Why should I consider enrolling in a flexible spending account (FSA) and how much can I contribute?
There are two types of FSAs – health care and dependent care – and both offer a great way to save money by allowing you to contribute pre-tax dollars into an account (avoiding federal and state income tax, as well as FICA) that you can use to pay for eligible expenses. How much you save depends on how much you spend on health care and dependent care each year and on your tax bracket. But using an FSA to pay out-of-pocket costs on eligible expenses such as copays, deductibles, and daycare related expenses, can save you hundreds of dollars a year.
The maximum amount you can contribute to a Health Care FSA in 2019 is $2,650. If you are in the 25% federal tax bracket and you contribute the maximum, that means you would save $662 on eligible health care expenses for you and your dependents!
Don’t forget! You may rollover up to $500 of unused funds in your Health Care FSA. This is a great feature. It means that you are less likely to forfeit unused funds at year’s end, or be forced to “spend down” your account on non-essentials. And, you do not have to try to precisely predict out-of-pocket medical expenses a whole year in advance. The $500 rollover does not count toward the annual maximum contribution amount ($2,650), which means you could have access to $3,150 in the new year. You will still want to think carefully about how much you contribute to a Health Care FSA. While you can rollover up to $500 of unused funds, you will lose any amount over $500 not incurred by Dec. 31, 2018 if you don’t claim it by the filing deadline of Apr. 30, 2019.
The maximum amount you can contribute to a Dependent Care FSA in 2019 is $5,000 – per household. If you are in the 25% federal tax bracket and you contribute the maximum, you would save $1,250 on eligible child care or elder care expenses! You will want to be even more careful about deciding how much to set aside in a Dependent Care FSA, because no rollover is permitted if you don’t claim all your funds by the filing deadline of Apr. 30, 2019.
What is the difference between a health care FSA and a dependent care FSA?
The health care FSA can be used to pay for eligible health care expenses such as copays, deductibles, prescription drugs and over-the-counter medications (with a prescription), dental exams and treatment, eyeglasses, contact lenses, and sunglasses (with a prescription). You can use your health care FSA to pay for health care expenses for your family members, too – whether or not they are covered by your health insurance – as long as they are your tax dependent.
If you have to pay for daycare and related expenses for a dependent child or adult so that you and your spouse can work or attend school, you can use a dependent care FSA.
Can I use my FSA to pay for my family members’ expenses?
Yes. If you elect a Health Care FSA, you can spend the funds on expenses for yourself, your spouse, and your children, or other individuals that you claim as dependents on your tax return. Neither you nor your family members need to be enrolled in the SU medical plan, or even enrolled in the same health plan.
If you elect a Dependent Care FSA, you can spend the funds on care for a child under the age of 13, or for an adult dependent that you claim on your tax return. Dependent Care expenses are eligible if they are incurred so that you can work, search for work, or attend school full-time in lieu of working.
What expenses are eligible for reimbursement by a Health Care FSA?
Eligible Health Care Items and Services
Services and products that are medically necessary to treat a specific condition are usually considered eligible health care expenses. Cosmetic or non-medical expenses are not eligible. Prescriptions are required for the reimbursement or purchase of over-the-counter medication such as aspirin, allergy and stomach medications, but certain over-the-counter items do not need a prescription. Some services may require a letter of medical necessity from your doctor. Only the portion of the cost not covered by other insurance is eligible for reimbursement.
The WageWorks website has a searchable database of eligible health care expenses.
Common Health Care Expenses
- Prescriptions for almost any medical condition
- Prescribed over-the-counter health care products like allergy medicine, antacid, antibiotics, and aspirin
- Copayments and deductibles
- Dental care, both preventive and restorative
- Orthodontia, child and adult
- Vision care, including exams, eyeglasses (including prescription sunglasses), and contact lenses
- Laser vision correction
- Physical therapy
- Counseling and psychology
- Chiropractic care, acupuncture and some other alternative treatments
- Items that don’t require a prescription: band-aids, SPF-15 and above sunscreen, air-activated heat wraps, cooling headache pads, digital thermometers, first aid kits, contact lens solution, instant cold compresses, ankle brace, and reading glasses.
What expenses are eligible for reimbursement by a Dependent Care FSA?
Eligible Dependent Care Services
These accounts reimburse the cost of care for your qualifying child (under age 13) or other qualifying dependent, while you work or which enables you to work. Your care provider must provide his/her Social Security or Tax ID number. Care may be provided by a family member such as a parent or grandparent, but an FSA will not reimburse care provided by someone who is your tax dependent (such as an older child watching a younger child).
The WageWorks website has a searchable database of eligible dependent care expenses.
Common Dependent Care Expenses
- Babysitting or au pair services
- Before/after-school programs
- Day care and nursery schools
- Summer day camp
- Preschool programs
- Elder care services
Ineligible Dependent Care Expenses
- Private school tuition (kindergarten and up)
- Sports registration fees
- Sleep-away camp
I’d love to save on taxes, but I don’t want to have to deal with the paperwork to submit my receipts. Isn’t there an easier way to get reimbursed?
Yes, there is! If you elect a Health Care FSA*, you can enroll in an automatic reimbursement option. Any copays or coinsurance you pay for an SU medical, prescription, dental or vision claim is forwarded from our plan administrator to WageWorks for automatic reimbursement to you. Reimbursement is generally made within three weeks, and you can set up direct deposit if you wish. You will not have to save receipts or complete claim forms to receive reimbursement from your Health Care FSA for these expenses if you elect this option. Check the box to enroll in automatic reimbursement when you indicate your Health Care FSA contribution amount in MySlice during Open Enrollment, or contact the HR Service Center at any time during the year to request this feature.
The only expenses you would need to submit to WageWorks would be for over-the-counter prescription costs, or other expenses that are not processed by the SU benefit plan. Expenses for all your covered dependents will also be automatically reimbursed, so you should not choose the automatic reimbursement if you cover a domestic partner on the SU health plan because the IRS does not permit FSA reimbursement of domestic partner expenses.
*Automatic reimbursement is not available for Dependent Care FSA.
How do I submit expenses if I don’t choose the automatic reimbursement option?
There are three alternative methods you can use to submit your claims for reimbursement:
- The EZ Receipts app on your mobile device – use this free app for Apple or Android devices to take a photo of your receipt, upload it, and file your claim with a few swipes.
- Submit an online claim – scan a copy of your receipt and submit your claim on the Wageworks.com website
- Mail or fax a paper claim [PDF] to WageWorks. Dependent care expenses can be submitted on a paper form [PDF] also.
Submitting your claim electronically eliminates the need to save paper receipts. Set up direct deposit of your reimbursements with WageWorks to get your money even faster and avoid the hassle of taking a paper check to the bank.
Does the University offer assistance with dependent care expenses? How can I find out if I’m eligible?
Balancing work and home is hard. It is even more stressful when funds to pay for dependent care are limited. As part of the University’s ongoing efforts to support the changing needs to families, the University has expanded benefits offered to faculty and staff to assist with dependent care in 2019. The newly expanded Dependent Care Subsidy Program effective Jan. 1, 2019 includes a greater subsidy amount, an expansion of the age range of eligible dependents, and an increse in the annual household income threshold used to determine faculty and staff eligibility. The application deadline [PDF] for 2019 participation is Dec. 7, 2018.
If you qualify, the University will deposit the subsidy into a Dependent Care FSA on your behalf. You may contribute additional funds into this FSA, up to a combined maximum of $5,000 per year. This $5,000 maximum applies per household, so make sure that if your spouse also contributes, you do not exceed the annual cap. For more information including program details, eligibility guidelines, and a copy of the application, visit the Dependent Care Subsidy Program website.