Important Facts About Your Flexible Benefits Program
- Section 125 of the Internal Revenue Code allows employees to pay specific health-related, medical expenses as well as Dependent Care expenses with pre-tax dollars. This can reduce an employee's Federal, State, and Social Security taxes.
- The maximum dollar amount that each employee can elect under a Healthcare Flexible Spending Account is limited by plan design. Each employee determines how much he/she will elect to spend annually on these expenses up to the maximum amount defined by the plan. The elected amount is deducted from GROSS earnings through payroll deduction (in equal amounts every pay period) and is redirected to a flexible spending account or accounts. The result is increased take home pay because taxable income is less. Benefits paid by the Program are not considered taxable income.
- The maximum dollar amount that can be diverted, pre-tax, to a Dependent Care Reimbursement Account may not exceed the smaller of the following limits:
- The maximum allowed under the plan.
- $5,000 (if you are married and filing a joint tax return or are single, head of household) and $2,500 if you are married and separate returns are filed.
- Your taxable compensation (after all compensation reduction elections). If you are married, your spouse’s actual or deemed earned income.
- If you are married, your spouse’s actual or deemed earned income.
- Money is credited to an employee's account on each payday in equal installments. Any installments that are not made due to an unpaid leave of absence or other reasons cannot be made up later. Once an amount is decided upon, changes or cancellations may not take place during the year, except under special circumstances.
- Each time a claim is filed, information will be sent to the employee detailing the deposits, reimbursements, and balance(s) of the account(s). Participants will also receive a special notice approximately one month prior to the end of the plan year stating the existing balance(s) in the account(s).
- Flexible Spending Plans are a great way to save money on eligible unreimbursed health care and/or dependent care expenses. But you should know a few things about the account before deciding to participate. Specifically: You cannot stop, start, or change your contribution amount during the Plan Year unless you have a qualified status change (for example, birth of a child, marriage, divorce, legal separation, a change in your or your spouse's work status.)
- You can't transfer money from the medical spending account to the dependent care or vice versa, nor can you use the money in one account to pay for expenses eligible under the other account.
- With careful planning, you can easily use all of the money in your account. In addition, you will have 60 days immediately following the end of the Plan Year to submit eligible claims.
Key Differences Between Health Care And Dependent Care Accounts
HEALTH CARE ACCOUNTS:
- The entire elected amount is available to the employee on the first day of the plan year for expenses incurred during the plan year.
- If there is still money remaining in the account after all expenses have been submitted, you may be allowed to roll over an amount based on your district’s plan document. A roll over is only allowed for active and eligible employees that are with a participating district. Any amount above the established rollover amount will be forfeited.
- The roll-over amount established for your district can be located either in your district’s plan document or on our website under the “participating districts” bullet.
DEPENDENT CARE ACCOUNTS:
- Reimbursements can only be made up to the balance that has been contributed via payroll deductions at the time of the request.
- According to IRS rules, any money left in the account at the end of the plan year can’t be returned to you. Any unclaimed funds will be forfeited.