What you should know about the FSA program
Aug 10, 2005 12:02 PM
EDITOR’S NOTE: Flexible Spending Accounts are methods of paying for eligible expenses on a pre-tax basis. In response to queries from many members, we present the following Q&A.
What are FSAs?
The city’s Flexible Spending Accounts (FSA) Program include the Health Care Flexible Spending Account (HCFSA) program and the Dependent Care Assistance Program (DeCAP).
- UFT members can participate in both the HCFSA program, which helps pay for out-of-pocket medical expenses on a pre-tax basis, as well as the DeCAP, which helps pay for expenses to care for your child(ren) or other dependents while you or your spouse work or attend school full-time.
- Members who choose to participate contribute a predetermined amount of money on an annual basis (Jan. 1 through Dec. 31) to each account. The contribution is divided equally among the payroll periods on a before-tax basis, which will reduce your federal and Social Security taxes.
Will participation in either HCFSA or DeCAP affect my Social Security, pension or TDA?
Social Security benefits may be slightly less as a result of participation in either of these FSAs. However, there is no effect on pension or TDA contributions or benefits.
When can I enroll in the FSA Program?
Members can enroll in the FSA Program during the open enrollment period in the fall for the next plan year. However, members may be eligible to enroll in the FSA Program in the middle of the year if they incur a qualifying event. Generally, a qualifying event can be either a family or employment status change. Please refer to the FSA Program brochure through the city’s Web site at www.nyc.gov/ html/olr.
Health Care Flexible Spending Account
What dollar amount can members contribute to HCFSA?
The annual contribution is limited to a minimum of $260 and a maximum of $5,000 (including an annual administrative fee of $48).
What are the expenses for which you can claim payment from your HCFSA?
Basically, any medical expense, such as dental, optical, or hearing, that is not covered by your insurance can be claimed for reimbursement. Also included are copayments, amounts applied to meeting deductibles and certain over-the-counter drugs. Members can refer to the FSA Program brochure for a more detailed listing.
Who can be claimed as an eligible health care recipient under HCFSA?
The recipient must be eligible to be covered by your medical plan and must be either the participant, the participant’s spouse or an eligible dependent.
How do you request reimbursement for health care expenses?
Claim forms are submitted once a month and each expense must be listed separately on the form. Members must also attach copies of receipts or billing statements from the medical provider as well as an Explanation of Benefits statement from the health insurance carrier or Welfare Fund, which shows the unreimbursed balance from your claim. The claim will be processed and a reimbursement check from your HCFSA account should be issued by the end of the month following the month of your claim submission.
Can members submit claims for an amount greater than the current balance in their HCFSA account?
Yes. The full amount of your election, reduced by any claims that have already been paid and the $48 administrative fee, is always available for reimbursement of eligible claims, regardless of the current balance in your account. Contributions are made on a monthly basis commencing in January and ending in December. If during March, for example, you submit a claim for $200 and your HCFSA balance is only $150, you will be reimbursed the entire amount of $200. Obviously you will be making contributions for nine more months, which will cover the amount paid and your account will be adjusted as contributions are made.
Can members change or discontinue their annual contribution to HCFSA?
No, you cannot change or discontinue your annual contribution for any reason during the plan year.
What happens if you don’t use up all of the money that you have contributed to HCFSA by the end of the plan year?
Money not claimed in this account is forfeited if not used during the annual period. This is called the “Use It or Lose It” rule.
- However, beginning in Plan Year 2006, there is a g race period offered following the end of a plan year. During this grace period, participants may submit claims for eligible medical expenses incurred from January 1 through March 15 of the following year using the remaining balance in their previous plan year’s account, if any.
- This should not be confused with the “claims-run out period,” which is provided in the event that a participant was unable to submit HCFSA claims incurred during the plan year.
Members who choose to participate in HCFSA are cautioned to be very conservative in their planning. A review of their past annual health payments as well as consideration of future health concerns must be carefully considered. Account statements are sent to HCFSA participants on a quarterly basis.
My planning shows that I will have far greater than $1,000 in medical costs during the next year. Should I participate in HCFSA or just deduct the expenses when I file my tax return?
For questions like this, members should contact their own financial advisors.
Dependent Care Assistance Program
What is DeCAP?
In this program, members contribute money to a DeCAP account, which will be used to reimburse participants for eligible dependent care expenses. These covered services, which are related to the care of one or more of your dependents, will allow you and your spouse to remain gainfully employed or go to school full time. The services can be performed within or outside your home during the period that you are at work and are traveling to and from work.
What dollar amount can members contribute to DeCAP ?
The minimum annual contribution is $500 and the maximum is $5,000 (including an annual administrative fee of $48). The $5,000 is reduced to $2,500 if you are married and file a separate federal income tax return (unless you are legally separated), or by the amount your spouse is contributing to a dependent care assistance program through his or her employer.
Further limitations on maximum contributions are placed if your spouse is a full-time student and if you or your spouse earns less than $5,000 a year. (Members should refer to the FSA Program brochure for further information, if they are in either of these categories). Account statements are sent on a monthly basis.
Who is considered a dependent care recipient?
Benefits can be claimed for any dependent claimed on your tax return who is: a child of yours (son, daughter, stepson or stepdaughter) under the age of 13; any dependent who is physically or mentally incapable of caring for himself or herself and who regularly spends at least eight hours a day in your home (such as a dependent parent, a handicapped child of any age or an incapacitated spouse); any other dependent who is under the age of 13 and whose gross income for the plan year is less than the IRS maximum salary. In 2006 , the maximum was $3, 300. The 2007 exemption amount will not be less than the 200 6 amount. You may only claim expenses if you are the custodial parent of a dependent child and you cannot be reimbursed for any child support.;
What are examples of dependent care services?
Eligible employment-related services or qualifying day-care centers may be used for reimbursement. Eligible employment-related services may be performed by a qualifying caregiver who is: not your dependent (or anyone you can claim as a dependent; not your spouse; not your child or your spouse’s child, unless he or she has attained the age of 19 as of the close of the plan year in which services were provided. Licensed nursery schools, pre-schools, day camps (not overnight camps) and child-care centers, which provide day care, are considered qualifying day-care centers. Members should refer to the FSA Program brochure regarding the definition of a qualifying day-care center.
How do you request reimbursement from DeCAP ?
You must complete a claims form and have the dependent care provider sign and date the form and provide his or her name, address and federal tax ID or Social Security number. Reimbursement requests can be made on a monthly basis. However, unlike the HCFSA rules, participants will only receive reimbursement up to their current account balances.
Can members change or discontinue their contribution to DeCAP?
Yes, members may increase, decrease, or terminate their annual contribution. However, they must experience a midyear qualifying event to do so. These events include: marriage, divorce, or annulment; birth or adoption of a child; death of a spouse or dependent; ineligibility of a dependent; start or termination of employment of participant or participant’s spouse; switching from part-time to full-time status or vice versa by participant or participant’s spouse; and taking an unpaid leave of absence by participant or participant’s spouse.
What happens if you don’t use up all of the money that you have contributed to DeCAP?
The same “U se it –or lLose it” rule applies as with HCFSA contributions. However, please note that the HCFSA grace period does not apply to DeCAP. A claims- run out period for DeCAP is provided in the event that a participant was unable to submit DeCAP claims incurred during the plan year. Members are once again cautioned to be conservative in their planning of contributions to their DeCAP account.
Who can I contact about this Q&A if I have further questions?
A brochure with program details is available from the City of New York. To request a brochure and for answers to other questions, members can either access the FSA Web site at www.nyc.gov/html/olr and choose “FSA programs”, or contact the FSA Administrative Office at 1-212-306-7760 between 9 a.m. and 5 p.m., Monday through Friday. Members can also contact the UFT Welfare Fund at 1-212-539-0500 and ask for an advisor on either HCFSA or DeCAP.
