Flexible Spending Accounts
Two types of Spending Accounts are offered, Health Care and Dependent Day Care. You must re-enroll each year during Annual Enrollment if you wish to continue your participation in the new plan year. If you do this, your participation will begin the following September 1. You can enroll in one or both accounts. (This is a use it or lose it account.)
The grace period is a provision under federal law that allows the A&M System to extend the time Flexible Spending Account participants have for withdrawing funds from their Health Care and/or Dependent Day Care Spending Accounts. Under this provision, if you are actively employed or contributing through COBRA and have funds remaining in your accounts at the end of the plan year, (August 31), you can use those funds to pay expenses incurred during the next two and a half months (in other words, through November 15).
If you were enrolled in a Flexible Spending Account, but did not enroll in the next year, you are still eligible to submit claims during the grace period.
Contribution for these accounts are through payroll deduction before paying federal income and Social Security taxes. When qualifying expense are incurred, you may withdraw money from your accounts to pay those expenses. This money is not taxed at withdrawal. In other words, you never pay federal income tax or Social Security tax on this money.
- Because of the tax advantages, the federal government sets the following restrictions on these accounts:
- You cannot change your contribution amount during a plan year unless you add or lose a family member or you experience a change in job status, and the change you make corresponds to the change that has occurred.
- You forfeit unused amounts at the end of the plan year.
- You can use the accounts only for expenses incurred during the plan year.
- You cannot transfer money between accounts.
- While the same types of expenses that qualify for spending accounts also qualify for the medical tax deduction or child care tax credit on your federal income tax return, you cannot take the deduction or credit for expenses reimbursed through the spending accounts.
- The plan year runs from September 1 through August 31.
Health Care Spending Account: You can set up a Health Care Spending Account to reimburse yourself for medical, prescriptions dental, vision and hearing care expenses not covered by your other benefit plans for yourself or family members. This includes deductibles, coinsurance and copayments as well as expenses not covered by your health and dental plans. You may not use the account to pay premiums for health or dental coverage.
- You may contribute from $240 - $2,650 each year to a Health Care Spending Account.
Dependent Day Care Spending Account: You can set up an account to reimburse yourself for the cost of day care for a child or older person who requires care while you (and your spouse if you are married) work. The dependent must share your home at least eight hours a day, be claimed as a dependent on your income tax return and be a child age 12 or younger or an older person who requires care due to a physical or mental disability. The day care provider must be a licensed center or an individual who is not claimed as a dependent on your tax return.
- You may contribute from $480 to $5,000 each year to a Dependent Day Care Spending Account. If you are married and file a spearate tax return, your maximum is $2, 500 a year.