Flexible Spending Accounts
Individuals who hold a full-time appointment will be eligible to enroll in either or both of the Flexible Spending Accounts (FSAs) offered by UBFA. The two types of accounts are health care and dependent care. The accounts are set up so you can set aside pre-tax dollars to cover eligible medical and dependent care expenses. Each payroll period, the amount you request will be deducted from your paycheck and deposited in your FSAs. You may set aside an annual maximum of $2,400 for the health care account and $5,000 for the dependent care account. As you incur eligible expenses, you will be reimbursed from the FSA after you submit a claim form. You will never be taxed on the money used to pay these expenses! The pre-tax savings illustration will give you an idea as to how this tax advantage can work for you. However, careful planning of expenses is a must, because any amounts left in your accounts at year end are forfeited by you. So remember - USE IT OR LOSE IT!
If you decide to participate in the FSA program you must complete an enrollment form, which is available from the UBFA Payroll Department.
Eligible expenses under the FSAs
All medically related services that are not reimbursable through insurance are eligible, including but not limited, to:
- Health care plan co-payments and deductibles
- Dental care
- Vision care
- Podiatrists, etc.
- Other IRS eligible expenses
Dependent-care expenses incurred while you are working include those from a child care center, nursery school or an in-house baby-sitter.
The UBFA Payroll Department has a complete list of eligible expenses.
The Flexible Benefits Program, in addition to offering you a choice of benefits, provides significant tax advantages. Any cost of benefits to you will be paid via salary reduction. What this means is that you will be paying these costs with pre-tax dollars. This effectively lowers your taxable income and, therefore, the taxes withheld from your paycheck. The two examples below illustrate the tax savings associated with salary reduction. The after-tax column shows take home pay assuming all expenses are paid post-tax. The before-tax column shows take-home pay assuming expenses are paid on a pre-tax basis via salary reduction. Keep in mind that the actual tax impact may vary depending on your own tax situation.
|John is single. He anticipates spending $500 for unreimbursed medical care. What are the tax savings from the use of the Flexible Spending Account?||Kate is married and knows she will incur child care costs of $1,000 for the year. What are her tax savings from the use of the Flexible Spending Account?|
|Income (after deductions)||$20,000||$20,000||$35,000||$35,000|
|Less: Pretax expenses||$0||($500)||$0||($1,000)|
|Less: After tax expenses||($500)||$0||($1,000)||$0|
|Take Home Pay||$13,571||$13,786||$23,494||$23,924|
This example is intended to highlight the benefit plans provided by UBFA. The plan's official documents and contracts will govern in all cases.