Flexible Spending Account (FSA)
Flexible Spending Account (FSA)
Features
- It allows you to set aside part of your paycheck to reimburse
yourself for qualified expenses.
- This deduction is on a pre-tax basis (which should reduce your
federal, state, and social security taxes).
- Reimbursements to you are not taxable.
- SHDR must receive FSA claims for reimbursement by May 31 for the
prior calendar year.
UNM offers two flexible spending accounts, and you may enroll in one
or both.
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Medical Reimbursement Account
The Medical Reimbursement Account reimburses you for certain medical,
dental, vision, prescription, and hearing care expenses that are not
covered by any insurance plan for you and your eligible dependents as
outlined in IRS Publication 502.
The maximum you may contribute annually is $5,000.
Click
here for expenses that may be reimbursed.
A more extensive list of examples is available in IRS Publication 502,
which is available from the Internal Revenue Service.
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Dependent Care Spending Account
The Dependent Care Spending Account reimburses you for dependent care
expenses at a licensed facility for services provided by individuals
(see regulations for restrictions), dependent care centers, and other
qualified care expenses as defined by the IRS.
You may contribute up to $5,000 of your annual salary if you are
married and filing a joint return, or if you are single. If you are
married and filing separate tax returns, you may contribute a maximum of
$2,500. If your spouse's employer offers FSA, he or she may also
contribute up to $2,500 annually. However, the maximum allowable
contribution per household is $5,000.
To be eligible for reimbursement, expenses must be incurred in caring
for a "qualified individual."
For
a definition of qualified individuals, as well as qualified expenses,
please click here
Refer to IRS
Publication 503 for a complete list of qualifying dependent care
expenses.
Note: As FSA is a federal regulation, and because neither
the federal government nor the State of New Mexico recognizes a domestic
partner as a legal spouse, expenses for a domestic partner and/or
expenses for a domestic partner's dependents are not eligible
for FSA reimbursement.
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Flexible Convenience Card
The Flexible Convenience Card, "Flex Card", enables
employees to use the debit card wherever MasterCard or Visa are accepted from physician and dental offices to pharmacies and vision
service locations.
Approved expenses are automatically deducted from your medical
flexible spending account and/or dependent care accounts.
Other benefits include:
- Access to real-time account balance information via the Internet.
- Virtual elimination of claim forms.
- Elimination of wait time for reimbursement.
Note: You still need to keep receipts as the FSA
administrator may require you to provide receipts to ensure purchases
were for eligible items.
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Advantages of Enrolling in FSA
FSA allows you to contribute a specific dollar amount, up to the
annual maximums, on a pre-tax basis for qualified expenses, reducing
your taxable earnings, resulting in tax savings for you.
- For example, if your annual earnings are $25,000 and you decide to
contribute $3,000 to the Dependent Care Account, your taxes are based
on $22,000 annual salary rather than $25,000, reducing the amount of
taxes you pay.
If you know you will have specific qualified dependent care and/or
medical expenses during the next calendar year, you will likely benefit
from enrolling in one or both of these plans.
Contact the HR Service Center at 277-MyHR (6947) for questions on how
you might benefit from this program.
You are encouraged to consult with a tax advisor for specific tax
advice if you have questions on whether or not this plan would be
advantageous for you.
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Disadvantages of Enrolling in
FSA
As FSA is under the auspices of the IRS, you must meet the rules
specified under IRS guidelines for qualified expenses and qualified
dependents. The major disadvantage is the IRS "use it or
lose it" rule.
- For example: If you sign up to contribute $2,900 annually for
dependent care and only have actual qualified expenses of $2,600, the
$300 difference cannot be returned to you.
- However, the IRS allows for a 2 1/2 month Grace Period if you have not incurred qualified expenses to match your deductions by December 31. You have until March 15, 2010 to incur expenses for the 2009 calendar year. If you have money in your account after December 31 and use your debit card, your left over money from the 2009 calendar year will be used before you begin using your 2010 calendar year election.
Also, you cannot transfer dollar amounts between Dependent Care and
Medical Reimbursement accounts.
- For example: If you enroll for $2,500 in Dependent Care and $2,000
in Medical Reimbursement, and have actual expenses of $3,000 in
Dependent Care and $1,500 in Medical Reimbursement, you cannot transfer
$500 into Dependent Care from Medical Reimbursement to cover the
difference.
Given this IRS rule, you are encouraged to carefully plan the annual
amount you contribute.
The FSA reduces your annual income and could have an impact on your
social security benefits.
Despite the above drawbacks, if you have qualified expenses in either
or both accounts, the tax savings generally outweigh the disadvantages.
Note: The FSA operates on a calendar year basis (January 1 through
December 31) and requires active enrollment each year in November.
Claims must be received by Stanley, Hunt, Dupree, and Rhine (SHDR) by
May 31 to receive reimbursement on the prior year's FSA elections.
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FSA Comparison
|
| |
Without FSA
|
With FSA*
|
Annual Salary
|
$ 33,000.00
|
$ 33,000.00
|
Pre-tax Deductions
|
|
|
|
|
Medical
|
$0.00
|
$ 3000.00
|
|
|
Dependent Care
|
$0.00
|
$ 5000.00
|
|
|
Retirement
|
$ 2508.00
|
$ 2508.00
|
|
|
|
|
Taxable Income
|
$ 30,492.00
|
$ 22,492.00
|
|
|
|
|
Taxes
|
$ 7,398.93
|
$ 5104.82
|
Net Pay
|
$ 23,093.07
|
$ 17,387.18
|
|
|
Medical
|
$3000.00
|
$ 0.00
|
|
|
Dependent Care
|
$5000.00
|
$ 0.00
|
Net Spendable Income
|
$ 15,093.07
|
$ 17,387.18
|
|
Annual Savings with FSA = $ 2,294.11
*Based on a salary of $33,000, married with
one deduction and with contributions to Medical and Dependent Care
Accounts. Your results may vary.
|
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Frequently Asked Questions - FSA 2010 Open Enrollment
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Visit www.shdr.com for more information on Flexible Spending
Accounts.
FSA Contact Information
For additional information or questions, please contact Stanley, Hunt,
DuPree & Rhine at:
(800) 768-4873
(800) 930-2441
Or visit http://shdr.com/
