Flexible Spending Accounts
A Flexible Spending Account (FSA), also known as a Section 125 Flexible Benefit Plan or Cafeteria Plan is a voluntary, tax-free way for employees to save for qualified medical, dental, vision or dependent care expenses during a plan year. Employees can save between 25 and 50%, depending on their tax bracket.
Three ways to save!
Premiums employees pay for their employer-sponsored medical, dental or vision plans will automatically be withheld from pay on a pre-tax basis. (No reimbursement required.) Healthcare expenses such as medical, dental and vision expenses that are not paid by insurance. This includes co-pays, deductibles, Lasik eye surgery, orthodontic expenses, chiropractic care and prescription medications. If you and/or your spouse are currently contributing to an HSA, you cannot use the traditional Health FSA. You are able to use the Limited Purpose FSA, which is limited to dental and vision expenses, only.
Dependent care expenses for children under age 13 and/or older children or adults who are incapable of self-care. Up to $5,000 (federal limit) per calendar year can be
reimbursed through the Dependent Care FSA.
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 simply 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. Based on employee’s election, contributions to their FSAs are
automatically deducted from their paycheck over the plan year. The amount of contribution to a Health FSA and Dependent Care FSA should be carefully considered as unused amounts are forfeited at the end of the plan year.
As healthcare or dependent care expenses are incurred, employees submit them to Alliance Benefit Group for reimbursement. Alliance Benefit Group is required to “substantiate” each claim, which involves matching receipts, and explanation of benefits and claim forms to ensure all information has been submitted according to IRS regulations. Alliance Benefit Group reimburses employees by check or direct deposit.
Important rules and information about FSAs
If an employee does not spend the money they’ve elected to have taken out of their check, they forfeit it at the end of the plan year.
New employees beginning coverage after the plan year begins can be reimbursed for expenses incurred after their coverage starts.
Spouses and all tax dependents are covered and eligible for reimbursement from the FSA, regardless of where they have their medical, dental or vision insurance.
IRS Publication 502 is available at www.irs.gov and deals with what expenses are eligible for tax deductibility purposes.
IRS Publication 503 is available at www.irs.gov and deals with dependent care expenses. A tax credit is also available for dependent care. Employees should carefully consider which works better for them – the tax credit or the Dependent Care FSA.
Expenses covered by the Health FSA
The Health FSA covers expenses that are necessary to treat or alleviate a physical or mental defect or illness. These can be (but are not limited to) clinical, dental, orthodontic, vision, chiropractic or prescription drugs.
Dual purpose expenses
There are some expenses that may be considered cosmetic or general use items that may also serve a medical purpose. If a doctor recommends 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 condition is, what service / item is recommended and how it will alleviate this condition.
What to submit with your claim
Supporting documentation is required for all expenses that are submitted for reimbursement. This documentation must be itemized, showing date(s) of service and must clearly illustrate the amount you are responsible for paying. If the expense was covered by insurance, the
Explanation of Benefits from your insurance provider must be submitted with your claim.
Example of tax savings with FSA
Without Plan
With Plan
Gross Pay $25,000 $25,000
Less FSA Contribution - $0 -$4,000
Taxable Income $25,000 $21,000
Less Taxes (Fed, State, FICA) -$7,162 -$6,016
Less Qualified Medical & Dep Care Expenses -$4,000 -$4,000
FSA Reimbursement +$0 +$4,000
Take Home Pay $13,838 $14,984
Employee saves $1,146 per year!!!
Special Rule for HSA Owners
Covered 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 LP
Drug Treatment Operations Wheelchair
Egg Donor Fees Optometrist LP X-Ray Fees
Eye Exams / Glasses LP Orthodontia LP
Non- Covered Health FSA Expenses
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
Dual Purpose Health FSA Expenses (requires doctor’s letter of medical necessity)
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
Covered OTC Supplies
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
Non- Covered OTC Drugs (unless you have a prescription)
Important: The following OTC drugs and medicines are eligible only with a prescription.
Acid Controllers Cold, Cough & Flu Medicines Ointments / Rash Creams
Allergy Medicine Decongestants Pain Relievers / Fever Reducer
Anti-Diarrheal Medicine Expectorants Respiratory Treatments
Anti-Gas Treatments Digestive Aids Sleep Aids
Antiseptic Cream / Wash Laxatives Stomach Remedies
Dependent Care Expenses
Employment- Related Expenses
Expenses reimbursed by a Dependent Care Reimbursement Account must be expenses incurred to allow the participant and, if applicable, the spouse to be gainfully employed. This means the participant must only claim expenses incurred while they are actually at work, excluding
expenses which might be incurred while the participant 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:
After-school care Nanny
Before-school care Preschool/Nursery school
Day camp Registration fee (to obtain care)
How to submit claims
You can submit claims to your FSA online at www.myabg.com or by completing and submitting a Reimbursement Request Form.
The first time you log into the website your user ID will be your Social Security number (with no dashes) and your password will be the last four digits of your Social Security number. You will be prompted to change your user ID and password before continuing.
To submit a claim:
1. Log into your account at www.myabg.com (instructions above). 2. Select on the ‘Claims’ tab at the top of the screen.
3. Select ‘Enter New Claim’ from the menu on the left.
4. Enter all required fields in claim entry screen. Note that claims will not be processed until the date(s) entered in the Service Date fields have passed.
5. You will have the option to upload your itemized documentation or to print a cover sheet to fax in with your documentation.
Important: claims submitted online will not be approved for payment until supporting itemized documentation is received and approved by ABG
There are a few important things to keep in mind when submitting FSA claims online or using the Reimbursement Request Form. Following these basic claims submission guidelines will help prevent denials and make the claim process as quick and easy as possible.
Always include documentation to support the expenses you are claiming. This documentation must show what expense you are claiming, the name of the provider, date of service and the amount you are required to pay.
Do not fax supporting documentation for online claims if you already uploaded the documentation on the website when you entered your claim.
If you have multiple expenses it is okay to enter one online claim for all of them together. You should enter the first and last service dates and it is okay to upload all documentation together as one attachment.
Remember, online claims cannot be paid until itemized documentation is submitted to Alliance Benefit Group and approved.
If you submit a claim online please DONOT complete a Reimbursement Request Form. If you choose not to use online claims you can use the Reimbursement Request Form to request funds from your FSA. Completed forms can be mailed, faxed or emailed to:
Alliance Benefit Group Toll free fax: 1-866-808-7823
Attention: FSA Department Email: [email protected]
Other Options Online
We encourage you to take a look at the ‘My Profile’ tab on our website to make sure your personal information and preferences are up to date. The following preferences can be updated under ‘My Profile’:
Direct deposit – this an available payment option for your FSA. If you are not already receiving payments by direct deposit you can enter your bank information here.
Email address – if we have your email address we will email your direct deposit notices. Email notifications – you have the option to receive an email notification when new claims are entered for your FSA.
You can also view Transaction History and Payment History on the ‘My Account Summary’ screen. These options will allow you to easily view the activity on your account. You will have the option to filter this information for more refined searching.
Contacting Alliance Benefit Group
You can access your Health and/or Dependent Care FSA online at any time by visiting
www.myabg.com. If you have never logged in before, your user ID will be your Social Security number (with no dashes) and your password will be the last four digits of your Social Security number.
