Presentation on theme: "Flexible Spending Accounts"— Presentation transcript:
1Flexible Spending Accounts What are they? How do they work? How can I enroll for 2014?BG
2Flexible Spending Account What is it? A Flexible Spending Account (FSA) lets you set aside pre-tax dollars to pay for eligible health and dependent care expensesSometimes referred to as:Section 125 plan (refers to section of tax code)Flex PlanReimbursement AccountsCafeteria plan
3UAMS offers 2 FSA plansHealth Care FSADependent Care FSA3
4Is the FSA for me? In 2014, will you… Have out-of-pocket healthcare expenses for you or your dependents?Pay for childcare for your dependents while you and your spouse work?If the answer is “yes” to any of the above, then an FSA may be a good benefit for you
5How do FSA’s work?You estimate how much you’re going to spend for health care and/or daycare in Be conservative. Only include predictable expenses.We deduct that from your paycheck PRE-TAX throughout the yearExample: You elect to put $1500 into a healthcare FSA.If you’re paid monthly, $125 deduction ($1500 divided by 12 paychecks).If you’re paid biweekly, $57.70 deduction ($1500 divided by 26 paychecks).We deposit that $ into your FSA (administered by UMR, same company that administers our health plan, but a different team)
6How do FSA’s work? (cont) You then incur an eligible expense during the plan year. You’re going to reimburse yourself from your FSA by filing a claim, along with your receipts, to UMR. Or you can swipe your UMR FSA Benny Card to pay for eligible health care expenses up front.What’s the benefit of an FSA? Tax avoidance! That’s right… you avoid paying FICA, federal, and state taxes on the money you have deducted from your paycheck that goes into your FSA. It reduces your W-2 wages.It’s still your money you’re using to pay for these items. But it’s money you didn’t pay taxes on. The real benefit is the tax savings.
7FSA’s: How do they work? (cont) If you’re in a 30% tax bracket, it’s like saving 30% on eligible health care and daycare expensesIf you’re going to have enough eligible expenses to make it worth your while and you’re comfortable with the process, then an FSA is for you!Caution: You can’t do an FSA and also claim expenses as a deduction on your income tax return, except for $1000 in related child care towards tax credit (ask tax advisor).Do you itemize your deductions on your tax returns? If you do, will you be able to take the medical deduction because your out of pocket expenses are at least 10% of your income? If the answer is no, then consider an FSA.
8Example of money saved (someone with $1500 of eligible FSA expenses) Without FSAWith FSASavings with FSAAnnual Compensation$ 30,000Estimated Tax Free Expenses$ 0$ 1,500Taxable Income$ 28,500FICA Tax (7.65%)$ 2,295$ 2,180$ 115Federal Tax (18%)$ 5,400- $ 5,130$ 270State Tax (5%)- $ 1,425$ 75Net PaycheckAfter Tax Expenses$ 20,805- $ 1,500$ 19,765$Actual Take Home Pay$ 19,305$ 460Savings will vary for each participant depending on marital status, number of exemptions, and tax bracket. Consult with a tax advisor to determine your actual potential savings. Because FSA expenses are deducted pre-tax, the amount reported for Social Security is reduced. But tax savings are generally greater than the loss to Social Security.
9What would you do with the extra $$$ ? Or put the money in your UA Retirement Plan !
10How much can I put in an FSA? Health Care FSA$120 minimum to $2,500 maximumDependent Care FSAUp to $5,000 maximumIf both spouses participate in a Dependent Care FSA and are filing jointly, the entire household cannot exceed the $5,000 cap. $2,500 is the maximum if married and filing single.
11Health Care FSA Eligible health care expenses must be: incurred during the plan year which is Jan 1 through Dec 31, plus the Grace Period if needed (more on grace period later)for you or your eligible dependentsAnd be true out-of-pocket costs not reimbursed by an insurance plan. (You don’t have to be on our medical plan in order to do a health care FSA.)Your annual election amount is available to you to spend on January You have the rest of the year to pay it back via payroll deduction. (Another FSA benefit you might not have known about.)
12Health Care FSA – Eligible Expenses Co-Pays, Co-insurance, Deductible (what you pay after insurance pays)Doctor VisitsDentist VisitsHospital/ERChiropractic, PT, OTVision Exams12
13Health Care FSA – Eligible Expenses Includes some things that our insurance doesn’t coverBraces, OrthodontiaInfertility TreatmentLaser Eye SurgeryCaution. Just because our insurance doesn’t cover it doesn’t mean it’s eligible for reimbursement through a health care FSA. For example, cosmetic surgery is not eligible.13
14Health Care FSA – Eligible Expenses Medical SuppliesPrescription eyeglassesPrescription sunglassesContact lenses, solutionBandaids, rubbing alcoholHearing aids & batteriesDurable health equipmentInsulin & suppliesGot money left in your FSA at the end of the year? Buy a pair of glasses. Optometrists love FSA’s because they know it’s going to increase their business at the end of the year.If you have vision insurance, plan accordingly for your healthcare FSA. You can only file your true out-of-pocket costs after vision insurance pays.14
15Health Care FSA – Eligible Expenses Prescribed drugs$10, $35 or $70 co-payMost OTC Meds, but only with dr prescriptionAllergy/cold medicinesPain medicinesCreams/ointmentsBirth controlSmoking cessationTIP: You cannot use your FSA Debit Card to purchase prescribed OTC (over the counter) meds. You would pay for these items with your own money, then file a reimbursement claim with documentation.15
16What is NOT an FSA eligible expense? Health Care ExpensesWhat is NOT an FSA eligible expense?over the counter medicine without doctor’s prescriptioncosmetic proceduresover the counter vitamins for general well beingdeodorant, general hygiene itemsnutritional supplementsteeth bleachingmarriage counselinghealth insurance premiumshealth or fitness club feesexpenses incurred after you no longer work for UAMS, or outside the plan year
17Dependent Care FSA Eligible Expenses Day Care ServicesBabysittersGeneral Purpose Day CampsPre-SchoolsSome ineligible expenses include private school tuition, overnight camps, instructional camps and assisted living.17
18Eligible expenses are for day care of a child or adult dependent Dependent Care FSAEligible expenses are for day care of a child or adult dependentCare of dependent child through age 12 (age 13 is the cut-off) by a babysitter, child care center, or housekeeper whose job is taking care of your childCare of a disabled dependent who lives with you and you claim on your taxesDependent care expenses must be work-related. Expenses must relate to care that enables you and your spouse to work.Both spouses must be employedTIP: If your child starts kindergarten, be sure to take your reduced daycare costs into account. Remember, you’re estimating how much you will spend for the entire plan year.
19More on Dependent Care FSA The IRS allows for reimbursement up to the current YTD payroll deductions. Claims submitted in excess of the payroll deductions will be held until future payroll deductions are received.If you make more than $30,000, a Dependent Care FSA is generally better than taking the tax credit.
20How do I get reimbursed? How to get the money out of your FSA # 1 File a claim form, attach receipts and IRS required documentationPay yourself backClaim forms on OHR and UMR websites# 2 Or if you have a health care FSA, use your UMR FSA benny card(more on that later)
21Health Care FSA Receipts What information is needed? RequiredPatient’s nameDate of serviceProcedure descriptionProvider nameCharge for the serviceEOB to show what insurance paid & your responsibilityFor OTC meds, an itemized cash register receipt showing purchase date & name of the medication , plus doctor’s prescriptionNot AcceptableAccount balance statementsBalance forward statementsCancelled checksCash register receiptCredit card receiptsRemember, these are IRS regs. You have to cross your T’s and dot your I’s.
22Daycare FSA Receipts What information is needed? Either the daycare provider signs your claim form and provides their tax ID or SSNOr you attach itemized receipt showing:Dates of serviceName and DOB of childItemization of charges (e.g. to show custodial care, not tuition)Provider’s name, address and tax ID #
23FSA’s last a yearFSA plan year = January 1 to December Your payroll deduction automatically ends on December 31. Annual enrollment required to keep participating.Expenses must be incurred during the plan year (January 1 – December 31) or during the Grace Period.Grace Period: Expenses incurred January 1 – March 15 immediately following the end of the Plan Year. This means you have an extra 75 days to spend down your old year FSA.If you are in the Grace Period (Jan 1-Mar 15) and want to file a claim on your old year FSA, you have to file a paper claim. Can’t use your benny card for “old year” money.
24Important deadlinesDecember 13, 2013 is last day for current employees to sign up for a 2014 FSA. Enroll online through UAMS Employee Self Service (ESS) starting Nov 13. [New employees can enroll within their first 30 days via paper form.]2013 “old year” claims must be filed to UMR by March 31, 2014 or funds are forfeited.Avoid “Use it or lose it.” Estimate your FSA amount carefully.24
25Mid-year changesWhat would happen if you decided to flex $1000 and then found out that wasn’t enough, that you needed to put more money in your account? Can you change your election mid-year?Only under limited circumstances:Change in number of tax dependents (e.g. birth of child)Change in job status of you or your spouse30-day deadline to make changes
26How do I check my FSA balance? 24 hours a day via secure Internet access to real-time account information allows you to check your balance at any time at:(same as you log-in to view your medical insurance plan and claims)Or call UMR toll-free at
27FSA Debit CardHow the card works if you’re enrolled in a health care FSA
28FSA Debit Card“Benny” Card is automatically sent to anyone who enrolls in a health care FSA.The card is for your convenience. You’re not required to use it. If you’d rather pay out of your pocket and file a reimbursement claim with required documentation, that’s ok. Keep in mind that the IRS limits the places you can use your card.
29What’s nice about the Benny card? Better cash flow. You don’t have to pay for your health care expenses up front and then wait to be reimbursed.Payment comes directly from your health care FSA
30Beware the misconceptions Using the card DOES NOT mean “paperless”Using the benefit card DOES NOT mean you don’t need to save your receipts. IRS requires each FSA reimbursement or card swipe to be “substantiated.”You can’t use the card everywhere… only at certain merchants, and then only to pay for eligible medical expenses. Can’t use the card to pay for daycare… it’s only for your health care FSA.
31Where can you use it?Health care merchants: doctor, dentist, hospital, optometrist, clinic, chiropractorPharmacy, grocery or retail box stores… only if their computer “talks” to UMR’s computer (called an “Inventory Information Approval System” or IIAS, as approved by the IRS)For example, can use the card at Wal-Mart, Sam’s Club, Target, Kroger, WalgreensAn IIAS is a computer that talks to a FSA plan administrator’s computer. This list will likely grow as more merchants convert their systems.
32Benny CardSwipe your card only for your health care FSA purchases. Pay for other, personal items separately.If you are asked “Is your card debit or credit?”... say credit. While it actually debits your account, it has to be processed as a MasterCard credit card.Keep copies of ALL receipts.Then wait. Do not file a claim. See if UMR asks you for documentation. They likely will not if your expense was filed under your UA medical insurance.If UMR does request documentation (for example, on dental and non-medical claims), send in your receipts and other required documentation promptly.Walgreen’s example.You’re buying aspirin, rubbing alcohol, cheetos and soda.Ring up your items in 2 stacks. First just the rubbing alcohol and aspirin on your benefit card. Then pay for your cheetos and soda separately with your own money.
33Why would UMR request documentation? Because the IRS requires substantiationof ALL your card purchases4 ways for UMR to “auto” substantiate your FSA Debit Card purchase, without you having to send in documentation:The merchant has an IIAS compatible computer that provides the required dataYour expense exactly matches the copay structure of our medical plan (for example, $10-$35-$70 rx copay)You have a recurring monthly expense that you already provided documentation for – same $, same merchant code, every timeUMR has processed your health insurance claim and therefore knows the copay, deductible or coinsurance amounts that are your responsibility
34FSA Debit Card If UMR is unable to “auto” substantiate They will notify you by letter to send in documentationIf no response, your card is suspended.If you don’t send in documentation, final action is for us to take the amount from your paycheckUnsubstantiated reimbursements = ineligible reimbursements in the IRS’ eyes
35Employee Self Service web enrollment How do I sign up?Employee Self Service web enrollmentLog in as an employee/participant at https://enterprise.uams.edu/irj/portalFor employees without access to computer, they can come by our office and we’ll help them log in and enroll.Link and instructions will be on our website by November 13, 2013.Above does not pertain to new employees, who may enroll in an FSA via paper form at orientation.
36But first…Review educational material on UAMS Human Resources and UMR websitesUse the FSA worksheet to calculate expenses for 2014 plan yearDecember 13, 2013 is the deadline for current employees to enroll online in a 2014 FSA
3715% of UAMS employees participate in FSA’s 15% of UAMS employees participate in FSA’s. If most people can benefit, why is participation in Flexible Spending Accounts not higher?Lack of understanding regarding how the programs work and the savings that can be realized?Scared of IRS ‘use it or lose it’ rule?Don’t want to bother with claims?
38But with a little work on your part, the tax savings can make it worth your while!
39Benefit Questions Later? Call HR/Employee Services at (501)Visit the Office of Human Resources, Monday-Friday, 7:30 - 4:30 (4th floor of Central Building, Wing C)Visit our web site,