A Flexible Spending Account (FSA), also known as a Section 125 Flexible Benefit Plan or Cafeteria Plan, is a volun-tary, tax-free way for employees to save for qualified medical, dental, vision or dependent care expenses during a plan year. Employees save between 25 and 50%, depending on their tax bracket.
Three Ways to Save!
Premiums for employer-sponsored medical, dental, vision, etc. are automatically withheld from pay on a pre-tax basis. (No reimbursement required.)
Reimbursement of out-of-pocket medical, dental and vision expenses not paid by insurance.
Reimbursement of work-related dependent care expenses for children under age 13 and/or older children or adults who are incapable of self-care.New for 2013
The recent Health Care Reform law mandates that employees cannot contribute more than $2,500 to a
Health or Limited Purpose FSA for plan years beginning January 1, 2013. Prior to this time the maximum Health or Limited Purpose FSA election was determined by the employer.
The $2,500 limit applies on an individual level, not a household level, so married couples can each elect up to $2,500 in their respective Health or Limited Purpose FSAs.
The Dependent Care FSA limit remains the same at $5,000 per household.
How an FSA Works
Prior to the plan year, employees elect how much they would like to have taken out of their paycheck on a pre-tax basis. ‘Pre-tax’ means before state, federal, Social Security and Medicare taxes are applied. As a result, savings are somewhere between 25 and 50%, depending on tax bracket.
Contributions to FSAs are deducted from each payroll during the plan year. The amount of contribution to FSAs should be carefully considered, as unused amounts are forfeited at the end of the plan year.
As eligible expenses are incurred, employees submit claims to Alliance Benefit Group for reimbursement. Alliance Benefit Group is required to “substantiate” each claim by reviewing receipts, explanation of benefits and claim forms to ensure all information meets applicable regulations. Alliance Benefit Group reimburses employees directly by check or direct deposit.
The Health FSA causes an employee and their spouse to be ineligible to contribute to a Health Savings Account, or HSA. However, the Limited Use FSA, which reimburses only dental and vision expenses, does not impact HSA-eligibility.
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Flexible Spending Accounts
BeneFIT access Department 201 East Clark Street PO Box 1226 Albert Lea, MN 56007
Phone: 855.866.8060 Fax: 866.808.7823
Important Facts About FSAs
If an employee or their spouse is contributing to an HSA they can elect the Limited Purpose FSA for dental and vision expenses but cannot elect the traditional Health FSA.
If an employee does not spend their election they forfeit it at the end of the plan year.
New elections for Health, Limited Purpose and Dependent Care FSA are required each plan year.
Elections are irrevocable during the plan year unless there is a change in family status.
Spouses and all tax dependents are eligible for reimbursement from the FSA.
IRS Publication 502, available at www.irs.gov, explains eligible health care expenses.
IRS Publication 503, available at www.irs.gov, explains eligible dependent care expenses.Dependent Care FSA Expenses
What does employment-related mean?
Expenses reimbursed by a Dependent Care Reimbursement Account must be incurred in order to allow the partici-pant and, if applicable, the spouse to be actively and gainfully employed. This means the participartici-pant must only claim expenses incurred while they are actually at work, excluding expenses which might be incurred while the par-ticipant is on a leave of absence, on vacation or is out of work ill.
However, temporary absences from work for matters such as illness or vacation can be disregarded if the participant is required to pay for dependent care expenses on a weekly or longer basis. Dependent care expenses incurred during a typical leave of absence (paid or unpaid) are non-reimbursable.
The following employment-related expenses are eligible for reimbursement by a Dependent Care Reimbursement Account:
Health and Limited Purpose FSA Expenses
The Health and Limited Purpose FSA covers expenses that are necessary to treat or alleviate a physical or mental defect or illness.
Dual purpose expenses
Some expenses may be considered cosmetic or general-use but also serve a medical purpose. If a doctor recom-mends a service / item that would not normally be considered “medically necessary” to treat or alleviate a specific, diagnosable medical condition, it is considered a dual-purpose expense.
A written statement from the physician must accompany these expenses. This statement must explain what the con-dition is, what service / item is recommended and how it will alleviate this concon-dition.
Before/After-school care Nanny
Day Camp Preschool/Nursery school
Daycare Center Registration fee (to obtain care)
Elder Care Sick-child facility
What to submit with your claim
Supporting documentation is required with all claims. Documentation should be itemized to show the date of ser-vice, what service is being claimed and the amount you are responsible for paying.
If the expense was covered by insurance, the Explanation of Benefits from your insurance carrier must be included with your claim.
Special rule for HSA owners
If you and/or your spouse is currently contributing to an HSA you are unable to use the Health FSA. Instead a Limited Purpose FSA that covers only dental and vision expenses is available.
Limited Purpose = (LP)
Eligible Health FSA Expenses
Dual-Purpose Health FSA Expenses
Acupuncture Fertility Treatment Osteopath
Alcoholism Treatment Flu Shots Oxygen
Ambulance Glucose Monitoring Devices Physical Exams
Artificial Limbs / Teeth LP Guide Dog LP Physical Therapy
Bandages Hearing Aids Prescription Drugs
Birth Control Pills Home Care Prosthesis
Blood Pressure Monitoring Devices Hormone Replacement Therapy Psychiatric Care
Body Scan Hospital Services Psychoanalysis
Breast Pumps Immunizations Psychologist
Chelation (EDTA) Therapy Inclinator Reading Glasses LP
Chiropractors Insulin Screening Tests
Circumcision Laboratory Fees Sleep Deprivation Treatment
Copays / Deductibles Lactation Assistance Supplies Sterilization Procedures
Contact Lenses / Related Material LP Laser Eye Surgery LP Supplies for Medical Condition
Counseling (excludes marriage) Learning Disability Surgery
Crutches Medical Records Charge Therapy
Dental Treatment LP Medical Services Transplants
Dentures LP Nursing Services Vaccines
Diabetic Supplies Obstetrical Expenses Vasectomy
Diagnostic Services Occlusal Guards LP Vision Correction Procedures LP
Drug Treatment Operations Wheelchair
Egg Donor Fees Optometrist LP X-Ray Fees
Eye Exams / Glasses LP Orthodontia LP
Air Purifier Electric Toothbrush LP Orthopedic Inserts
Acne Treatment Exercise Equipment / Programs Over-the-Counter Drugs (prescribed)
Capital Expenses Glucosamine Prescription Weight Loss Drugs
Chondroitin Health Club Dues Special Foods
Cryogenic Storage Fees Language Training (for disability) Sunscreen
Dietary Supplements Massage Therapy Treadmill
Ear Plugs Mattress Varicose Veins Treatment
Ineligible Health FSA Expenses
Eligible Over-the-Counter Supplies
Ineligible Over-the-Counter Drugs (unless prescribed)
Prescribed OTC drugs will only be reimbursed by ABG if dispensed by the pharmacy. Rx receipt required.
Appearance Improvements Electrolysis Over-the-Counter Drugs
Baby-Sitting / Child Care Face Lifts Personal Use Items
Birthing Classes Funeral Expenses Pre-Payment for Services
COBRA Premiums Genetic Testing Retin-A
Controlled Substances Hair Removal Rogaine
Cosmetics Household Help Safety Glasses
Cosmetic Procedures Illegal Operations Student Health Fee
Chemical Peels Insurance Premiums Sunglass Clips
Dancing Lessons Long-Term Care Tanning Salons / Equipment
Diapers Maternity Clothes Teeth Whitening
DNA Collection/Storage Medicare Premiums
Bandages Crutches Nebulizers
Birth Control Products Denture Supplies LP Ostomy Products
Blood Pressure Monitoring Kits Diabetic Supplies Oxygen Equipment
Braces / Supports Diagnostic Products Pregnancy Test Kits
Canes / Walkers External Catheters Reading Glasses LP
Cold / Hot Packs First Aid Supplies Syringes
Compression Stockings Hearing Aid Batteries Thermometers
Contact Lens Solution LP Hot / Cold Packs Wheelchair & Accessories
Corn / Callus Pads Incontinence Supplies
Acid Controllers Cold, Cough & Flu Medicines Ointments / Rash Creams
Allergy Medicine Decongestants Pain Relievers / Fever Reducer
Anti-Diarrheals Expectorants Respiratory Treatments
Anti-Gas Treatments Digestive Aids Sleep Aids
Benny™ Prepaid Benefits Card
The Benny™ Prepaid Benefits Card draws funds directly from your FSA to pay for eligible expenses and eliminates the wait for reimbursement. Benny can only be used at certain places, such as pharmacies, clinics or dental offices, where you might obtain health care services.
Dependent Care providers accepting Visa® will also accept this card.
Using Benny is easy! Simply present it at qualified merchants and the cost of your transaction will come directly from your FSA.
Submitting Receipts
IRS rules require all Benny transactions to be substantiated. In some cases, this substantiation will occur electronical-ly and you will not need to submit any documentation for your purchase.
However, you will sometimes be required to submit documentation for a Benny transaction after it occurs in order to meet the IRS requirements.
No Receipts Required for:
Pharmacy Purchases: Most pharmacy purchases (including discount and grocery store pharmacies) will be electronically substantiated.
Co-Pay Matching: Purchases in the amount of a co-pay under your employer’s health plan, including multiples up to five times a co-pay, will be electronically substantiated.
Reoccurring Amounts: Transactions that reoccur in the same amount at the same merchant will only require documentation the first time in a given plan year.Other Import Things You Need to Know
Don’t use Benny to pay for expenses that took place in a previous plan year. Benny is only linked to your current plan year election. Use online or paper claims to submit run-out expenses.
Retain documentation for all Benny purchases, even if ABG does not request it.
Only use Benny to pay for eligible expenses - ineligible transactions will require repayment.
Using Benny is optional - paper or online claims can still be submitted any time.All other Benny transactions will require receipts.
If you are required to submit receipts for any of your Benny purchases, they will be requested by email or mail. You will have 60 days to submit any requested receipts. Remember, if ABG asks you to send receipts for a purchase, the merchant has been paid for your service or expense.
