Know your benefits

Do you pay for child care or incur hefty out-of-pocket medical expenses?: Save money with flexible spending accounts

Oct 4, 2007 2:02 PM

Do you spend a lot each month on child care? Is your out-of-pocket spending on health care adding up? You may be able to save hundreds of dollars a year in federal and Social Security taxes by enrolling in the city’s Flexible Spending Accounts program.

The program allows public school educators and other municipal employees to use pre-tax earnings to cover dependent-care costs or medical expenses not covered by your health plan.

It is not too late to enroll for calendar year 2008. Open enrollment for the program is from Sept. 24 to Nov. 16, 2007, if you plan to enroll for Jan. 1, 2008.

Save on dependent-care costs

In the city’s Dependent Care Assistance Program, the Department of Education will withhold between $500 and $5,000 (you decide how much) in pre-tax income from your paychecks over the year and deposit the money in a special flexible spending account. As you incur costs for day care, baby-sitting, summer camp, or caring for an elderly parent in your home, you submit claim forms (with receipts documenting your expenses). Then you’ll be reimbursed from your flexible spending account. See IRS Publication 503 for a list of covered expenses.

Save on out-of-pocket medical costs

Your family dentist suggests that your daughter receive orthodontic treatment to correct her overbite. He recommends a non-participating orthodonist. This will likely mean that you will have out-of-pocket expenses — the difference between the dentist’s fees and the UFT’s dental allowance. In the Health Care Flexible Spending Account, the DOE will withhold between $260 and $5,000 (you decide how much) in pre-tax income from your paychecks over the year and deposit the money in a flexible spending account. This account can then be drawn down to pay for your out-of-pocket medical expenses including co-pays, deductibles, most over-the-counter drugs (including painkillers, cold remedies and allergy medications), a surgical procedure not covered by your health plan or performed by a doctor who does not accept your health insurance, or any dental, optical or hearing expense not covered by your health plan. Medical expenses incurred by family members on your health insurance (not including domestic partners) can also be covered. To get reimbursed, you must submit claim forms (with itemized receipts and health insurance explanation-of-benefit forms documenting your expenses). See IRS Publication 502 for a list of permissible expenses.

There is a $48 annual administrative fee — which will be deducted from your account — for each program.

The ‘use-it-or-lose-it’ rule

Here’s the rub: You have to use up all the funds you put into either of these accounts on relevant expenses by the end of the calendar year. You will lose any money that is left in the account at the end of the year. So if you decide to enroll, it’s best to be conservative in estimating your expenses for the coming year.

For more information, including brochures and enrollment forms, go to www.nyc.gov/olr and click on “Flexible Spending Programs,” or call the city’s information helpline at 1-212-306-7760 between 9 a.m. and 4 p.m., Monday through Friday. UFT members can also contact the UFT Welfare Fund at 1-212-539-0500 and ask for an advisor on the flexible spending accounts program.