Maine's Public Universities - University of Maine System
Life the way it should be

HR Home > Benefits > FSA

UMS FSA logo

Flexible Spending Accounts (FSA)

 

Important FSA Debit Card Changes Effective July 1, 2009

 


All employees who work at least half-time may choose to enroll in Health Care and/or Dependent Day Care FSA plans. The FSA plans are designed to let participants pay for eligible expenses with before-tax dollars. Funds in the FSA plans are not subject to federal or state income or social security taxes resulting in valuable tax savings. Participation in these accounts is entirely voluntary. Employees may sign up for one, both or neither option. Employees must re-enroll each year for the accounts, even if they participated the previous year. 


USING THE ACCOUNTS

FSAs work much like checking accounts. Before the beginning of each calendar year, employees decide how much they want to deposit in each account for the following year. The money will be automatically deducted from paychecks each pay period in equal amounts – before any federal, state income or Social Security (FICA) taxes are taken out.  (See also:  Understand Your Pay Stub)


The maximum amount employees can contribute in a calendar year is:

  • Health Care $4,000
  • Dependent Day Care $5,000


The minimum amount employees can contribute to either account in a calendar year is $200.


Employees then continue to pay expenses as they do now (or use the new FSA Benefits Card).  After employees pay expenses that qualify under the program, they simply submit a claim form to EBPA, the University’s FSA administrator, along with receipts for expenses, and employees will be reimbursed in before-tax dollars (see Submitting Claim Forms below). For health care expenses, you may be reimbursed up to the amount of your annual deposit. For dependent day care expenses, employees can only be reimbursed up to their account balance as of their last paycheck.


HOW YOU BENEFIT (TAX SAVINGS)

Because employees do not pay federal, state or Social Security taxes on monies set aside in FSAs, they save money (these contributions may slightly impact future Social Security earnings). Depending on employees' tax situations, they may save as much as 27%–40% or more in taxes on the  amount elected to set aside. That’s the advantage you receive when you participate in the FSA program.

MAKING CHANGES

Because you are restricted from changing your deductions after you enroll, it is important that you carefully plan your decision to participate in FSA Plans. Contribution amounts may only be changed in the event of a qualified status change as defined by the Internal Revenue Service (IRS). 


PLANNING YOUR CONTRIBUTIONS

The IRS requires that any unused amounts left in FSAs at the end of the plan year be forfeited. Therefore, employees should be sure they do not set aside amounts in excess of what they can claim during the plan year. Employees cannot “bank” or “carry over” unused amounts into the new plan year.  If participants are not reasonably certain that they will have the types of eligible expenses provided for under the program, then they should not enroll in FSA plans.  If, however, employees determine that they are going to have eligible expenses that must be paid anyway, why not pay them with before-tax dollars?


If, at the end of the year, employees have outstanding claims that were incurred during the calendar year, they have until April 15 to submit these expenses for reimbursement. After that date, any money left in accounts is automatically forfeited.


ELIGIBLE FSA HEALTH CARE EXPENSES

Employees can use their Health Care FSA to be reimbursed for health care expenses that are not paid or reimbursed by any other medical or dental insurance.  Refer to the FSA Summary Plan Description for details.  Examples include:

  • Medical expenses not covered by insurance.
  • Dental expenses not covered by insurance.
  • Copays, deductibles or coinsurance amounts.
  • Eye examinations (not covered by insurance), glasses, contact lenses, and supplies.
  • Other health expenses, such as weight loss or smoking cessation programs prescribed by a physician.
  • Over-the-counter drugs.

While IRS regulations have always permitted a Health Care FSA to reimburse the cost of prescription drugs not covered by health insurance plans or any copays for prescription drugs, the IRS now permits reimbursement for
over-the-counter drugs (OTC), but only to alleviate or mitigate a specific disease, sickness, or injury. The IRS continues to require that when submitting for reimbursement, one must provide a receipt with the name of the drug and the date purchased. The IRS ruling DOES NOT permit reimbursement of OTC medications purchased for cosmetic remedies, vitamins, dietary supplements, or other things of that nature that are beneficial to general good health and welfare. While this IRS ruling on OTC
medications appears to be very broad, it is likely to be refined over time; therefore, it is recommended that employees be conservative when determining the amount of OTC medications used to establish how much they wish to set aside for each calendar year. 

Note:

  • If you use the Health Care Account for these expenses, you cannot also take a tax deduction on your income tax return.
  • The premiums you pay for medical and dental coverage out of your paycheck are not eligible expenses.
  • Flexible Spending Accounts may not be used for a domestic partner unless the domestic partner is a tax qualified dependent in accordance with IRS rules.

ELIGIBLE FSA DEPENDENT DAY CARE EXPENSES (Not Health Care)

Employees can use their Dependent Day Care FSA to be reimbursed for child or dependent day care expenses. Examples include:

  • Expenses for dependent day care that enable employees (and their spouse) to work or to attend school.
  • Services inside or outside employees' homes.
  • Services in a dependent or child care center or nursery school.


Individuals who qualify for dependent day care services are dependent child(ren) under the age of 13 whom can be claimed as a dependent for tax purposes, or an adult dependent or spouse who normally spends at least 8 hours in the employee's home each day and who is physically or mentally incapable of caring for him or herself and earns less than $3,400 annually in 2007 (indexed each year), including any Social Security payments.

Note:  Employees cannot be reimbursed for paying one dependent (your teenager, for example) to care for another dependent.


DEPENDENT DAY CARE TAX CREDIT

Dependent Day Care FSA contributions cannot also be claimed as federal income tax deductions.  For most people, the Dependent Day Care FSA
will provide greater tax savings than the federal credit.


SUBMIT CLAIM FORMS FOR REIMBURSEMENTS

If employees choose not to use the new FSA Benefits Card, reimbursements can be obtained by completing a claim form, attaching appropriate receipts and returning to EBPA at the address listed on the claim form. Please refer to the reimbursement schedule for dates of reimbursements.


Please contact EBPA with questions regarding your FSA Account.

 

  

 

UMS questionsContact Benefits

The above is a brief summary of benefits offered by the University of Maine System. Detailed brochures/booklets are available online, at the local University Office of Human Resources, or at the System Office of Human Resources.

If you have a question about your benefits coverage, benefit deduction amounts or any other benefit related question, contact your Campus Benefits Office.  Be prepared to give your Employee ID number.

 

Last Updated:  June 22, 2009