Section 125 Health and Dependent Care Flexible Spending Accounts

1. Will I have to pay taxes on the money I use in the health and/or dependent care flexible spending accounts?
2. How much will I really save?
3. How much should I contribute?
4. Wouldn't I save more by taking a deduction on my income tax?
5. Do I have enough out-of-pocket expenses to make a health care flexible spending account worthwhile?
6. 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?
7. What is an "Eligible Expense" under the health care flexible spending account?
8. Can I change my election or stop contributing money to my flexible spending account at any time during the plan year?
9. How do I submit my FSA expenses?
10. What happens if I submit a claim for an amount greater than my health or dependent care flexible spending account balance?
11. 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?
12. Can I use the dependent care flexible spending account for elder care?
13. 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?
14. 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?
15. Is there a resource where I can obtain my FSA account information at any time?

1. Will I have to pay taxes on the money I use in the health 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.
2. How much will I really save?
   Depending upon your individual tax bracket and residency, you could save as much as 20 percent to 50 percent on eligible services by using a health and/or dependent care flexible spending account.
   
3. How much should I contribute?
   How much you contribute depends on your individual situation. Consider last year's medical and/or dependent care expenses, any medical/dental care costs you foresee that might not be covered under your medical/dental plans, and any changes in your family status that might have an impact on these expenses. You may want to estimate conservatively the first year. Keep in mind that if you overestimate, the amount you forfeit may be offset by your total tax savings.
4. 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 and/or dependent care flexible spending accounts. According to the IRS, only medical and/or dental expenses that exceed 7.5 percent of your adjusted gross income can be deducted from your income taxes.
   
   For work-related dependent care expenses, the tax credit amount is determined by applying a percentage to your total dependent care expenses. According to the current tax structure, generally the tax credit is more beneficial than a dependent care flexible spending account if your annual family income is under $39,000. You need to determine which is better for you.
   
5. Do I have enough out-of-pocket expenses to make a health care flexible spending account worthwhile?
   Some examples of common out-of-pocket expenses covered by a health care flexible spending account include: copays/deductibles, eye exams/LASIK surgery, eyeglasses, contact lenses, saline solution, 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.
6. 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.
   
7. What is an "Eligible Expense" under the health care flexible spending account?
   An "eligible expense" is defined as an item for which you could have claimed a medical expense deduction on an itemized federal income tax return for which you have not been reimbursed from insurance, or any other source. Premiums are not considered eligible medical expenses. You are encouraged to consult a tax advisor or IRS Publication 502 "Medical and Dental Expenses" for further guidance as to what is or is not an eligible expense.
8. Can I change my election or stop contributing money to my flexible spending account at any time during the plan year?
   Federal regulations state that once you have enrolled, you cannot change your election unless you have experienced a family status change. Your employer can provide you with a list of qualified family status changes that may allow you to alter your original account allotments.
   
9. How do I submit my FSA expenses?
   Utilize our Health Care and Dependent Care claim forms for manual submissions. If your employer has implemented our streamline option, our FSA system will automatically process your medical/dental, pharmacy copays and associated out-of-pocket expenses using MasterCard.
10. What happens if I submit a claim for an amount greater than my health or dependent care flexible spending account balance?
    When you submit a claim 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 claims will continue to be paid until your annual maximum is met.
    
    Dependent care claims are paid a little differently. If you submit a claim and your balance is less than the amount of the claim, you will only be reimbursed for the amount of money available in your account. The remainder will be reimbursed once money is deposited into your dependent care flexible spending account. This enables you to submit a claim only once and receive funding on an ongoing basis, rather than be denied payment or be forced to resubmit the claim until it can be paid in full.
    
11. 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?
    If you have not used all the money in your flexible spending account by the end of the plan year, IRS rules require that the money be forfeited. 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.
12. 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:
    1. You are responsible for at least 50 percent of the support of an elderly parent or any person living with you who is physically or mentally incapable of self-care; and this person is your legal dependent; or
    2. The elder care is needed because you work and your spouse is a full-time student.
    
13. 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. You must make payments for child and dependent care to someone you (or your spouse) cannot claim as a dependent. It is also required that the care provider be identified on your tax return.
14. 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 benefits plans. You cannot transfer money between accounts.
    
15. Is there a resource where I can obtain my FSA account information at any time?
    Yes, you will have access to My Paperless Office self-service website, available 24 hours a day, 7 days a week wherever you have Internet access. You will be able to view payment information, including amount awaiting payment, next payment date and minimum payment amounts, at www.fsa4u.com.