Frequently Asked Questions about Flexible Spending Accounts

Get answers to common questions about FSAs.

What is a Flexible Spending Account (FSA)?
A Flexible Spending Account is a benefit provided by your employer that allows you to deposit a certain amount of your paycheck into an account before paying income taxes. Then, during the year, you can be directly reimbursed from this account for eligible health care and dependent care expenses.

What types of Flexible Spending Accounts (FSA) are there?
There are two types of Flexible Spending Accounts. There is a Health Care Account for out-of-pocket health care expenses. And, there is a Dependent Care Account to help you pay for dependent care expenses which make it possible for you and your spouse, if applicable, to work.

What kind of savings can I realize by participating in a Health Care or Dependent Care FSA?
An FSA is exempt from federal income taxes, Social Security (FICA) taxes and, in most cases, state income taxes, saving you 1/3 or more in taxes.

Why should I participate in a Health Care Account when I already have health insurance?
By participating in a Health Care Account, you pay for health care expenses with pre-tax dollars. You save a percentage of each dollar you spend on eligible medical, dental and vision services that are not fully covered or are ineligible for payment under your health care plan. For a complete list of eligible expenses, go to the Sample Health FSA Expense Eligibility list.

Can I participate in a Health Care Account even if I am not covered under my company's health insurance plan?
Out-of-pocket expenses incurred by you, your spouse, or any dependent that you claim on your income tax returns are eligible for reimbursement whether or not you or they are insured through your company.

How do I make deposits into a Health Care or Dependent Care Spending Account?
When you enroll in the FSA, you estimate the amount of dependent care and health care expenses you will incur during the year. You have that amount deducted from your paychecks in equal amounts throughout the year. To help you estimate the amount you should save in your FSA, go to the FSA Savings Calculator.

How much may I contribute to a Health Care Spending Account each year?
The maximum amount that you may contribute each year to your health care spending account is set by your employer. Generally this amount ranges from $1,000 to $5,000. You should contact your Plan Administrator for details. To help you estimate how much to contribute, you can access the FSA Savings Calculator. You may also want to talk with your tax advisor or accountant.

What types of expenses can be reimbursed from a Health Care Spending Account?
Eligible expenses may include:

• Health care plan deductibles
• Co-payments
• Amounts over the maximum your plan pays
• Over-the-counter medications

For a list of eligible and ineligible expenses, review the Sample Health FSA Expense Eligibility list.

Can I use my Health Care Spending Account for over-the-counter medications?
You may use your Health Care Spending Account for some over-the-counter medications used for treating an injury or illness. For more information on over-the-counter medications, see your plan materials.

What are ineligible expenses for my Health Care Spending Account?
Ineligible expenses include, but are not limited to, health and dental insurance premiums and cosmetic-related surgery. For the complete list of eligible expenses, go to the Sample Health FSA Expense Eligibility list.

How much may I contribute to a Dependent Care Account each year?
Each year you may contribute a maximum of:

• $5,000 if you are single, or you are married, and you and your spouse file a joint federal income tax return, or
• $2,500 if you are married and you and your spouse file individual federal income tax returns.

To help you estimate how much to contribute, access the FSA Savings Calculator. You may also want to talk with your tax advisor or accountant.

What expenses are eligible for reimbursement under the Dependent Care Account?
Eligible expenses include services provided:

• Inside or outside of your home by anyone other than your spouse, a person you list as your dependent for income tax purposes or one your children under the age of 19
• In a dependent care center or a child care center. If the center cares for more than six children, it must comply with all applicable state and local regulations.
• By a housekeeper whose services include, in part, providing care for a qualifying individual
• Through child or adult daycare; through nursery, pre-school, after, or summer day camp programs. Taxes you pay on wages for eligible dependent care can also be reimbursed.
• By a provider who doesn't intend to claim the income as earnings. Provider's Social Security or Tax ID number and payment/services details must be included with your federal income tax return on Form 2441. As a result, your provider will have to pay taxes on that income.

Eligible dependents are:

• Your dependent under age 13 for whom you can claim an exemption
• A child under the age of 13 for whom you have custody if you are divorced or legally separated
• Your spouse who is physically or mentally incapable of self-care
• Your dependent who is physically or mentally incapable of self-care

What are ineligible expenses for my Dependent Care Account?
Ineligible expenses include dependent care for a child 13 or over, overnight camp, baby-sitting that is not work-related, schooling in kindergarten and higher grades and long-term care services. All submitted expenses are reviewed for eligibility according to Internal Revenue Code Sections 125.

When do Health Care or Dependent Care expenses have to be incurred to be eligible?
Expenses have to be incurred during each plan year. You have 90 days after the end of the plan year to submit claim forms for reimbursement.