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Child care, medical and Rx costs

Do you pay for it or incur hefty out-of-pocket medical expenses? Save money with flexible spending accounts
New York Teacher

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 (FSA) Program.

The program allows public school educators and other municipal employees to use pretax earnings to cover dependent care costs or medical expenses not covered by their health plan. The fall open enrollment period for the program is from Sept. 9 to Oct. 18, 2013, if you plan to enroll for Jan. 1, 2014.

Save on dependent care costs

In the New York City Dependent Care Assistance Program (DeCAP), the Department of Education will withhold between $500 and $5,000 (you decide how much) in pretax 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 day camp or caring for an elderly parent in your home, you submit claim forms. Then, you’ll be reimbursed from your DeCAP 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 nonparticipating orthodontist. 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 (HCFSA), the DOE will withhold between $260 and $2,500 (you decide how much) in pretax income from your paychecks over the year and deposit the money in a flexible spending account. This account can then be drawn against to pay for your out-of-pocket medical expenses including co-pays, deductibles, and over-the-counter drugs that diagnose, cure, treat, prevent or mitigate ailments (including painkillers, cold remedies and allergy medications).However, you must obtain a prescription from your doctor for these over-the-counter drugs.

Your account can also be used to pay for 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 expenses not covered by your health plan, as long as the services are medically necessary and not cosmetic.

Medical expenses incurred by family members on your health insurance can also be covered (same-sex married couples are eligible; however, unmarried domestic partners are not). To get reimbursed, you must submit claim forms (with itemized receipts and health insurance Explanation of Benefit statements documenting your expenses). See IRS Publication 502 for a list of permissible expenses.

There is an annual administrative fee of up to a $48 — 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, or for HCFSA only, by the end of the grace period (March 15, 2015). 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/fsa, or call the city’s information helpline at 1-212-306-7760 between 9 a.m. and 5 p.m., Monday through Friday. UFT members can also contact the UFT Welfare Fund at 1-212-539-0500 and ask to speak to an adviser on the Flexible Spending Accounts Program.