What is an FSA?
A Flexible Spending Account (FSA) is a valuable employee benefit that allows you to have pre-tax dollars withheld from your paycheck to pay for eligible health care or dependent care expenses.
FSAs cover not only your medical expenses but also the expenses of your spouse or tax dependents. So, depending on your tax bracket, you can save up to 30% or more.
A medical flexible spending account (FSA) is a tax-advantaged account maintained by employers where employees can set aside a portion of each paycheck to pay for out-of-pocket medical expenses. In 2021, the cap is $2750.00
Dependent Care FSA
A dependent care FSA (DCFSA) is a pre-tax benefit account used to pay for eligible dependent care services, such as preschool, summer day camp, before or after school programs, child or adult daycare. In 2021 the cap is $5000.
Premium-only plans (POPs) are cafeteria plans that allow employees to choose between receiving their full salary in cash or using a share of that salary to pay group insurance policy premiums on a pretax basis.
Flexible Spending Account FAQ’s
What is an FSA?
What is the difference between a Medical FSA and a Dependent Care FSA?
All health plans require you to pay for out-of-pocket expenses each year. In addition, all families raising children have certain child-rearing expenses that are costly. Two types of FSAs help you pay for these kinds of expenses.
- A Medical FSA can cover medical, dental or vision expenses that you would otherwise pay for out of pocket. Everyday qualified expenses that a health care FSA will usually cover include the deductible, coinsurance or copayment amounts for your health plan, eyeglasses or contact lenses, dental work and orthodontia, medical equipment, hearing aids, and chiropractic care. Many over-the-counter drugs, such as cold and allergy medicines, pain relievers and antacids, can also be reimbursed through an FSA. Your employer may limit what expenses your plan reimburses; please see your Summary Plan Description for more information. For a list of eligible expenses, see Qualified Medical Expenses.
- A Dependent Care FSA covers employment-related expenses for child care. Qualified expenses must be for services that allow for you to be able to go to work. Typical expenses under the account include daycare, nursery school, and elder care charges for your legal tax dependents. For a complete list of eligible expenses, please see Qualified Dependent Care Assistance Program Expenses.
What are the benefits of a Flexible Spending Account?
The most significant benefit is the tax savings. Every dollar you set aside in your account reduces how much you pay in income taxes. Plus, you can be reimbursed for qualified expenses that you are already paying for.
How does a Flexible Spending Account work?
- Funding. You, the employee, typically contribute a pre-determined amount to your FSA account. In some cases, your employer may also contribute to employee FSAs.
- Accessing Funds. When you have an eligible health care expense, pay for them directly using your standard payment methods and then request online reimbursement. Remember always to keep your receipts.
- Requesting Reimbursement/Substantiating Purchases. It’s quick and easy to request reimbursement for eligible expenses paid by using personal funds. Our Benngi app will save you time and make your life easier.
- Benngi Online Upload – Log into your online account, then upload scanned images directly to your claim. No need for faxing or mailing and the image is saved with your claim as a record of submission.
- Mobile App Upload – coming soon.
- Claims Processing. We will promptly process your request and reimburse you by direct deposit.
- Account Management. Log in to your online account regularly to check your account balance and access health education tools.
What is the difference between an FSA and an HRA (Health Reimbursement Arrangement)?
The main difference between an HRA and FSA is that the employer funds an HRA, while an FSA is funded primarily by the employee through pre-tax payroll deduction. However, you can have both accounts.
FSA Eligible Expenses
What types of expenses are eligible for reimbursement with an FSA?
The IRS legislates rules for funding and accessing funds in an FSA. There are thousands of products and services that meet the approved healthcare expenditure list, which is referred to a Section 213(d) as defined in the IRS code. For dependent care expenses, see IRS Publication 503 Child and Dependent Care Expenses.
For a general list of approved medical expenditures, please refer to Qualified Medical Expenses.
What types of expenses are not eligible for reimbursement with an FSA?
Medical FSA: Services that are typically not eligible or reimbursable include:
- Skin or teeth whitening
- Health club dues
- Hair transplants
- Cosmetic surgery or treatment of any kind
- Contract fees for maintenance/replacement of contact lenses or eyeglasses.
Dependent Care FSA: Services that are typically not eligible include
- Child support payments
- Fees for services that have yet to occur (e.g., summer day camp deposits)
- Kindergarten tuition
- Meals or transportation
- Overnight camp, registration, and/or activity fees.
What happens if I use the account for a non-eligible expense?
Reimbursement for a non-eligible expense will be denied by Benafica.
Flex Spending Account Contributions and Tax Information
How much can I contribute to my FSA?
For 2021, the maximum contribution is $2750 for Medical FSA per person. However, your employer may elect a lower contribution limit.
For Dependent Care FSA, you may contribute up to $5000 per family per year if you are married and filing a joint return or if you are a single parent. If you are married and filing separately, you may contribute up to $2500 per year per parent.
Can I transfer funds from the Medical FSA to my Dependent Care FSA?
No, this is not allowed.
How does participating in the Dependent Care Account differ from using other tax credits relating to dependents?
Reimbursements under the dependent care account must be for employment-related expenses, and IRS regulated Section 129 Dependent Care Assistance Programs regulates what expenses may be reimbursed. Employment-related means a cost for dependent care that allows you and your spouse, if applicable, to be gainfully employed.
The Dependent Tax Credit is an alternative to using a Dependent Care account and is a credit against tax liability. IRS Publication 503 Child and Dependent Care Expenses contains detailed information for determining whether a taxpayer may claim the Dependent Care Credit. For some employees, the Dependent Care Credit may be more advantageous than participating in the Dependent Care FSA, and care should be used in determining which method to select.
What happens if I do not claim all the money in my account?
Depending on your plan design, your plan may allow rollover of apportion of unused funds, a grace period during which you may continue to incur claims, or you may forfeit funds that are not claimed during the plan year.
Can I use the Dependent Care FSA if my provider doesn’t report the income to the IRS?
No. We must have your provider’s social security number or Employer Identification Number in order to process dependent care claims.
What information is reported to the IRS?
Benafica does not supply information to the IRS related to an individual FSA. The plan sponsor, your employer, may be required to file an IRA form 5500, which includes participation and total disbursements information.
Health Insurance Coverage
What is I am not covered under my company’s health insurance plan?
You and your family can still participate in the Medical and Dependent Care FSA programs.
Can I use my Medical FSA for my spouse’s deductible and copayment expenses?
Yes. All eligible out-of-pocket expenses incurred by you and your qualified dependents can be reimbursed by your Medical FSA, even if they are not enrolled in your employer’s health plan.
Who are qualified dependents?
Dependents must be either your spouse or someone you can claim as an exemption for federal income tax purposes.
To be covered through your Dependent Care FSA, the individual must meet one of the following criteria:
- Your dependent under age 13 for whom you would be entitled to a deduction under IRS Code 151(c)
- Your dependent who is physically or mentally incapable of caring for themselves.
- Your spouse who is physically or mentally incapable of caring for him or herself.
How to use your Benafica FSA Account
How will I be able to access my Benafica FSA funds?
You will pay for eligible expenses with any form of payment you choose and then request reimbursement from your account.
How can I find out my account balance and review transactions?
Log into your Benafica Benngi account, and navigate to FSA/Ledger.
Can I make changes to my FSA election after the plan year starts?
Once an election for the FSA(s) has been made, you cannot change the amount unless you terminate employment with your company or there is an appropriate change in status. Valid changes in status for both the Medical FSA and Dependent Care FSA include:
- Legal Marital status change
- Change in number of dependents
- Change in employment status of the employee, spouse, or dependent, switching from part-time to full-time or vice versa, return from an unpaid leave of absence.
- Change in Resident
- Dependent eligibility- situations when a dependent satisfies or ceases to satisfy the rules for eligible dependents due to the attainment of age, student status, or similar circumstances as provided in the plan.
- Annual election changes for changes in the cost of coverage.
If my child turns 13 during the plan year, may I still use my dependent Care FSA through the end of the plan year?
No. you are no longer eligible to be reimbursed for care of a child as of age 13 unless they are physically or mentally incapable of caring for themselves. Having a child attain age 13 is a qualifying event and a reason to terminate your participation in the plan.