Contributing to a Flexible Spending Account is easy! You choose whether to set aside money for medical expenses, dependent expenses or both. If your Flexible Spending Account Plan allows for both medical and dependent care accounts, you will be notified of the annual limits that you can contribute. Typically, the employer limits how much you can contribute to a medical FSA, and Dependent Care FSAs are generally set to a $5,000 limit per plan year. Each pay period, the amount you choose to contribute will be deducted from your gross pay and deposited into your Flexible Spending Account. Throughout the year as you incur expenses that are not covered by insurance, you can use the money in your Medical Flexible Spending Accounts to pay for them. As you incur dependent care expenses, you can submit those for reimbursement.
Given the money most people spend annually on these expenses, a properly funded FSA can result in significant tax savings. As a reminder, when determining the amount to put aside for your "flex plan," be sure to budget wisely. Any funds unused at year's end will be forfeited. If you would like to learn more about how an FSA can save you money and the types of expenses covered, Click Here.
*Effective January 1, 2011, over-the-counter (OTC) medicines and drugs require a prescription from a provider in order to be eligible for reimbursement. Insulin and other OTC items, such as Band-Aids, crutches and contact lenses, will still continue to be reimbursed without a prescription.
*Effective January 1, 2013, Medical FSA contributions will be capped at $2,500 for salary reduction contributions. In addition, eligibility for “children” who have not yet attained age 27 under the new Health Care Reform law and subsequent revised Internal Revenue Code, will now be effective for the Medical FSA. This means that if you have a “child” who meets this new definition, reimbursements from your FSA expenses are now eligible for reimbursement on their behalf.
A Premium Offset Plan or Premium Only Plan is a provision under the Internal Revenue Code Section 125 that enables employers to allow their employees to have certain premiums that they have to pay out of their paycheck, to be taken out before the employee pays tax. These premiums would be taken out before the Federal tax, FICA tax, and any applicable State tax. The POP also allows the employers to save on the matching FICA that they would have had to contribute on this amount.What Premiums Qualify?
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