Human Resources » Benefits Information Center » Flexible Spending Account

• General Information
• Medical Expenses That May Be Claimed And What Expenditures Are Eligible For Reimbursement Under NWHSU's Medical Flexible Spending Account
• Dependent Care Expenses That May Be Claimed And What Expenditures Are Eligible For Reimbursement Under NWHSU's Dependent Care Flexible Spending Account
• FAQs

General Information

Flexible Spending Accounts allow employees to make payroll deductions to a pre-tax account and use this money to pay for dependent care costs or medical / dental /vision expenses not covered by insurance. It also allows for certain insurance premiums to be automatically deducted from the employee's paycheck on a pre-tax basis. Employees must use this money during the current calendar year or they will lose it. Regular full time and regular part time employees (budgeted to work 20 or more hours a week) in a benefit eligible position become eligible to participate in the plan during open enrollment each calendar year and should see Human Resources for more detailed information.

Additional information regarding the Medical and Daycare Reimbursement Plan may be found in the Summary Plan Description which is available in Human Resources.

Medical Expenses That May Be Claimed And What Expenditures Are Eligible For Reimbursement Under NWHSU's Medical Flexible Spending Account

EMPLOYEE * The employee may deduct medical expenses paid for one self.

SPOUSE * The employee may include medical expenses paid for his/her spouse. The employee must have been married, and the medical expenses incurred during the Plan Year.

DEPENDENTS * A person whom you can claim as a dependent on your federal income tax return. See DEFINITIONS in your SPD.

In general, amounts paid for medical care (defined as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure of function of the body) are eligible for reimbursement. Examples of services that are eligible for reimbursement include the following:

Following are a few examples of health care expenses that you CANNOT include in figuring your medical expenses for reimbursement:

For more examples of reimbursable and non-reimbursable health care expenses refer to the IRS Publication 502, available in the Human Resources department. Please note, however, three key differences between Publication 502 and this plan. First, expenses under this plan are reimbursable based upon the date incurred, NOT the date paid. Second, health insurance premiums for the employee are NOT reimbursable under this plan. Third, while over-the-counter drugs are NOT deductible under Publication 502, they are reimbursable.

Dependent Care Expenses That May Be Claimed And What Expenditures Are Eligible For Reimbursement Under NWHSU's Dependent Care Flexible Spending Account

To be eligible for reimbursement, a dependent care expense must meet the following requirements:

• If you are a single parent, the care must be necessary in order for you to work.
• If you are married, the care must be necessary in order for you to work and for your spouse to work, to seek work, or to attend school full time.
• The amount to be reimbursed must not be greater than your annual earned income or your spouses' annual earned income, whichever is lower.

If the dependent is a child, the following rules apply:

• Only expenses incurred for the care of your child from birth through age 12 will be eligible.
• Care may be provided either inside or outside your home, but it may not be provided by anyone considered your dependent and for whom you can claim an exemption for income tax purposes.
• If care is provided by your child who is not considered a dependent for income tax purposes, such child must be age 19 or older by the end of the calendar year.
• If the care is provided by a facility that cares for more than six children, the facility must be licensed and must comply with all applicable state and local requirements.
• You must have legal custody of the child and they must regularly spend at least 8 hours per day in your home.

If the dependent is an adult, the following rules apply:

• The individual must be physically or mentally incapable of caring for himself/herself.
• The individual must be your spouse or a dependent for which you can claim as exemption (or could claim an exemption except the person had $3,000 or more of gross income).
• Care may be provided either inside or outside your home. However, expenses outside your home (such as a nursing home) are eligible only if the dependent regularly spends at least 8 hours per day in your home.

Examples of Dependent Care Expenses (assuming the expenses satisfy therequirements described on the above)

For more examples of reimbursable and non-reimbursable dependent care expenses refer to the Publication 503, available in the Human Resources department. Please note, however, that while Publication 503 refers to expenses paid during the year, your dependent care flexible spending account plan will only reimburse you for expenses incurred during the plan year. Also be aware that the "dollar limit" described in Publication 503 (i.e., $3,000 for one dependent and $6,000 for two or more dependents for tax years after 12/31/02 ) does not apply to your dependent care flexible spending account plan. Rather, the maximum reimbursable amount under the dependent care flexible spending account plan is $5,000 per calendar year, regardless of the number of dependents.

FAQs

Q: What is a Flexible Spending Account Program ("Flex Account")?

A: A Flex Account is an easy way to lower your taxes and increase your after tax income. With a Flex Account, you set aside part of the money you earn each year before taxes are calculated. Then, that money is paid back to you as reimbursement for health care and/or dependent care expenses that you incurred and have to pay out of your own pocket.

Q: How is that going to lower my taxes?

A: Payments are made to you from your Flex Account with no deductions for taxes. Since the money was deposited before taxes, and paid to you tax free, you reduce your taxable income, which in turn lowers your taxes for the year.

Q: Does this reduction of my taxable income affect any other company benefits?

A: The amounts payable under other benefit plans (such as life and long-term disability insurance, and Workers' Compensation Benefits) are based upon the definition of compensation in those plans. While these benefits are not normally affected by participation in this plan, you should check with Lisa Franczak @ Human Resources to be sure.

Q: What kinds of expenses qualify for a Flex Account?

A: You can establish two different types of separate Flex Accounts - one for health care expenses and the other for dependent care expenses. Generally, amounts paid for medical care (defined as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body), or any expense that qualifies for the federal dependent care tax credit will qualify for these two Flex Accounts.  

Health care insurance premiums are not eligible for reimbursement

Q: How do I make deposits to my Flex Account?

A: All deposits to Flex Accounts are through regular payroll deductions, taken out before taxes are withheld.

Q: How do I receive reimbursements from my Flex Account?

A: You must complete a Universal Claim Form and submit it to Administrative Resources Corporation (ARC). For each claim, you must indicate the person who provided the service, the date the service was provided, and the amount. You must also include third party documentation (copies of itemized receipts, statements, etc.) for each service.   

Q: How long will it take to get reimbursed when I submit claims?

A: Flex checks are issued according to the reimbursement schedule that is provided to you. Your reimbursement checks will be sent to your home address or you can choose to have your checks directly deposited. You can expect to receive the checks less than two (2) weeks after the reimbursement request deadline indicated on the reimbursement schedule.

Q: How much will I receive when I submit a claim?

A: By law, the Health Care Account and the Dependent Care Account work differently. For the Dependent Care Account, you will receive either the amount you submitted or the balance in your account, whichever is less. If you submit a claim for more than the balance in your account, the amount in excess of your balance will automatically be reimbursed as you make additional contributions. For the Health Care Account, you will receive the lesser of the amount you submitted or the amount you signed up for in your Health Account for the entire plan year, minus any previous Health Care reimbursements you received during the plan year.

Q: OK, so what's the catch?

A: Because of the substantial tax benefits involved, the IRS has established numerous rules that apply to Flex Accounts. A critical consideration is the fact that you must determine how much money you are going to deposit in your Flex Accounts for an entire year before the start of each year. This is an important decision for the following reasons:

Once you've committed an amount to your Flex Accounts, you cannot change these amounts during the plan year unless you experience a major change in your job or family status.

You cannot use a balance from a Health Care Account to pay for Dependent Care expenses, or vice versa.

Money allocated to a Flex Account for a plan year can only be used for expenses incurred during that plan year. Federal law requires that unused funds be forfeited at year end.

Q: What about claims incurred late in the year?

A: It is understood that sometimes when you incur expenses late in the year, it takes some time for those expenses to be processed. That's why you will be given an extension period after the close of each plan year in order to get all of your claims in for the preceding plan year. The length of the extension period will be specified in other materials provided to you.

Q: What happens to my Flex Account if my employment ends during the year?

A: You may continue to submit claims for eligible dependent care expenses to your Dependent Care Account for the remainder of the plan year regardless of whether such expenses were incurred before or after your date of termination. You may continue to submit claims to your Health Care Account for the remainder of the plan year for claims incurred prior to your date of termination. For medical claims incurred after date of termination you need to continue contributions through COBRA in order to use your Health Care Account.

Q: Do I have to sign up each year?

A: Yes. Your Flex Account elections automatically stop at the end of each plan year. You must sign up each plan year, even if you don't change your elections.

Q: When must I decide how much money to allocate to my Flex Accounts?

A: You must enroll online or submit your enrollment form, indicating your Flex Account elections for the coming plan year no later than the deadline established by Lisa Franczak @ Human Resources, which must be before the start of the new plan year.

Q: Will the Flex Accounts affect my ultimate Social Security Benefit?

A: Since your Flex Account deposits reduce the gross wages upon which your FICA taxes are paid, it is possible that the ultimate amount of Social Security payment you receive could be affected but any such impact is normally minimal. Please review the form entitled "Percentage of Primary Social Security Benefit "Lost" As A Result of Participating in Flex" for more information.

Q: Am I required to use a Flex Account?

A: No. Your participation in this benefit program is completely voluntary. But because they result in lower taxes, nearly everyone can save money with a Flex Account.

Q: Can I request reimbursement of health care expenses and also deduct those same expenses on my income tax return?

A: No. You can use the Flex Account or the itemized deduction, but not both for the same expense.

Q: Can I request reimbursement of Dependent Care expenses and use the federal income tax credit for the same expenses?

A: If you use the federal income tax credit, your qualified expenses must be reduced by any Dependent Care reimbursement from a Flex Account. You should consult your personal tax advisor to determine the best approach for you.

Q: How do I access my account information?

A: You can access your account information by logging on to ARC website at www.arcbenefitaccess.com. On the website you will be able to view your claims, your payments, and your account balance. Claim forms can also be printed from this site. If you wish to speak to a ARC Representative you can call ARC at 1-866-898-4371 between 8:00 and 5:00 Central Time.

Q: How can I sign up?

A: Simple. Just complete the enrollment form (called the "Employee Flexible Benefit Cafeteria Plan Program Election/Change Form") and turn it in to Lisa Franczak @ Human Resources. Remember, you must enroll by the enrollment deadline in order to be accepted for the plan year.

Please Note:
These questions and answers represent a brief summary of Flexible Spending Account program rules. They are not intended to provide legal or tax advice. If any statement in this document conflicts with the provisions of your formal plan document, the formal plan document will be considered to be correct.

Your Flexible Spending Account Plan is administered by:
Administrative Resources Corporation
PO Box 548
Anoka, MN 55303-0548
Phone: 866-898-4371
Fax: 763-772-1370
Email: vebaclaims@arcadministration.com