As health care costs continue to increase employees are finding it more and more difficult to afford important and necessary health related expenses.  Learn how The Preferred Groups Flexible Spending Account can be that savings tool.  Employees can save anywhere between 30-40% on eligible health related expenses.  By redirecting a small portion of your gross annual salary pre-tax through the Flexible Spending Account you will see a much needed savings. 

Flexible Spending Accounts (FSA) 

Flexible Spending Accounts (FSAs) were designed by the IRS to provide a tax relief to employees on every day unreimbursed medical and dependent day care expenses.  FSAs allow employees to contribute pre-tax dollars to these accounts; these contributions are not subject to FICA, federal or state payroll taxes.

Use the Flexible Spending Account to pay for eligible Medical, Dental, Vision, Dependent Day Care with pre-tax dollars.

• Save up to 30-40% on your out-of-pocket costs
• An FSA covers expenses for you, your spouse, and any of your federal income tax dependents
• Enroll in any or all accounts that your employer offers
• Select a target amount that you expect to spend on eligible expenses during the plan year for each account
• Payroll takes deductions from your paycheck pre-tax
• Submit claims for reimbursement as you incur eligible expenses or use the Benefits Card to pay at point of service
• Same Day reimbursement for eligible claims
• 90 day grace period following the end of the plan year to submit vouchers for expenses that occurred within the plan year

Unreimbursed Medical FSA

The most common type of FSA account is the Unreimbursed Medical Account; this allows employees to be reimbursed for out-of-pocket expenses which are not covered by insurance.

• Pay for medical, dental, hearing, and vision co-pays and deductibles with pre-tax dollars
• Pay for your prescription drug co-pays and costs that your insurance will not cover
• Pay for eligible over-the-counter expenses and Lasik eye surgery
• Receive immediate reimbursement for your total annual amount day 1 of the plan
• Cosmetic procedures are not eligible for this account

Dependent Day Care FSA

The FSA Dependent Day Care Account is designed to benefit employees with young dependent children or disabled dependents of any age.  This account is capped at $5,000 per year and funds must be deposited into the account in order for reimbursement.

• Use pre-tax dollars to pay for day care services that allow you and your spouse to work or attend school full-time
• Expenses are covered for children under 13; disabled and elderly dependents at any age
• Use this account for Day Babysitters, Day Care Centers, Elder Care, Day Camp, After-School Programs and Nursery School
• Overnight camps and kindergarten tuition are not eligible
• Parents must be working or attending school full-time during day care

Savings Example: 

Q.  If I set aside part of my paycheck before taxes, will I make less money?

A.  No. Your spendable income should remain the same or show an increase for your Plan Year.  Here is an example of an individual earning $35,000 and paying $5,000 for Dependent Day Care Expenses.

                                                     After Tax-Dollars                              Pre-Tax Dollars

Premium Expense Account

This account allows an employee to pay for privately held, health related insurance premiums with pre-tax dollars.  Several examples of these eligible premiums would be COBRA, Medicare Part B, Supplemental Health and Cancer Policies.  You can not pay for Long Term Care or Life Insurance through this account.

Over-the-counter drugs and medical items

Another very powerful medical FSA feature that has been introduced in recent years is the ability to pay for over-the-counter (OTC) drugs and medical items. In addition to substantially expanding the range of "FSA-eligible" purchases, adding OTC items made it easier to "spend down" medical FSAs at year-end to avoid the "use it or lose it" rule.  …....see list of over-the-counter eligible expenses…….

Use it or lose it

For some, the “use it or lose it” rule can be frustrating.  FSA funds must be spent “within the coverage period”.  This coverage period is usually defined as the plan year.  Any money that is left unspent at the end of the coverage period is forfeited to the employer; this is commonly known as the "use it or lose it" rule.  You are encouraged to check and monitor your accounts thru The Preferred Group’s online access and will receive quarterly statements expressing any balances.

 It should be noted and called out for emphasis that under most plans your "coverage period" generally ceases upon termination of your employment whether initiated by you or your employer unless you continue coverage with the company under COBRA or other arrangements.

Reimbursement Process

You are reimbursed for eligible expenses that occur within your Plan Year.  In order to be reimbursed from any Flexible Spending Account, you must submit a signed and completed reimbursement voucher with a copy of the third party receipts to support your claim.  Following the end of your Plan Year you have a 90 day Grace Period to submit vouchers that occurred within the Plan Year. …….see voucher……

Pre-paid Benefits Card

The Prepaid Benefits Card is a special purpose MasterCard that gives you an easy, automatic way to pay for eligible expenses.  The debit card allows for the automatic electronic transfer of pre-tax dollars from an employee account when paying for qualified expenses. Employees are able to receive immediate reimbursement of their unreimbursed medical and dependent day care expenses simply by using their card at the point of service. The normal paper claims process is eliminated although receipts are still required to be saved and kept with your tax records and can be requested during an audit or for substantiation on claims.