What is a Flexible Spending Account Plan?

A benefit provided by your employer that lets you set aside a certain amount of your paycheck into an account before paying income taxes. Then, during the year you can be directly reimbursed from your account for qualified health care and dependent care expenses.

Why should I participate in the Health Care Reimbursement Account when I already have health insurance?

This account is used to pay for expenses that are not covered by insurance. For example, your insurance may not cover annual physicals, co-payments, eye exams, eye surgery, glasses, orthodontics, prescription drugs or dental care, just to name a few.

If I set aside part of my pay, won't I make less money?

No. Your net take-home pay will increase by the amount of taxes you did not pay.

Can I change my contributions during the year?

Only if you have a change-in-status, such as: marriage, birth, adoption or a change in your or your spouse's employment status.

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What if I currently take the dependent care credit on my annual tax return?

Whether to participate in the day care portion of this plan depends on your income, filing status, number of dependents and annual day care expenses.
The amount you deposit in your Dependent Care Reimbursement Account reduces the amount, dollar for dollar, that you can claim as a credit on your tax return. Contact your plan administrator for further information.

Click here for a comparison (2012 Tax Rates)
Click here for a comparison (2011 Tax Rates)

How do I get reimbursed for my expenses?

Once you have completed the Enrollment Form, you will receive a claim form and instructions on how to file your claim. Simply complete the form, attach a copy of the health care or dependent care bill and mail or fax your form to your Plan Administrator. Within a short time, you will receive your reimbursement.

Do I have to wait for the money to be deposited in my account in order to make a claim for reimbursement?

The amount you set aside each year for the Health care Reimbursement Account is available to you at any time throughout the plan year. The amount available to you from your Dependent Care Account is the amount you have contributed to date.

How do I know how much is available in my accounts?

Each time you receive a reimbursement, a statement (attached to your reimbursement check) will show the dollar amount you have set aside as well as the amount you have been paid to date. Or you may check your account online. Click here for an example.

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What happens to my accounts if I terminate my employment?

You will be able to request reimbursement for health care and day care expenses that you incurred prior to your termination. Check your Summary Plan Description for any additional rights or benefits provided by your company's plan.

What if I don't use all of the money I set aside in my account(s)?

Carefully review your estimated expenses before making the decision to participate. Any contributions that are not used during the plan year may not be paid to you in cash or used in a later plan year.

What if I am not covered under my company's health insurance plan?

You and your family can still participate in the Health care, Dependent Care and Adoption Reimbursement Accounts.

How do I benefit by participating?

Your biggest advantage 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!

Are there any negatives that I should know about?

Yes. Because you are not paying any social security tax on that portion of your income that has been set aside, your social security benefits may be slightly reduced. Most tax advisors would tell you that the benefit of saving taxes now will be far greater than the potential loss of social security benefits when you retire.