Flexible Spending Accounts

Health Care and Dependent Care Flexible Spending Accounts (FSAs) are accounts in which you set aside pretax money to pay for health care or dependent care expenses (not covered by your insurance) that arise throughout the year. Because your FSA contributions are deducted from your paycheck before taxes are calculated, FSAs can help you save money by reducing your taxable income. You may elect to participate in one or both of the following Flexible Spending Accounts:

  • Health Care Flexible Spending Account ($5,000 annual limit)
  • Dependent Care Flexible Spending Account ($5,000 annual limit)

Because FSAs are regulated by the IRS, certain restrictions apply. Before you elect to participate, you may want to review the IRS Rules. For example, if you have any amount left in your account(s) at the end of the year, you forfeit that money. However, if you plan carefully, you won't lose anything.

The Internal Revenue Code, section 129, does not allow participation in the Dependant Care FSA while on medical leave.  Dependent care expenses incurred during a medical leave are not eligible for reimbursement.  Since your Dependent Care status has changed as a result of medical leave, you may elect to change your election for the balance of the year.

How the Options Work

During Open Enrollment, you estimate the amount you will spend on out-of-pocket, non-reimbursable health care and/or dependent care expenses in the upcoming year. Using this estimate, you decide how much you want to contribute in before-tax dollars to each account and enter this amount in the Online Enrollment Form or on your 2007 Personal Benefits Enrollment Worksheet.

Meritain will process your claims and reimbursements on a weekly basis. Claim forms and receipts can be submitted via fax or mail, and reimbursements will be made by check or direct deposit. You can contact the Meritain Customer Service Center by phone at 1-866-448-1696, by fax at 1-716-319-5575, or by mail at P.O. Box 926 , Amherst , New York 14226-0926.

Anytime throughout the year, you can request reimbursement by submitting a claim form and associated receipts to Meritain for payment of eligible health care and/or dependent care out-of-pocket expenses from the tax-free money you have set aside in your FSA accounts. You must accumulate at least $10 in expenses before submitting a claim, unless it is year-end.

If you participate in the Health Care FSA, Meritain will automatically process your eligible medical plan co-payments and/or co-insurances through your FSA account to reimburse you for these out-of-pocket expenses. This process, known as auto-referral of claims, simplifies the process for you, because now you only need to submit receipts or itemized bills for dental, prescription, over-the-counter medications, and vision expenses. When auto-referral occurs, you will receive an explanation of benefits from Meritain noting the unpaid balance referred to your FSA.

Note: Reimbursements can be paid faster by electing direct deposit. To begin direct deposit, you must complete a Direct Deposit Authorization Form, attach a voided check, and return both to Meritain directly. You can contact Meritain to request a direct deposit form or you can use the form on the Open Enrollment website. Otherwise, you can still receive a check by mail.

Reimbursable Health Care Expenses

Many common health care expenses are eligible for reimbursement from your Health Care FSA, including medical and dental co-payments, deductibles, most prescriptions, over-the-counter medications, vision care, and certain orthodontia expenses. As a general rule, any health care expense you could deduct on your federal income taxes is eligible for reimbursement from your Health Care FSA.

Reimbursements for eligible orthodontia expenses are treated as incurred when the care is actually provided, not when the participant is billed or pays for the care. This presents some difficulties regarding orthodontic services and payments, which usually span more than one year.

Proper information is necessary to administer your orthodontic FSA claims. For example:

  • A detailed copy of the orthodontic contract (description of the fees for the initial placement of the braces, x-rays, extractions, and the monthly adjustment fees).
  • A copy of the itemized bill from the orthodontist.

Reimbursable Dependent Care Expenses

Eligible dependent care expenses include qualified day care providers for children up to age 13 or for dependents who are physically or mentally unable to care for themselves in the home, e.g., disabled spouse or elderly parent.

You can use the Dependent Care Flexible Spending Account only if you are paying for dependent care as a result of employment. In addition, if you are married, your spouse must work or attend school full-time at least five months each year, or be disabled.

More information is available on our website at http://hr.nd.edu . You can view account balances directly through Meritain Health 's website at www.meritain.com or by logging onto Notre Dame's Self Service. For specific information regarding the FSAs, please contact the IRS or your accountant.

  Health Care FSA Dependent Care FSA
Annual minimum $120.00 per year $120.00 per year
Annual maximum $5,000 per year $5,000 per year (per family)

Tax-Saving Examples

Based on 2005 Federal, State, and Local Tax Rates

  Example 1 Example 2
  Paying with After-Tax Dollars Paying with FSA (Before-Tax Dollars) Paying with After-Tax Dollars Paying with FSA (Before-Tax Dollars)
Annual Pay $28,000 $28,000 $60,000 $60,000
Before Tax Payment $0 -$1,500 $0 -$1,500
Taxable Pay $28,000 $26,500 $60,000 $58,500
Federal Tax -$3,835 -$3,610 -$11,665 -$11,290
Social Security Tax -$2,142 -$2,027 -$4,590 -$4,475
Indiana/Local Income Tax -$1,176 -$1,113 -$2,520 $2,457
After-Tax Payments -$1,500 $0 -$1,500 $0
Take-Home Pay $19,347 $19,750 $39,725 $40,278
Tax Savings  $403     $553  

Open Enrollment

 

Open Enrollment Related Content