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FAQ_and_Overview_updated_10310

VIEWS: 2 PAGES: 8

									Flexible Spending Account Benefits Overview and FAQs

   Set aside tax-free money to help pay your medical and dependent care expenses!
Flexible Spending Accounts (FSAs), will allow you to save taxes on the money you spend for uncovered
medical and dependent care expenses. In general, a FSA allows you to:
         • Set money aside through payroll deductions before taxes are withheld; and
         • Receive the full amount deducted as reimbursement for eligible expenses.

What is a Flexible Spending Account (FSA)?
FSA accounts are sponsored by your employer as an optional employee benefit and are regulated by the IRS.
They are designed to help workers and their families pay for health care and/or dependent care by allowing the
participant to use tax-free money for certain eligible expenses. Participants make pre-tax contributions by payroll
deduction and the contributions are allocated to an account maintained on the participant's behalf by the
employer.

How does an FSA work?
Once you have enrolled, the amount you have specified is taken from your paycheck each payroll cycle on a
pre-tax basis and deposited in your account. You pay your health care and/or dependent care expenses as
usual. You submit a request for reimbursement form and receipts to CBCA requesting reimbursement for these
expenses. CBCA sends you a reimbursement check drawn on funds from your account. The result of paying
for eligible expenses through the FSA plan may be lower income taxes and, often, an increase in take-home
pay.


What are the advantages to contributing to an FSA?
The advantages of using pre-tax dollars through a FSA program to pay for eligible health care and dependent
care expenses can be significant. Depending upon your individual income and tax filing status, you could save
as much as 20% to 50% on eligible services. Refer to the example below to see how you can save.


 Family, Spouse Works, Semi-Monthly pay         Without Flexible      With Flexible Spending
 cycles = 24 pay cycles annually                Spending Account      Account
 Gross Pay (Per Pay Cycle)                      $2,000.00             $2,000.00
 Flex Plan Deduction Medical Expense                                  $50.00
 Flex Plan Deduction Dependent Care                                   $200.00
 Adjusted Taxable Amount                        $2,000.00             $1,750.00
 Federal Withholding Tax (28%)                  $560.00               $490.00
 Social Security Tax (7.65%)                    $153.00               $133.88
 NET PAY                                        $1,287.00             $1,126.12
 Out-Of-Pocket Medical Expense                  $50.00                0
 Out-Of-Pocket Dependent Care                   $200.00               0
 Net Take-Home Pay                              $1,037.00             $1,126.12
 Increase in Take-Home Pay:                                           Monthly @ $178.24
                                                                      Annually @ $2,138.88


Wouldn't I save more by taking a deduction on my income tax?

According to current tax structure, if your income is greater than $40,000, in most cases (depending on your
filing status, number of dependents, and dependent care expenses) a FSA is more beneficial than the tax credit.
Ultimately, you need to determine whether taking tax deductions is more beneficial than using health and/or
dependent care flexible spending accounts. For more information, please consult your tax adviser.



FSA FAQ CBCA.doc                             Page 1 of 8
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What are the different types of FSAs?

There are two types of accounts: Health Care Reimbursement Account and Dependent Care
Reimbursement Account.

    1. A Health Care Reimbursement Account can be used to set aside money for anticipated co-payments,
       deductibles and other eligible health care expenses not covered by your health plan(s).
    2. A Dependent Care Reimbursement Account can be used to pay for the care of your dependents (e.g.
       babysitter, pre-school, day care, etc.) so that you or you and your spouse can work.


Who is eligible to participate in the FSA program?

There are two levels of eligibility requirements:

    1. Requirements set by the employer sponsoring the program (e.g. full-time employment status)
    2. Requirements specific to the type of FSA (e.g. the dependent care account has spousal work
       requirements)


How do I enroll in the FSA program?

You will need to make your election for either the Health Care Reimbursement or Dependent Care
Reimbursement Account through your employer. You should do this during your initial benefit elections during
your new hire orientation period or during your employer’s open enrollment period. Just fill out the FSA
enrollment form and indicate which FSA you are interested in and determine how much your plan year
contribution will be.

How much should I contribute?

How much you contribute depends on your individual situation. Consider last year's medical and/or dependent
care expenses, any medical or dental care costs you foresee that might not be covered under your medical or
dental plans, and any changes in your family status that might have an impact on your medical/dental or
dependent care expenses. You may want to estimate conservatively the first year as any unused funds cannot
be refunded. Refer to “What happens to funds I don’t use?” for details.


Are there any limits to how much I can contribute to my FSA?

The limits are set differently for each type of FSA, and similar to the eligibility requirements, there are two levels
which combine to determine contribution limits:
    1. Limits set by the employer sponsoring the program. Please refer to your Flexible Spending Account
        Summary Plan Description (SPD) for these limits.
    2. Limits set by the IRS specific to the type of FSA (e.g. the dependent care account has spousal work and
        income requirements). See the FAQ specific to the account type or IRS publication 503 for details.


What happens to funds I don't use?

IRS regulations impose a “use it or lose it” rule that requires you to forfeit any money not used by year-end.
Money cannot be refunded to you, or carried forward from year to year. So, it is important to carefully estimate
qualifying expenses before enrolling. It is also important to note that you cannot use dependent care money to
pay for medical costs or vice-versa. Except for unusual events, like a change in family status, once the election
is made, it can’t be changed.

What happens if I have a claim at the end of the Plan Year and don’t submit it by the last day of the Plan
Year?


FSA FAQ CBCA.doc                              Page 2 of 8
                                                                                                 Oct-05
You will have a grace period after the end of the Plan Year to file claims for services that were provided during
the Plan Year. Please refer to your Flexible Spending Account Summary Plan Description (SPD) for details
about your grace period.

What happens if I submit a claim and my account balance is less than the amount of the claim?

For Health Care Account claims, you will be reimbursed up to the full amount of your annual Health Care
Account FSA election (less amounts already reimbursed), even if the money has not yet been deposited into
your account. Contributions will continue throughout the year and claims will continue to be paid until your
annual maximum is met.

Dependent care claims are paid a little differently. These claims will be paid up to the cash balance available in
the account. The remaining claim submission will be paid when the Dependent Care account is funded again
through payroll deductions.


How do I file claims for reimbursement?

After you have paid for an eligible expense, submit a request for reimbursement along with along with receipts
or other required documentation to the address indicated on the request for reimbursement (available on
www.CBCA.com). Faxing of requests for reimbursements is also allowed.


Is there a minimum claim amount?

You must have at least $10 of eligible expenses before requesting reimbursement from either account. The
minimum reimbursement check amount is $10. If a claim is submitted for less than the minimum, it will be held
until subsequent claims total more than the minimum. (You may, however, submit a final claim for less than $10
at the end of the year.)


Who is responsible for determining if an expense claimed is an eligible expense?

Claims and supporting documentation are reviewed by CBCA and processed in accordance with the terms and
conditions of the program. The IRS dictates eligibility of expenses, and those guidelines are used by CBCA
when reviewing claims.


Can I change my election or stop contributing money to my flexible spending account at any time
throughout the year?

Federal regulations state that once you have enrolled and selected the contribution amount, you cannot change
your decision until your next open enrollment unless you have a family status change such as marriage, birth of
a child, or divorce. Refer to “Can I change my election or stop contributing money to my flexible spending
account at any time throughout the year?” in the Health Care Flexible Spending Account FAQ for Employees
(page 6) and the Dependent Care Flexible Spending Account FAQ for Employees (page 9) for details.




FSA FAQ CBCA.doc                             Page 3 of 8
                                                                                               Oct-05
Health Care Flexible Spending Account FAQ for Employees

What health care expenses are eligible under the FSA?

The IRS determines the type of expenses eligible for reimbursement through a FSA. Some examples of eligible
and ineligible expenses are listed below. Note that eligible expenses include only those expenses incurred
during a plan year. "Incurred" means when the service is performed, not when you were billed or when you paid
for the service. For example, if you choose to make FSA contributions during calendar year 2005 but elect not to
participate in 2006, services incurred in 2006 will not be eligible for reimbursement from your unused 2005
account balances.

Eligible health care expenses include, but are not limited to:

•   Deductibles, co-payments and coinsurance payments

•   Eye exams, eyeglasses, contact lenses and contact lens supplies (i.e. saline solution)

•   Lasik eye surgery

•   Chiropractic treatment

•   Acupuncture

•   Prescribed medicines

•   Doctor’s fees, including routine physicals

•   Hearing exams and hearing aids

•   Laboratory fees

•   Dental treatment, including orthodontia

•   Psychiatric/Mental health treatment

Can I use a Health Care FSA to pay for a spouse and/or dependent's eligible out-of-pocket medical
expenses?

Yes. Dependents are generally defined as those individuals claimed on the participant’s personal tax return.


How much I can contribute to my Health Care Account?

Each calendar year you can set aside between $10 and $115.38 per pay period which is equal to $260-$3,000 a
calendar year. If you participate in Health Care FSA other than the beginning of a calendar year, the amount set
aside is based on the remaining pay periods in the year.

How do I file claims for reimbursement?

If you are covered by a group health, dental or vision plan, you should file claims for eligible expenses under
that plan first, then file a request for reimbursement from your FSA with the Explanation of Benefits (EOB)
issued by your health plan. After you have paid for an eligible expense, submit a claim for reimbursement along
with receipts or other required documentation to the address indicated on the claim form.


I have a managed care plan. Do I have enough out-of-pocket expenses to make a health care flexible
spending account worthwhile?
FSA FAQ CBCA.doc                              Page 4 of 8
                                                                                             Oct-05
Even though you may be enrolled in a managed medical and/or dental plan, there still may be expenses not
covered by the medical or dental plan. Some examples of common out-of-pocket expenses include:
copays/deductibles, eye exams, eyeglasses, contact lenses, saline solution, prescription copays, chiropractic
treatment, orthodontia and dental work. A health care FSA can be a valuable way to fund these expenses on a
tax-free basis.


Can money in a Health Care FSA be used for Dependent Care expenses and vice versa?
No. Under IRS regulations, transferring money between FSA accounts is not permitted. This means that a
Health Care account cannot be used to pay for dependent care expenses, and a Dependent Care account
cannot be used to pay for health care expenses.

Can I change my election or stop contributing money to my flexible spending account at any time
throughout the year?

Federal regulations state that once you have enrolled and selected the contribution amount, you cannot change
your decision until your next open enrollment unless you have a family status change.

Changes in family status include:
•   your marriage or divorce

•   birth or adoption of a child

•   change in work schedule (e.g., part-time to full-time status or full-time to part-time status) of employee,
    spouse or dependent

•   death of a spouse or covered dependent
•   you or your spouse taking an unpaid leave of absence

So, for example, if a child was born, you might want to increase your health care expense reimbursement
amount to allow for increased health care expenses related to the newborn. Changes may only be made with
regard to future expenses, not retroactively.

Dependent Care Flexible Spending Account FAQ for Employees

Which Dependents are Eligible?

Qualifying dependents are:

•   A child under age 13 in your custody whom you claim as a dependent on your tax return;

•   A spouse who is incapable of self-care; and

•   A dependent who lives with you-such as a child over age 13, parent, sibling, or in-law-who is incapable of
    self-care, and whom you claim as a dependent on your tax return.

If care for a disabled spouse or dependent is provided outside the home, the dependent must live with you at
least eight hours a day.

What Expenses Are Eligible Under The Dependent Care Plan?

The dependent care must be necessary so that you, or you and your spouse, can work or look for work (you
must have work income during the year). If care is provided in a day-care center, the center must charge a fee.
If the center cares for six or more dependents who are not residents, it must comply with all state and local
licensing laws and applicable regulations. Expenses must be incurred during the FSA Plan Year. You will not be
reimbursed for expenses until after the care is provided. If you enroll midyear, expenses incurred before your
effective date are not eligible.
FSA FAQ CBCA.doc                              Page 5 of 8
                                                                                                Oct-05
Eligible dependent care expenses include, but are not limited to:
•   In-home dependent care

•   Private pre-school program

•   Nursery school

•   Care provided at a day-care center or other location outside your home

•   Public or private before-school and after-school care
•   Summer day camp (if cost is reasonable compared to other alternatives and the main purpose is to provide
    for the child's well-being)

Expenses that do not qualify for reimbursement include, but are not limited to:
•   School expenses for children in kindergarten or above

•   Food or clothing provided for your dependent

•   Care provided by your spouse, your child under age 19, or someone you claim as a dependent for tax
    purposes

•   Transportation expenses to and from the care location

•   Baby sitting for social events
•   Overnight camp expenses

Please note: Dependent care expenses must meet the statutory requirements of IRC sections 21 and 129.
School expenses for children below kindergarten may or may not be eligible, depending on your day-care
arrangement. For more information, refer to IRS Publication 503 or consult your tax adviser.

Reimbursement for Dependent Care

You will be reimbursed semi-monthly

How much can I contribute to my Dependent Care Account?

Each calendar year you can set aside between $10 and $192.30 per pay period which is equal to $260-$5,000 a
calendar year. If you participate in Dependent Care FSA other than the beginning of the calendar year, the
amount set aside is based on the remaining pay periods in the year. The IRS limits the maximum annual
amount you can deposit in your dependent care account to $2,500 if you are married and filing separately. The
IRS imposes additional restrictions based on marital status, tax-filing status, and spousal income and work
status as described below.


IRS Imposed Limits for Dependent Care Expense Contributions

    •   If you are single or married and file a joint tax return and your spouse does NOT contribute to a
        dependent care FSA you may contribute up to $5,000.00.

    •   If you are married and file a joint tax return and your spouse DOES contribute to a dependent care FSA
        you may contribute up to $5,000.00 COMBINED.

    •   If you are married and file a joint tax return and your spouse earns less than $5,000.00 a year you may
        contribute up to your spouse’s annual earnings.

    •   If you are married and you and your spouse file separate tax returns you may contribute up to $2,500.00
        and your spouse may also contribute up to $2,500.00 to a separate dependent care FSA account.
FSA FAQ CBCA.doc                             Page 6 of 8
                                                                                              Oct-05
    •   If you are married and file a joint tax return and your spouse is a full time student or disabled you may
        contribute up to $2,400.00 if you have one dependent and up to $4,800.00 if you have two or more
        dependents.



How do I file claims for reimbursement?

Complete and submit a request for reimbursement along with a statement (i.e. bill or invoice) from the care
provider. You may indicating the name of the provider, the provider federal tax ID number or Social Security
number, the dates of service, the name of the person(s) receiving the service, and the cost of the service on the
front side of the request for reimbursement. In lieu of providing a receipt your provider can simply sign the
backside of the request for reimbursement. Canceled checks are not acceptable as sufficient supporting
documentation.


Can I request reimbursement from my flexible spending account for services I receive before the plan
year begins, if I am not billed until after the plan year starts?

No. According to IRS guidelines, a qualified expense is "incurred" at the time the service is provided, not when
you are billed (or charged) or actually pay for this service. Therefore, reimbursements made during a plan year
are only made for eligible expenses incurred during that same plan year.


Can I use the dependent care flexible spending account for elder care?

Yes. You can use the dependent care flexible spending account for day care expenses so that you (or if you are
married, you and your spouse) can work if:

•   You are responsible for at least 50% of the support of an elderly parent or any person living with you who is
    physically or mentally incapable of self-are; and
•   This person is noted on your income tax statements as a legal dependent.

You can also use the dependent care flexible spending account if the elder care is needed because you work
and your spouse is a full-time student.

If I have someone come into my home to take care of my children instead of using a day care facility, do
these expenses qualify for a dependent care flexible spending account?

Yes. You can include wages paid to a baby-sitter or companion in or outside your home if the services are
necessary in order for you (or, if you are married, you and your spouse) to work. Expenses will also qualify for a
dependent care flexible spending account if you work and your spouse is a full-time student. The services are
not covered if the baby-sitter is someone you declare as a dependent.


If I underestimate my dependent care flexible spending account contributions, can I use money from my
health care flexible spending account to make up the difference?

No. The health and dependent care flexible spending accounts are two separate benefit plans. You cannot
transfer money between accounts.


Can I change my election or stop contributing money to my flexible spending account at any time
throughout the year?

Federal regulations state that once you have enrolled and selected the contribution amount, you cannot change
your decision until your next open enrollment unless you have a family status change.


FSA FAQ CBCA.doc                             Page 7 of 8
                                                                                               Oct-05
Changes in family status include:
•   your marriage or divorce

•   birth or adoption of a child

•   change in work schedule (e.g. part-time to full-time status or full-time to part-time status) of employee,
    spouse or dependent.

•   death of a spouse or covered dependent
•   you or your spouse taking an unpaid leave of absence

•   change in day care costs and/or coverage

•   changes in election should be made within the 30 day period immediately following the date of the “qualified
    event.

So, for example, if a child was born, you might want to increase your dependent care expense reimbursement
amount to include dependent care for the child (if both you and your spouse are returning to work after the birth.
Changes may only be made with regard to future expenses, not retroactively.

NOTE: Please refer to your Flexible Spending Account Summary Plan Description (SPD) for additional
Plan information and restrictions.




FSA FAQ CBCA.doc                              Page 8 of 8
                                                                                                Oct-05

								
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