COMMONLY ASKED QUESTIONS

1. How do Flexible Spending Account (FSA) plans save on taxes?

Every dollar that you deposit to an FSA is done on a pre-tax basis. Your employer will deduct the amount you elect directly from your "gross" wages. This means that FSA contributions are deducted before federal, FICA, and in most instances, state income taxes. If you are in a 28% tax bracket for example, you will save 28 cents for every dollar you contribute to your FSA account.

2. Will taxes be due on these FSA contributions at a later date?

No. Unlike 401(k) or 403(b) retirement plans in which contributions are tax deferred, contributions to an FSA are NOT subject to tax. Your W-2 form from your employer will properly notify the government of your participation in the plan.

3. How much may I contribute to my FSA account?

You may establish either a Health Care FSA, a Dependent Care FSA, or both, depending on your personal circumstances. Each FSA has a separate limit.

Health Care FSA — You may contribute up to the maximum amount set by your employer each year. This amount is in addition to any pre-tax contributions you make to your company’s group insurance program. (See your Summary Plan Description for the Maximum Health Care FSA Benefit at your Company.)

Dependent Care FSA — You may contribute up to the lesser of either $5,000 per year per family or the lowest paid spouse’s income.

4. How do I participate in an FSA plan?

In order to participate in an FSA plan, you will need to determine how much money, if any, you would like to contribute to the Health Care FSA, the Dependent Care FSA, or both. The IRS requires that you estimate your expenses before you actually incur them. As you will read later, it is important to estimate your future expenses carefully because unused money in your account at the end of the year is forfeited. This element of risk is essential to a qualified FSA plan. Therefore, it is best to limit your FSA contributions to only an amount which you are fairly certain to spend in the upcoming plan year.

You may want to examine prior-year records to determine what you have spent in the past to better predict the future.

Once you determine which FSA(s) suit(s) your particular needs and how much you wish to contribute, you must complete an enrollment form that authorizes your employer to deduct the appropriate amount from your paycheck. Ordinarily, you may only enter this plan annually during the plan’s “open enrollment period.” You should contact your employer for specific dates.

5. Can I change my contribution election during the plan year?

You may change your contribution election at the beginning of each plan year’s “open enrollment period.” Otherwise, you may only change your election during the Plan Year if you can demonstrate a “change in status.” Only the following events will be considered a valid change in status under Internal Revenue Service rules:

1. Change in legal marital status

2. Change in number of dependents

3. Change in employment status

4. Change in work schedule

5. Dependent satisfies or ceases to satisfy eligibility requirements

6. Change of residence or worksite

7. Judgement, Decree, or Order pertaining to child or spouse

8. Change in spouse’s status

Any change must satisfy a consistency requirement that the election change corresponds with the gain or loss of coverage.

6. How Do I Get Reimbursed From My FSA Plan?

As you incur qualified expenses, you may file a claim for reimbursement with IPG FLEX. IPG is a third party administrator who has been hired by your employer to adjudicate and process all reimbursement claims on behalf of your plan.

You must submit your claim using a IPG Claim Form.

All submitted claims must be accompanied by independent, third-party substantiation and mailed to IPG FLEX, 85 Washington St., Keene, NH 03431. All claims are processed daily and are paid on a weekly basis.

7. What Happens If I Do Not Spend All The Money In my Flexible Spending Account(s)?

The FSA program provides a valuable tax savings to those who choose to participate. It is very important, however, that you estimate your contributions carefully. The Internal Revenue Service requires that any unused funds in participant accounts at Plan Year-end be forfeited.

To alleviate some concern about forfeitures, IPG provides a ninety-(90) day grace period after the close of the plan year to submit all claims incurred in the prior year. For example, if your plan year ended on December 31 and you incurred an expense on December 26th, you would have until March 31st to submit a claim.

After the ninety-(90) day grace period expires, IPG closes all accounts for the prior plan year and returns any forfeitures to your employer. Unfortunately, your employer is prohibited by federal law to return these forfeitures to you.

8. Can I Transfer Unused Funds In My FSA To My Company’s Retirement Plan?

No. Funds earmarked for FSA plans may not be deferred into a retirement plan. Unused FSA money is forfeited as required by law.

9. If I Participate In Both FSA Plans, Can I Transfer Unused Money From One FSA Plan To Another And Avoid Forfeiture?

No. Health Care FSA plans and Dependent Care FSA plans must be maintained separately. Therefore, cross funding is prohibited.

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