Benefits: Health Care Flexible Spending Account
Date to be reviewed:
|Director of Human Resources
Wheeling Jesuit University has provided an IRS 125 Plan Flexible Spending Arrangement (FSA), otherwise known as "cafeteria plan," for all benefits eligible employees to use to pay for out of pocket expenses with pre-tax dollars for approved health care and dependent care services.
2.0 POLICY STATEMENT
2.1 Policy Statement
The University will provide all full-time and part-time, benefits-eligible, employees' access to an IRS Section 125 Health and Dependent Care Flexible Spending Account ("flex spending account").
- "Section 125 Plan" - A plan established per IRS guidelines; a pre-tax payroll deduction, approved by the employee, authorizing the University to deduct, from the employee's pay check, amounts the employee must pay out of pocket for uncovered medical, dental, vision and dependent care expenses incurred within the benefit year.
- "Benefit Year" - The University's self-defined benefit year begins on March 1 and ends on the last day of February in the subsequent calendar year.
- "Benefits-Eligible" - Full-time employees (Faculty, Staff, and Administration) are provided, as a part of their overall package, access to health and welfare benefits for themselves and for qualified dependents. Participation is optional with costs being shared by both the University and the employee through payroll deductions as premium contributions. Full time is defined in the policy "Types of University Employment."
- "Dependent Care Flex Spending" - A Dependent Care Flexible Spending Account (FSA) allows you to set aside money on a pre-tax basis to reimburse yourself for eligible dependent care expenses. You can be reimbursed for the cost of services provided for: your qualifying children under the age of 13 or a qualifying relative who is physically or mentally unable to care for him or herself and who lives with you and who you claim as a dependent on your Federal tax return.
- "Health Care Flex Spending" - A Health Care Flexible Spending Account (FSA) allows you to set aside money on a pre-tax basis to reimburse yourself for qualified expenses incurred by you, your spouse or eligible dependents, that are not covered, or are partially covered, by your medical, dental and vision insurance plans during the course of a plan year.
2.3 Authorized Amounts
- Effective January 1, 2013, Internal Revenue Code Section 125(i) was amended by the Patient Protection and Affordable Care Act of 2010 for purposes of limiting employee contributions to flexible spending accounts to a total of $2,500.00 per plan year, per plan participant. Therefore, employees may authorize the University to deduct from their pay check up to $2500 annually for uncovered health care expenses (medical, dental or vision expenses not covered by insurance).
- The maximum amount can contribute to the Dependent Care FSA per year, in accordance with IRS regulations, is $5,000 for a married couple filing taxes jointly or a single head of household; or $2,500 each for a married couple filing separate tax returns. Your contributions will be deducted from your paycheck on a pretax basis throughout the year and credited to your account on a monthly basis. You are allowed to be reimbursed only up to what you have had deducted from your paycheck at that point, but requests in excess of this amount will be reimbursed as additional deductions are taken from your paycheck. Your contributions may be limited if you are considered a highly compensated employee.
- Due to nondiscrimination regulations imposed by the IRS, the maximum contribution may be decreased for employees considered “highly compensated” (as determined by the IRS) in any plan year. Generally, if you earn more than the amount used by the IRS to designate a highly compensated employee in the immediately previous taxable year, you may not be able to contribute the maximum amount to your Dependent Care FSA. (Note: Health Care Flexible Spending Accounts do not have such a limitation).
- All authorized deductions are made pre-tax and deposited into an account in the employee's name, lowering the employee's taxable income by the amount deducted.
You are eligible to participate in a Flexible Spending Account (FSA) on the first day of the month following completion of one month employment. To participate in an FSA, you must enroll within 30 days of your date of hire. If you do not elect to participate in an FSA during your new hire period, the IRS requires that you wait until the next Open Enrollment period, unless you have a qualifying status change (See HIPAA Notice of Special Enrollment Rights). When you enroll during Open Enrollment, participation begins on March 1st (the beginning of the benefit year). Health Care Flexible Spending Account elections do not carry over from year to year - you must open a new account each year during Open Enrollment if you wish to continue to participate. If you do not elect to participate during Open n Enrollment, you will not have an account in the following year and you will not be able to elect to participate until the next Open Enrollment, unless you have a qualifying status change.
You will no longer be eligible to participate in the FSA if you:
If you have a qualifying status change, you can change your existing Health Care Flexible Spending Account or enroll in coverage for the first time. You must make your changes to your coverage within 30 days of your qualifying status change. The effective date of the change is the date of your status change. You must provide appropriate documentation of the date of the event to the Human Resource Office.
- Become permanently and totally disabled;
- Go on an unpaid leave of absence;
- Transfer to an ineligible employment category (reduce your hours to part-time status);
The Dependent Care Flexible Spending Account and the Health Care Flexible Spending Account are separate. Money you set aside for the Health Care Flexible Spending Account cannot be used to pay for dependent care expenses. Similarly, any money set aside for the Dependent Care Flexible Spending Account cannot be used to reimburse any health care expenses.
- The following is a partial list of examples of expenses which are reimbursable by a Health Care Flexible Spending Account plan: medical and dental deductibles and co-insurance, medical and prescription drug co-payments, prescription eyeglasses or contact lenses, LASIK surgery, insulin and
over the counter (OTC) medications with a prescription.
- The following are some examples of expenses that are not eligible for reimbursement: custodial care in a nursing home, cosmetic surgery, diet pills or appetite suppressants, health club membership fees, vitamins. For a complete list of eligible expenses, go to IRS Publication 502.
- Employees are permitted to submit for reimbursement up to the maximum amount of the flex spending account balance even if those funds have not yet been contributed to the flex spending account as long as they are incurred within the benefit year.
- Changes to the employee's total contribution to the flex spending account must be made during open enrollment unless a qualifying event occurs during the benefit year (birth of child, etc). The employee must adjust the total contribution within thirty (30) days of the qualifying event. All changes to the employees flex spending account must be initiated through Human Resources.
2.5.2 Dependent Care Flex Spending
- The Dependent Care Flexible Spending Account is used to pay for eligible dependent care expenses such as child care for children under age 13 or day care for anyone who you claim as a dependent on your Federal tax return who is physically or mentally incapable of self-care so that you (and your spouse, if you are married) can work, look for work, or attend school full-time. The expenses must be for services in the plan year in which you make contributions. The following is a partial list of examples of reimbursable expenses: qualified day care or child care centers, licensed nursery schools, adult day care centers, summer day camp (not overnight camp), baby sitters, provided the babysitter provides his/her EIN or Social Security number, after-school programs, pre-school and nursery school tuition (below kindergarten),
- The following is a partial list of examples of expenses that are not eligible for reimbursement: expenses while you are away from work because of illness or leave of absence, payments to a caretaker who could be claimed as a dependent on your (or your spouse's) tax return, education expenses for kindergarten and above, expenses for overnight camp, transportation to and from a care site. For a list of eligible expenses, consult IRS Publication 503
2.6 Roll-Over Provisions
The Department of Treasury issued Notice 2013-71 announcing a significant change to how flexible spending accounts (FSAs) are administered by modifying the "use-or-lose" provision to allow a limited rollover of Medical FSA funds. Notice 2013-71 outlines the following: Employers now have the option to allow participants to roll over up to $500 of unused funds at the end of the plan year to the next plan year. The rollover amount of $500 does not impact the maximum election for the following plan year. (e.g. If you have a maximum election limit of $2,500 and a maximum rollover of $500, a participant could have access to up to $3,000 for the next plan year.)
This eliminates the "Grace Period." The plan is not permitted to allow unused amounts to be cashed out or converted to another benefit. Rollover funds can only be used to pay for qualifying medical expenses.
For a complete analysis of University ERISA requirements and Summary Plan Descriptions, refer the University's "Wrap Document."
The Director of Human Resources, in conjunction with the Controller, has the authority to change or modify this policy at any time with or without notice, and in compliance with the Plan and IRS guidelines, with the approval of the Board of Directors through the University President.
FAQs for government entities regarding Cafeteria Plans
IRS Publication 503