
- Immediate Tax Savings – The dollars deducted from your paycheck that go into your fund will not count as taxable income.
- Medical Expense Reimbursement – allows the reimbursement of any qualifying medical expenses that were paid for out-of-pocket.
- Limited Purpose Medical FSA & Limited FSA works with a qualified, high-deductible health plan (HDHP) and a Health Savings Account (HSA).
- A Limited FSA will only reimburse for vision and dental expenses.
- Dependent Care FSA – Reimbursements of dependent care expenses for eligible dependents, like daycare are allowed
- Enjoy Tax Savings – Quick and easy access to your funds and it is possible to use your prepaid benefits card or request to have funds directly deposited into your bank account.
- Reduce Filing Hassles and paperwork by using your prepaid benefits card.
- 24/7/365 Secure Access to your accounts on our consumer portal.
- User-Friendly Mobile Application – file claims, stay up to date on balances and action required and get one-click answers to benefits questions.
Download the FSA calculator.
Dependent Care Flexible Spending Account:
NOTICE for 2021: Passed as part of the American Rescue Plan Act of 2021, the dependent care FSA limit increases to $10,500 ($5,250 for married individuals filing separately) for the 2021 calendar year. For 2022, the maximum annual amount is $5,000 per year ($2,500 if you are married and file separate returns). Your maximum allocation may not exceed the earned income limitation.
As a rule, you can’t change your Health Care FSA (HCFSA), Limited Expense Health Care FSA (LEX HCFSA), or Dependent Care FSA (DCFSA) election amount during a benefit period (the plan year). That’s why it’s important to plan an election that suits your needs for your entire benefit period. But there are circumstances – called qualifying life events (QLEs) – when you can make changes.
Qualifying Life Events
The IRS determines what counts as qualifying events. They typically include:
•Change in employment status for you, your spouse, or dependent.
•Change in legal marital status (marriage, divorce, or death of your spouse).
•Change in the number of your dependents (birth or adoption of a child, or death of a dependent)
•Change in your dependent’s eligibility (for example, your child reaches age 13 and is no longer eligible under a DCFSA).
•Change in child care or elder care provider, change in cost, or change in coverage. This applies to a DCFSA only. It doesn’t apply to an HCFSA or LEX HCFSA.