Frequently Asked Questions

About FSA Accounts

Can I participate in Flexible Spending Accounts even if I don’t have health care coverage through my employer?
Yes, provided you are eligible for health care coverage according to your employer’s rules.


Can I pay for my spouse’s or dependent’s unreimbursed eligible medical expenses with my Health Care FSA if they are not on my health care plan?
Yes


Will I have to pay taxes on the money I use in the Health Care and/or Dependent Care Flexible Spending Accounts?
No. Contributions used for flexible spending accounts are taken out of your salary before federal income taxes, Social Security taxes and most state and local taxes are applied. You also will not be responsible for paying taxes on any money taken out of the health care and/or dependent care flexible spending accounts to pay for eligible expenses.


Do I have to report the money I use on my tax return?
No, the money in a FSA account is free from Federal, State and Social Security Taxes and will not be reported on your W-2 at the end of the year.


How much will I really save?
Depending upon your individual income and tax filing status, you could save as much as 20% to 50% on eligible services by using a health care and/or dependent care flexible spending account.
Paying for eligible expenses through a FSA offers a two-fold potential tax advantage:
  -You are paying for eligible expenses with dollars that are never taxed. With before-tax contributions you make to the FSA, you do not pay Federal income taxes or Social Security taxes (FICA), and in most cases, state and local taxes. (The current state exceptions are New Jersey, Pennsylvania and Alabama.)
  -Also, before-tax contributions lower the taxes you pay because they reduce your taxable income base.
Refer to the Health Care Tax Savings Worksheet and/or Dependent Care Tax Savings Worksheet on this site for additional assistance in determining your savings with a FSA account.


How much should I contribute?
How much you contribute depends on your individual situation. Consider last year's health care and/or dependent care expenses, and any medical, dental or vision care costs you foresee in the next year that might not be covered under your medical or dental plans, and any changes in your family status that may have an impact on your health care or dependent care expenses. Use the Health Care Budget Worksheet and/or Dependent Care Budget Worksheet to help you make these decisions.

You may want to estimate conservatively the first year. But, keep in mind that even if you overestimate, your total tax savings may offset the amount you forfeit.


Are there maximum Contribution Amounts?
Health Care Spending Account
Federal regulations do not limit the maximum annual contribution, it is determined by your employer.  (If you become eligible during the plan year, the maximum is the same amount, it is not pro-rated.)  Consult with your employer to determine your maximum contribution amount.

Dependent Care Spending Account
Federal regulations limit the maximum annual contribution to $5,000 ($2,500 if married and filing separate tax returns). If you or your spouse earns less than $5,000 annually, this lower income amount is the most you can deposit. Once again, your employer may select a contribution level below this federal maximum.

Wouldn't I save more by taking a deduction on my income tax?
You need to determine whether taking tax deductions is more beneficial than using health care and/or dependent care flexible spending accounts. According to the IRS, only medical and/or dental expenses that exceed 7.5% of your adjusted gross income can be deducted from your income taxes. Most people do not have expenses high enough to qualify for this deduction.
For work-related dependent care expenses, the tax credit amount is determined by applying a percentage to your total dependent care expenses. According to current tax structure, generally the tax credit is more beneficial than a dependent care flexible spending account if your family income is under $24,000. But keep in mind that contributions for a flexible spending account are taken out of your pay before taxes are applied, thus reducing your gross salary and your taxable income. You will need to determine which is option is better for you.
Refer to the Health Care Tax Savings Worksheet, Dependent Care Tax Savings Worksheet and/or Dependent Care Spending Account versus the Federal Tax Credit Worksheet on this site for additional assistance in determining your savings with a FSA account


Does my participation affect my Social Security Benefit?
Because the Flexible Spending Account and other before-tax benefit costs reduce the amount you pay in Social Security taxes, they may cause your benefits from Social Security to be reduced. If there is a benefit reduction, it generally will be very small – less than $5 per Social Security check.


How do I enroll?
You choose if you want to participate in either Flexible Spending Account, so you must enroll by indicating your election in advance for the next enrollment period.  Employees hired after the start of the benefit year generally have until the last day of the month following the month of employment to enroll. Consult with your benefits office to make sure that you understand your open enrollment period and the last date when you can enroll, for this can vary by employer. To enroll, you must complete the FSA Enrollment Form. If you do not elect to participate at that time, you can only enroll during the open enrollment period for the following year.


When am I first eligible?
Your participation extends from January 1 through December 31 (or from the first day of the month after you enroll, through December 31). Your participation stops at the end of each calendar year. In some cases the applicable period is the employers benefit year, which may not coincide with the calendar year. New employees generally have until the first of the month following employment or thirty days following employment to enroll. Consult with your benefit office for specific details concerning your plan.


Can I request reimbursement from my flexible spending account for services I receive before the plan year begins, if I am not billed until after the plan year starts?
No. According to Internal Revenue Service (IRS) guidelines, a qualified expense is "incurred" at the time the service is provided, not when you are billed (or charged) or actually pay for this service. Therefore, reimbursements made during a plan year are only made for eligible expenses incurred during that same plan year.


Must I re-enroll each year?
Yes. Each year you must re-enroll by indicating your election in advance for the next year. To ensure your annual election amounts are correct you must complete an enrollment form declaring your election for the next enrollment period. If you fail to enroll, your eligibility for participation in the Flexible Spending Account program will be waived for the entire year, unless you have a qualifying change in status, such as a marriage, divorce, birth/adoption of a child, or other approved change as outlined by the IRS.


What records should I keep?
Keep copies of all materials sent to CHC including the election form, claim forms, receipts, EOBs, etc.


How are deductions handled?
Contributions to your FSA will be deducted from your pay each pay period on a before-tax basis, up to the maximum amount indicated below.

For example, if you are paid bi-weekly, and you designate $1200 to be set aside in a dependent care account, then for each pay period during the year $50 will be deducted to obtain your yearly contribution ($1,200). Where there are 26 pay periods in the year the annual contribution is divided by 26 to determine the paycheck deduction.


What should I send in with my Request for Reimbursement Form?
Health Care Expenses: Send the Explanation of Benefits (EOB) from your insurance company (if you have partial coverage for the expense) or an itemized bill. The EOB or bill must contain:
    o Name of the patient
    o Date the service was provided
    o Service Provider’s name and address
    o Description of the service
    o Prescription drug name RX item number (if applicable)
    o Total charges for the service or item.
    o IRS Guidelines do not consider cancelled checks, bank statements, cash register receipts or credit card    receipts as valid documentation for reimbursement.
Dependent Care Expenses: Send in your request for reimbursement form; include all information requested in the Dependent Care Account section. You may also submit a copy of your cancelled check, (which must indicate in the memo section that the payment is for dependent care), the dates of service, the provider tax identification number or SS# and signature on the back of the check.


What happens if I submit a request for reimbursement for an amount greater than my health or dependent care flexible spending account balance?
When you submit a request for reimbursement for your health care flexible spending account, you will be reimbursed up to the full amount of your annual election, regardless of the amount of money that has been deposited into your account. Contributions will continue throughout the year and requests will continue to be paid until your annual maximum is met.
Do Dependent Care Accounts work the same way?
No, Dependent Care Accounts work a little differently. If you submit a request for reimbursement and your balance is less than the amount of the request , you will only be reimbursed for the amount of money available in your account. The remainder will be reimbursed once the money is deposited into your dependent care flexible spending account. This enables you to submit a request only once and receive funding on an ongoing basis, rather than be denied payment or be forced to resubmit the request until it can be paid in full.


Where should I send my Request for Reimbursement Form?
Colonial HealthCare Inc
FSA Reimbursement
P.O. Box 827
Lanham, Maryland 20703-0827
OR fax requests to: 301-306-2509


How often are reimbursement checks mailed?
Claims are processed within one week of being received and reimbursement checks are mailed according to a schedule selected by your employer.

What is the minimum reimbursement amount?
$10 is the minimum reimbursement amount if you receive your reimbursement by check. For those employees with a debit card, there is not a minimum reimbursement amount.

What if I do not use all of the money that I deposit into my flexible spending account by the end of the plan year?
A grace period, typically 30-90 days, will be established by your employer, which allows you to submit requests for reimbursement that were incurred prior to the end of the plan year. If you have not used all of the money that you deposited into your flexible spending account by the end of this period, then your remaining funds must be forfeited, according to IRS rules.
Careful planning of your yearly expenses and awareness of your account balances and filing deadlines will assist you in using your flexible spending accounts to their maximum potential. Account activity statements will be sent during the year to remind you of your balance and important request filing deadlines. To make certain you make the best estimate possible each year, use the Health Care Budget Worksheet and/or Dependent Care Budget Worksheet on this site.


Can I change my election or stop contributing money to my flexible spending account at any time throughout the year?
Federal regulations state that you may change your election decisions during the year only if you have a qualifying change in your status, and the election you request is consistent with the circumstances of your status change. Qualifying status changes include the following:
   -Marriage, divorce, legal separation or annulment
   -Death of a spouse or dependent child
   -Birth, adoption, placement for adoption of a dependent child
   -Employment status change, including termination or commencement of employment of employee, spouse or dependent
   -Change in work schedule
   -Reduction of salary

You must notify your company within 30 days of the qualifying event date. Modified elections are effective on the first paycheck after the form is received and approved by the plan administrator. Consult with your Human Resources Department to more fully understand the notification period.


Under what circumstances will my contributions end?
Your payroll-deducted contributions to the Health Care and/or Dependent Care Spending Account ends on:
  -The earliest of the date your employment terminates
  -The date you transfer to an ineligible class of employee
  -The effective date of an allowable election to cease contributions due to a qualifying change in family status
  -The first day of an enrollment period in which you do not specifically authorize participation
  -The date you begin an unpaid leave of absence,
  -The date Company Name discontinues the plan

If your contributions end due to a work force reduction, an approved unpaid leave of absence or retirement, and you subsequently return to work during the same enrollment period as when your contributions ended, your elections in effect before your last day worked are reinstated when you return to work.

If your participation ends for any reason and you have a balance remaining in your accounts, you will have a grace period following the termination of you participation to submit requests for reimbursement against the money in your FSA account(s). Unclaimed funds remaining in your FSA account(s) after that time will be forfeited.

NOTE: Participation in the Health Care Flexible Spending Account may continue through COBRA election on post-tax basis. The amount due each month will be 102% of your prior contribution. This can be useful to extend the availability of funds past 90 days after termination, if the planned medical expense is past that date.


What if I leave my company? What will happen to my Flexible Spending Account?
If your participation ends for any reason and you have a balance remaining in your accounts, you will have a grace period following the termination of your participation to submit requests for reimbursement against the money in your FSA account(s). The incurred date of the service must be before your termination date.  Unclaimed funds remaining in your FSA account(s) after that time will be forfeited.


Can I use the dependent care flexible spending account for elder care?
Yes. You can use the dependent care flexible spending account for day care expenses so that you (or if you are married, you and your spouse) can work if:
· You are responsible for at least 50% of the support of an elderly parent or any person living with you who is physically or mentally incapable of self-are; and
· This person is noted on your income tax statements as a legal dependent.
You can also use the dependent care flexible spending account if the elder care is needed because you work and your spouse is a full-time student.


If I have someone come into my home to take care of my children instead of using a day care facility, do these expenses qualify for a dependent care flexible spending account?
Yes. You can include wages paid to a baby-sitter or companion in or outside your home if the services are necessary in order for you (or, if you are married, you and your spouse) to work. Expenses will also qualify for a dependent care flexible spending account if you work and your spouse is a full-time student. The services are not covered if the baby-sitter is someone you declare as a dependent.


Can I pay a family member to care for my child?
Yes, as long as the family member is over the age of 19 and not a dependent on your federal tax return.


If I underestimate my dependent care flexible spending account contributions, can I use money from my health care flexible spending account to make up the difference?
No. The health and dependent care flexible spending accounts are two separate benefit plans. You cannot transfer money between accounts.


What about the Federal Income Tax Credit for Dependent Care Expenses?
If you have dependent care expenses, you are eligible for a special tax credit on your Federal Income Tax Return. You cannot apply the same expenses to both the tax credit and a Dependent Care Spending Account, so you must make a decision about which tax-saving method to use. You may, however, apply some expenses to the tax credit and others to the Dependent Care Spending Account. Here are some general guidelines. However, keep in mind that the IRS may change these guidelines from time to time.

  -If your family’s annual income is $27,000 or more, you generally will have a greater tax savings if you use the Dependent Care Spending Account rather than the tax credit.

  -If your Family’s annual income is less than $27,000, your particular situation will determine which method is better for you, and it would be best to do a side-by-side comparison.

  -If the Federal Tax Credit is more advantageous, the most you can apply to the tax credit is expenses up to $3,000 for one child or up to $6,000 for two or more children. Since eligible expenses above this amount cannot be applied to the tax credit, they can be paid through the Dependent Care Spending Account and gain a tax advantage up to a total of $5,000 for both the credit and the Dependent Spending Account.

NOTE: For more information about the Federal Tax Credit, see Internal Revenue Publication 503, which is available at your local IRS office, or contact your tax advisor.

I have a managed care plan. Do I have enough out-of-pocket expenses to make a health care flexible spending account worthwhile?
Even though you may be enrolled in a managed care plan or health maintenance organization, you may still incur out of pocket expenses not covered by those plans. Some examples of those expenses include: co-payments, deductibles, eye exams, eyeglasses, contact lenses, prescription co-payments, chiropractic treatment, orthodontia and dental work. A health care flexible spending account can be a valuable way to fund these expenses on a tax-free basis. Use the Health Care Budget Worksheet on this site to help you estimate your out of pocket expenses.