What is a Flexible Spending Account?
A Flexible Spending Account (FSA) lets you pay for eligible expenses with tax-free money. You contribute to an FSA with pretax money from your paycheck. This, in turn, may help lower your taxable income. There are three types of FSAs – health care FSA, dependent care FSA and Limited Purpose FSA.
Health Care FSA
A health care FSA helps you pay for eligible out-of-pocket medical, dental, vision, hearing and prescription drug expenses for you, your spouse and your tax dependents. Out-of-pocket expenses are those not covered by insurance or any other plan. These include deductibles, coinsurance, co-pays, and over-the-counter (OTC) items. Keep in mind; you’ll need a prescription for an OTC drug or medicine to be considered an eligible expense. OTC items like bandages, hot/cold packs, thermometers, first aid kits or home diagnostic tests are eligible without a prescription.
Dependent Care FSA
A dependent care FSA helps you pay for eligible child or adult day care expenses. These include day care, before- and after-school programs, nursery school or preschool, summer day camp and adult day care. These expenses are so that you and, if married, your spouse can work, look for work or attend school full-time. The care must be for your child under age 13, or for a spouse or dependent who isn’t able to take care of him or herself and who lives with you at least half of the year.
Limited Purpose FSA
A Limited Purpose FSA generally helps you pay for eligible dental and vision expenses. Eligible expenses may also include prescriptions and OTC items for dental and vision care. A Limited Purpose FSA may also cover other health care expenses after you meet your deductible. You can enroll in a Limited Purpose FSA if you have a Health Savings Account (HSA). A Limited Purpose FSA can help you save your HSA funds for the future.
What is the benefit of enrolling in an FSA?
The main benefit of an FSA is that the money you contribute is deducted from your pay on a pretax basis. Therefore, your taxable income is less. So, when you use your FSA funds, it’s like you’re saving about 30 cents on every dollar you spend.
How much money can I expect to save in taxes with an FSA?
When you contribute to an FSA, that money is deducted from your pay on a pretax basis. This means your contribution comes out of your paycheck before Federal, Social Security and in some cases, state taxes are deducted from your pay. Generally, Federal taxes range from 15% to 28% and Social Security taxes is currently 7.65% of your pay. So, you could save about 30 cents on every dollar you spend on eligible expenses.
Example: You have an annual salary of $60,000 and you decide to contribute $2,500 to a health care FSA and $2,000 to a dependent care FSA. With your pretax FSA contributions, you could save about $1,020. Here’s how it works.
||With an FSA
||Without an FSA
|Health Care FSA contribution
|Dependent Care FSA contribution
|Taxable income after FSA contributions
|Estimated taxes withheld (22.65%)*
|Money spent after-tax on health care expenses
|Money spent after-tax on dependent care expenses
*This example is for illustrative purposes only. It’s based on 7.65% FICA and 15% tax bracket.
It’s quite simple really. You contribute, spend and save.
- Contribute - Estimate the amount you expect to spend during the plan year on eligible out-of-pocket expenses. Out-of-pocket expenses are those not covered by insurance or any other plan. Select the FSA (health care, dependent care, and/or Limited Purpose) that’s right for you and choose how much you want to contribute. Your employer will deduct that amount from your paycheck in equal amounts each pay period. These deductions are pretax. Each FSA has its own contribution limit, which is set by the Internal Revenue Service (IRS). Below are the current limits.
These limits are subject to change annually. Your employer may set a lower limit. You should check your plan to know how much you can contribute.
- Health Care FSA contribution limit - $2,650
- Limited Purpose FSA contribution limit - $2,650
- Dependent Care FSA contribution limit -$5,000
- Spend - Once funds are in your FSA, you can use the PayFlex Card®, your account debit card, to pay for your eligible expenses, if offered by your employer. Or you can simply pay out of pocket and then submit a claim to pay yourself back. You can do this online, through the PayFlex Mobile® app, or complete a paper claim form and fax or mail it to us.
- Save - Your FSA contributions are tax-free. So when you use your FSA funds on eligible expenses, you end up saving about 30 cents on every dollar you spend.
What does it mean when a Limited Purpose FSA has a pre- and post-deductible phase?
Some employers offer a Limited Purpose FSA with two phases – pre-deductible and post-deductible.
Pre-deductible – Before you meet your health plan deductible, you can use your Limited Purpose FSA for eligible dental and vision expenses. This phase may also include eligible prescriptions and over-the-counter items (OTC) for dental and vision care.
Post-deductible – Once you meet your health plan deductible, you’ll need to complete the Post-Deductible FSA Expense Reimbursement Certification Form. Then send to PayFlex. Go to Documents & Forms to download it. After we receive your completed form, you can use your funds to pay for all eligible health care expenses.
You should confirm your plan details with your employer.
Is there a maximum that I can contribute to a health care FSA?
Yes. For 2018, the health care FSA contribution limit is $2,650. This limit is for each FSA participant. This means, if you and your spouse are eligible to participate in a health care FSA, you may each contribute to your own FSA, up to this limit. Employers may set a lower limit, so you should check your plan to know how much you can contribute.
How do I use the money in my FSA?
Once funds are in your FSA, you can use the PayFlex Card®, your account debit card, to pay for your eligible expenses, if offered by your employer. Or you can simply pay with cash, check or credit card, and then submit a claim to pay yourself back. You can do this online, through the PayFlex Mobile®, or complete a paper claim form and fax or mail it to us.
What does the term “incurred” mean?
The IRS considers an expense to be “incurred” at the time you receive the care, service or supply. It’s not when you’re billed or pay for the expense.
You enrolled in a health care and dependent care FSA that’s effective January 1 through December 31 of this year. Eligible expenses that you incur during this period can be reimbursed.
- You received health care services in December of last year. You paid for those services in February of this year. This expense can’t be reimbursed because you incurred the expense before the start of the FSA plan year.
- You had dental work done in January of this year. You prepaid for the work last December. Though you paid for the work last year, you receive the dental treatment this year. This means the expense can be reimbursed from your FSA.
- You paid for summer day camp in March. Camp begins July 15 and ends July 22. The expense is considered “incurred” on July 22. This means you can be reimbursed from your dependent care FSA for the cost of camp after July 22.
How do I file an FSA claim?
After you incur an eligible expense, you can:
- Submit a claim online. You can upload or fax your documentation to us.
- Submit a claim using the PayFlex Mobile® app. You can download it for free* from your mobile app store. You’ll use the same username and password that you use for this website.
- Complete a paper claim form and mail or fax it with your documentation. You can find this form in Documents & Forms.
*Standard text messaging and other rates from your wireless carrier still apply.
What do I need to send with my FSA claim?
It depends on your expense type.
- If your expense went through your medical or dental plan, you’ll need to send an Explanation of Benefits (EOB) from your plan. This is the best form of documentation.
- If your expense didn’t go through your medical or dental plan, you can send an itemized receipt or statement for the expense. It must show:
- Date of purchase or service
- Amount you were required to pay
- Description of the item or service
- Name of the merchant or provider
- If the claim is for an OTC drug or medicine, you must also include a written prescription from your doctor
- For prescriptions, send your detailed receipt that includes the pharmacy name, patient name, prescription name, date the prescription was filled, and amount you paid.
- For dependent care expenses, the dependent care provider must sign the claim form or provide an itemized receipt. It must include the date(s) of service.
Note: If you don’t send an EOB, itemized receipt or statement with your claim, we’ll deny it. We can’t accept a cancelled check, credit card receipt, or billing statement that shows “previous balance,” “balance forward,” “estimated,” “filed,” or “pending insurance.”
Where can I view the documents I uploaded for my claim?
After you login, go to Documents & Forms. Select My Documents. To view your uploaded documents, go to the drop down and select Express Claim Document.
If my spouse and I each have an FSA, can we claim each other's expenses?
Yes. However, you can’t claim the same expense for both accounts. In other words, you can’t “double-dip.” If you claim your spouse’s expenses on your FSA then your spouse can’t claim those same expenses on his or her FSA. If your spouse claims your expenses under his or her FSA, then you can’t also claim them under your FSA.
I received a bill for an estimated amount. Should I pay this amount?
No. When you receive a bill for an estimated amount, that means that the amount you’ll actually owe is unknown. You should wait until your plan pays the claim and determines how much you owe. Your plan will send you an EOB or statement showing the amount you owe. Once you know how much you have to pay for the claim, then you can use your PayFlex Card to make the payment.
What does overpayment status mean?
An overpayment generally occurs when you pay for an expense with your PayFlex Card® and the information we have doesn’t support the amount you paid.
Example: You used your card to pay for a dental bill. The amount that you paid is more than what your dental plan shows that you owe. When you pay more than you should have paid, the difference is an overpayment. This will put your FSA into an overpayment status. Overpayment status can also happen when you don’t respond to a request for documentation or if your expense is considered ineligible. When your account is overpaid, we may have to suspend your PayFlex Card. This means that you won’t be able to use the card for that account. If you have other accounts on the card, the card will continue to work for those accounts. For your card to be fully active again, you can do one of the following:
- Send us the documentation that shows your expense is eligible.
- Send documentation for another eligible expense that hasn’t been reimbursed
- Send us a check for the overpayment amount.
How do I know if my account is in overpayment status?
If your FSA is overpaid, we’ll send you an Explanation of Payment (EOP). When you log in to your account, you’ll see an alert message. It will appear under Alerts on My Dashboard. If you signed up to receive EOPs by email, we’ll email it to you. The EOP will explain the overpayment. If you didn’t sign up to receive EOPs by email, we’ll mail the EOP to you. We store all documents online, so you can view and/or download the EOP at any time.
- View your PayFlex EOP online
You can view the EOP online. You can also download it. After logging in, go to My Dashboard. On the left side of the screen, select My Documents. From the drop down menu, select Coupon with EOP Report. If your account is overpaid, you’ll see the EOP that we sent to you.
- Sign up for electronic account notifications
To receive e-mails about your account, you’ll need to sign up for electronic account notifications. After logging in, go to your account settings. Click on the notifications link. Then, follow the online instructions.
Note: If your account is overpaid, you won’t be able to use your PayFlex Card for that account.
What should I do if my account is in overpayment status?
If your FSA is overpaid, you must do one of the following:
- If the claim that caused the overpayment has gone through your medical or dental plan, you should have received an Explanation of Benefits (EOB). Fax, mail or upload that EOB along with a copy of the Explanation of Payment (EOP) notice. The EOB will show the date of service, a description of the service and the amount you have to pay for the claim. This will show us if the amount in question was for an eligible expense.
- If the EOB shows that you paid more than you should have, you can substitute another eligible expense for the overpayment amount. Fax, mail or upload the EOB along with a completed claim form for that other expense. If you don’t have an EOB, you can use an itemized receipt. The receipt must show the date of purchase or service; the amount you’re required to pay; a description of the item or service; and the name of the merchant or provider. You must have incurred this expense in the same plan year. The amount of this expense would have to be equal to or greater than the overpayment amount. You must not have already received reimbursement for this expense.
- If you don’t have another expense to cover the overpayment, you’ll have to pay back your FSA. You can mail a check for the amount of the overpayment. You can find our mailing address on the Contact Us page. Make the check payable to PayFlex Systems USA, Inc. Please don’t send cash.
Can I change my election during the plan year?
Your FSA election remains in place for the plan year. This is an IRS rule. The only way to change your FSA election during the plan year is if you have a status change event and as a result of that event, it’s necessary for you to change your election. Your employer’s plan determines which status change events are allowed. Below are some examples.
- Change in legal marital status (marriage, divorce, legal separation, annulment, death of a spouse)
- Change in number of tax dependents (birth, adoption, death)
- Change in employment status that affects benefit eligibility
- Dependent becomes or is no longer eligible under the plan (reaches limiting age, gains or loses student status)
- Change in residence that affects eligibility
A dependent care FSA has additional status change events. For example, if you change dependent care providers, you may change your contribution amount. A change in your provider also includes going from having a dependent care provider to not having one. If your dependent care provider increases their cost and the provider is not a relative, you may make an election change.
Generally, you have 30 calendar days from the date of your status change to change your election. You’ll need to contact your Human Resources or Benefits Department to change your election.
How do I change my election?
You’ll need to contact your Human Resources or Benefits Department to change your election. You may have to complete a form and provide supporting documentation. Remember, the only way to change your FSA election during the plan year is if you have a status change event. Generally, you have 30 days from the date of your status change to change your election.
What happens if I have funds left in my FSA at the end of the plan year?
Generally, funds left in an FSA at the end of the year are forfeited. This is the FSA “use-it-or-lose-it” rule. However, your plan may have a “grace period” or “carryover” feature, which can help reduce forfeitures.
If your FSA has a grace period, you have an additional two months and 15 days after the end of your plan year to spend your FSA funds.
If your FSA includes the carryover feature, you may be able to carry over up to $500 in unused funds to the next plan year. Your employer sets your carryover amount.
If your FSA doesn’t have a grace period or the carryover feature, you may have a run out period. This gives you more time to submit claims for eligible expenses that you incurred during the plan year. Any funds left in your FSA after the run out period will be forfeited.
A grace period extends the time that you can incur eligible expenses. It can extend your FSA plan year for up to two months and 15 days. Your employer can choose whether to offer a grace period with your plan.
Example: You have an FSA and the plan year is January 1 through December 31. This means that you typically have to incur expenses during this time for the FSA to reimburse you. However, if your FSA has a grace period, then you would have until March 15 of the next year to incur eligible expenses. This period of January 1 through March 15 of the next year is the grace period. If you still have funds in the FSA during the grace period, the FSA will reimburse you for eligible expenses that you incur. You just need to make sure to submit your claims by the end of your run out period. Your employer determines this date.
Do I automatically have a grace period?
No. Your employer can choose to offer it as part of the plan. Please check your plan description.
How does PayFlex pay my grace period expenses?
When you incur an eligible expense during the grace period and submit a claim, we’ll first look to your prior year FSA. If you have funds available, we’ll use those funds to pay the claim. Once you use the funds in the prior year FSA, we’ll pay the claim from your current year FSA. If you didn’t re-enroll in the FSA, then we would pay the claim, up to the balance in your prior year FSA.
What if I still have money in my FSA after the end of the grace period?
Your employer may offer a run out period that ends after the grace period. You’ll want to check your plan documents for your run out period. Any funds left in your FSA at the end of the run out period are forfeited. This is the FSA “use-it-or-lose-it” rule.
How does the grace period affect my enrollment for the new plan year?
When your FSA has a grace period, you can still enroll in the FSA for the next year. When you incur an eligible expense during the grace period, we’ll first check for funds in your prior year FSA. If you have funds available, we’ll use those funds to reimburse you. Once you use the funds in the prior year FSA, we’ll reimburse you from your current year FSA.
When planning for the next plan year, you need to take into account any funds that you may have left in the FSA during the grace period. This will help you to plan your FSA election for the next plan year. If you’re planning to enroll in a Health Savings Account (HSA) for the next plan year, you should check your plan to confirm if the FSA grace period may affect your HSA eligibility.
What is a run out period?
A run out period is the additional time you have to submit eligible claims after the end of the plan year. It’s usually 90 days. You should check your plan documents for your run out period.
Example: Your FSA plan year is January 1 through December 31. With a 90-day run out period, you would have until March 31 of the next year to submit claims. These claims must be for eligible expenses that you incurred during the plan year.
How does a grace period differ from a run out period?
A run out period is the time you have to submit claims after the end of the plan year. It’s usually 90 days.
Example: Your FSA plan year is January 1 through December 31. With a 90-day run out period, you would have until March 31 of the next year to submit your claims. Note: You must have incurred these expenses during the plan year. Check your plan documents for your run out period.
The grace period gives you more time to incur eligible expenses. When you incur expenses during the grace period, you can receive reimbursement with funds left from the prior year FSA. With a plan year of January 1 through December 31, the grace period lets you incur expenses through March 15 of the next year. See your plan documents for information.
The carryover is a feature that your employer may offer with your FSA plan. It lets you “carry over” a limited amount of unused health care FSA funds to the next plan year. The carryover limit is $500. However, your plan may set a lower limit. Check your plan to see if your FSA has the carryover feature.
Do I automatically have the carryover feature in my plan?
Not all plans offer carryover. If your FSA has a grace period, it can’t also have the carryover feature. Check your plan to see if your FSA has the carryover feature.
My FSA has the carryover feature. How much of my FSA funds can I carry over to the next plan year?
It depends on your plan. The most you can carry over is $500. Your plan may set a lower limit for the carryover. You should confirm your carryover amount with your employer.
My FSA has the carryover feature. Does the carryover change how much I can contribute to a health care FSA or Limited Purpose FSA?
No. You can still contribute up to the IRS limit of $2,650 each plan year. However, your plan may have a lower limit, so you should check your plan to see how much you can contribute. If you have a carryover amount, it will be added to your FSA election amount.
Will my health care FSA or Limited Purpose FSA funds carry over each year?
That depends on what your FSA plan allows. Check your plan to see if your FSA has the carryover feature. Your plan will also determine how much you can carry over.
My employer offers the $500 carryover feature for my FSA. What happens if I have more than $500 in my FSA at the end of the plan year?
You can only carry over up to the $500 limit. If you have more than $500 in your FSA, you can still submit claims through the end of your plan’s run out period for eligible expenses that you incurred during the plan year. If you still have more than the carryover amount in your FSA after your run out period, the excess amount will be forfeited.
Example #1: Your plan has the $500 carryover feature. You have $750 in your FSA on December 31. You submit a claim for $250, which is approved. This leaves a balance of $500 in your FSA. You can carry over this balance to the next plan year.
Example #2: You have $750 in your FSA on December 31 and you don’t have any more claims to submit. You can carry over $500 into the next plan year. You’ll lose (“forfeit”) the remaining $250.
My FSA has the carryover feature. Does my FSA still have a grace period?
No. A health care FSA can have a carryover or a grace period, but not both.
What happens if my health care FSA has the carryover feature and I want to enroll in a Health Savings Account (HSA) in the new plan year?
You can’t have a health care FSA and an HSA at the same time. If you have a health care FSA this year and plan to enroll in an HSA next year, you may be able to carry over your health care FSA dollars into a Limited Purpose FSA. If a Limited Purpose FSA isn’t an option, you may be able to waive the carryover for your health care FSA. When you enroll in your benefits for next year, check your plan options. This can help you avoid losing your funds and make sure you are eligible for the HSA.
Can I waive the carryover feature for my FSA?
If your plan allows it, you can waive the carryover feature for your FSA. When you enroll in your benefits, you should ask if you have the option to waive the carryover.
Does the carryover feature apply to dependent care FSAs?
No. The carryover feature doesn’t apply to dependent care FSAs.
What happens to my FSA if I leave my company?
It depends on your plan. Your FSA coverage may end on your last day of work or it may end at the end of that month. You may still be able to submit claims for eligible expenses that you incurred during the time you had coverage. Your employer will let you know how and when to submit claims. You may also be eligible to elect COBRA coverage for your FSA.
If you have a dependent care FSA, your plan determines how you can use the funds you have left in your account. One option is to continue to incur eligible expenses and submit claims until you spend all of your FSA funds. Another option is that you submit claims for eligible expenses you incurred before your employment ends.
You should contact your Human Resources or Benefits Department for more information.
Do I have to enroll in my employer’s medical or dental plan to participate in the health care FSA?
Your plan will determine this. Although your employer can require that you take the medical or dental plan in order to have a health care FSA, not all plans are designed this way. You should check your plan documents to confirm this.
I have a health care FSA. If I’m contributing throughout the year, how much will my FSA cover for a claim in the beginning of the year?
With a health care FSA, your full election amount is available on the first day of the plan year. This means that you can use your entire election on day one of the plan year.
Example: You elect to contribute $1,200 for the plan year. In January, you have contributed $100. ($100 x 12 months = $1,200) In that same month, you receive health care services that cost you $1,000. At this point, you haven’t submitted any other claims. This means, you’ll receive the full amount of the claim from your FSA. You don’t have to wait until you actually contribute this amount to your health care FSA.
What expenses are eligible under a health care FSA?
Generally, expenses that are medically necessary are considered eligible. This means if you need the service or product for your health it may be an eligible expense. This includes co-payments, co-insurance and deductibles. You can view a list of common eligible expenses on this website. You can also find more information at www.irs.gov. Refer to IRS Publications 969 and 502. You should also check your plan documents for eligible expenses under your plan.
Can I use my FSA to pay for over-the-counter (OTC) items, supplies, drugs and medicines?
Yes. However, there are different rules on how you can use your FSA to pay OTC items, supplies, drugs and medicines. You can use your PayFlex Card® to pay for OTC items and supplies. These include items such as bandages, hot/cold packs, thermometers, first aid kits, home diagnostic tests and diabetic supplies. You can also pay for these items out of pocket and then submit a claim to us.
For OTC drugs and medicines, you can’t use your PayFlex Card. First, you’ll need a written prescription from your doctor. Then you’ll have to pay for the OTC drug or medicine out of pocket and then submit a claim to us. You’ll need to include your written prescription and the detailed receipt with your claim.
How does the FSA reimburse orthodontia?
The IRS knows that orthodontia is different from other types of health care. With orthodontia, what you need to submit depends on what’s allowable under your plan and your payment plan. Before you submit anything to PayFlex, your orthodontia expenses need to go through your dental insurance. Below are the reimbursement options.
- Coupon Payment Option – If your plan allows, this option works best when your orthodontist gives you a coupon book or a monthly statement of expenses. You must submit the coupon or itemized statement with a completed claim form. You’ll do this as the service is provided.
- Monthly Payment Option (Auto Pay) – If your plan allows, you can set up Auto Pay for recurring monthly reimbursements. To do this you must include a copy of the orthodontia contract or agreement* with your first claim form. Make sure to check the box to set up automatic monthly reimbursements. Once we process the first claim, we’ll automatically reimburse you each month, based on your agreement. You don’t have to submit a claim form for each visit. We use the agreement to set the monthly amount that you’ll receive from your FSA. This automatic reimbursement will be in place for the length of the agreement. You just need to be enrolled in the FSA and have funds available. You’ll receive the monthly payments on or about the due date stated in your agreement.
*You’ll need to get a payment contract or agreement from your orthodontist. That agreement must include:
- Patient name
- Date that the service begins
- Duration or length of treatment
- Cost of the initial banding work
- Amount you must pay each month
If you use Auto Pay, you can’t use your PayFlex Card® for these expenses.
- Total Payment Option – If your plan offers this option, you can receive reimbursement for the full amount if that’s what you paid. We’ll reimburse you up to your FSA election amount, minus any previous FSA payments. If you have sent in other claims, make sure to check your FSA balance. You can do this online. This will let you know how much you have available.
With this option, you must include a copy of your paid receipt. You also need to include an itemized statement. This must include:
- Provider name
- Patient name
- Date treatment started
- Amount you paid
- Amount insurance will pay
You can only submit the total payment once for reimbursement.
I have Auto Pay for orthodontia but I’m not re-enrolling in the health care FSA. Can I get reimbursed during the grace period?
If your plan has a grace period, Auto Pay will continue to pay with funds that you have left in your FSA. This will happen for the first two months of the grace period. The third month will have no payment activity. Payment for Auto Pay is only for a full month. Since the grace period is two and a half months, the third month is not a full month for payment. If you didn’t re-enroll in the FSA, you won’t receive payments after this.
May I submit eligible health care expenses incurred by my spouse and dependents?
Yes. You can be reimbursed for eligible health care expenses that you, your spouse and eligible tax dependents incur during the plan year. This is true even if you don’t cover your spouse and dependents on your health plan.
Why do I have to show that an expense was medically necessary?
There are some products or services that aren’t always used for medical care. Some products may be used for general health reasons. Two examples are massage therapy and weight loss programs. If you use the product or service to treat a medical condition, you’ll need to show that. This is “evidence of medical necessity.” You can submit a prescription or letter from your health care provider. You can also have your health care provider complete and sign a Letter of Medical Necessity form. You can find this form in the Documents & Forms.
Can I pay my spouse’s health insurance premiums through my health care FSA?
No. Premiums aren’t an eligible expense for the health care FSA. You can view a list of common eligible expenses on this website. For more information, visit www.irs.gov. There you can view IRS Publications 969 and 502.
How does the dependent care FSA work?
When you enroll in a dependent care FSA, you set aside money from your paycheck on a pretax basis for eligible child and adult care expenses. Your expenses must be work-related. This means that your dependents need the care so that you can work. During the plan year, you’ll pay for your eligible dependent care expenses out of pocket. Once your dependent receives the care, you can submit a claim to pay yourself back from your FSA. You can do this online, through the PayFlex Mobile® app, or complete a paper claim and fax or mail it to us.
A dependent care FSA does have a few rules that you should know:
- If you’re married, both you and your spouse must be working. If just one of you is working, the other spouse must be actively looking for work; be a full-time student; or be unable to care for him or herself. Unpaid or minimally paid volunteer work doesn’t qualify as employment.
- The expenses must be for a qualifying person. A qualifying person is your dependent child who is younger than age 13 or a spouse or tax dependent who is not physically or mentally able to care for him or herself.
- You must receive these services from an eligible care provider. This can include a licensed childcare facility, an adult day care center and a summer day camp. Check your plan for further details.
- The care provider can’t be your tax dependent, your child who is under age 19 at the end of the year, a person who was your spouse any time during the year or the parent of your qualifying person.
- The expenses must be for services you received during the plan year and while the qualifying person regularly spends at least 8 hours each day in your home.
- The expenses can’t be for future services. For example, you pre-pay your child’s summer day camp. You can’t receive reimbursement until after your child attends the camp.
- The Internal Revenue Service (IRS) annual contribution limit is $5,000. However, reimbursement is limited to the lesser of your earned income for the year or the cost of care, up to $5,000. If you’re married, this limit is based on the income of the lower paid spouse and whether you file joint or separate tax returns.
- Even if you have a dependent care FSA, you must file Form 2441, Child and Dependent Care Expenses, with your federal tax return.
What does “work-related” mean?
Work-related means that you pay for dependent care so that you can work and earn an income. If you’re married, your spouse must also work. If just one of you is working, then the other spouse must be actively looking for work; be a full-time student; or be unable to care for him or herself. Unpaid or minimally paid volunteer work doesn’t qualify. For the IRS definition of work-related expenses, you can refer to IRS Publication 503 at www.irs.gov.
What expenses are eligible under a dependent care FSA?
You can view a list of common eligible expenses on this website. You can also find more information in IRS Publication 503 at www.irs.gov.
How much can I contribute to a dependent care FSA?
Typically, the most that you can contribute to a dependent care FSA is $5,000. This is per household per year. This means that if you and your spouse each have a dependent care FSA, you’re limited to $5,000 between you. Keep in mind, this amount may be less based on earned income and tax filing status. For example, if you’re married and filing taxes separately, your individual contribution limit is $2,500.
When can I submit a claim for my dependent care expenses?
You can submit a claim at any time during the plan year. However, you can only receive reimbursement after the dates of service.
Example: You pre-pay your dependent care provider every Friday for the following week. To receive reimbursement, you must wait until the end of the next week to submit your claim.
What do I need to send with my dependent care claim?
When you submit a claim, we need the detail for that expense. You only need to send one of the following with your claim form:
- A completed Dependent Care FSA Claim form that your provider signs. The form must include dates of service, name of dependent, cost of care, and the provider’s name. You don’t need to include documentation if your dependent care provider signed the form.
- An itemized statement that includes the dates of service, name of dependent, cost of care, and the provider’s name.
I have a dependent care FSA. If I contribute throughout the year, how much will my FSA cover for a claim in the beginning of the year?
The dependent care FSA can only reimburse up to the balance in the account.
Example: You elect to contribute $2,400 to a dependent care FSA. In January, $200 is deducted from your paycheck and deposited into your FSA. At that point, you have $200 available for reimbursement of eligible expenses.
I have a dependent care expense that I want to submit for reimbursement. However, I don’t have enough in my FSA right now to cover the full amount. How should I submit this claim?
You can submit a claim for the full amount. The FSA will reimburse you up to the balance in your account. You’ll only receive reimbursement for the remaining amount if additional contributions are made to your FSA.
I pay tuition for my child’s kindergarten. Is this an eligible dependent care expense?
No. The cost of tuition is not an eligible expense. This includes kindergarten, as well as first grade and higher.
I just had a baby and will be home for six weeks. I’m taking my older child to day care during this time. Will these day care expenses be eligible?
This is not an eligible expense. The dependent care must be provided so you can work. Since you’re not working during this period, the day care expense is not reimbursable.
I pay my neighbor to watch my 13-year-old after school. Is this an eligible expense?
No. Care must be for a qualifying person. A qualifying person includes your dependent child who is younger than age 13. This would only be an eligible expense if your child wasn’t able to care for him or herself.
My 16-year-old daughter cares for my 8-year-old son after school. Will my dependent care FSA reimburse me for the amount I pay my daughter?
No. This is not an eligible expense. If the care provider is your child, they can’t be your tax dependent. They must also be 19 or older by the end of the year.
If I participate in the dependent care FSA, do I need to report this on my income tax return?
Yes. When you have a dependent care FSA, you must include this information as part of your tax return. You’ll do this on IRS Form 2441: Child and Dependent Care Expenses. For more information, see instructions for IRS Form 2441 at www.irs.gov. Your employer will also list your contributions on your Form W-2. If you have questions, you should speak with your tax adviser.
If I have the dependent care FSA, can I also use the Child and Dependent Care Tax Credit?
Generally, if you have a dependent care FSA you can’t also take the full tax credit. You should talk to your tax adviser to learn which option is best for you.