What is Health Care FSA?
A Health Care Flexible Spending Account is a pre-tax benefit account that you can use to pay for eligible medical care expenses for both you and your dependents that aren’t covered by your health insurance plan.
Who is eligible?
There are very few restrictions or criteria to meet to qualify for an FSA. Essentially, if the employer offers it, the employee is eligible.
Eligible expenses include:
Pharmacy (medically necessary)
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How are FSAs funded?
FSAs are pre-funded accounts. The employer places the total annual election on the first day the account is opened. But the employees must pay back the employer over the course of the year. The money is deducted pretax from the employee's paycheck to pay back the employer.
**For example, if an employee made an annual election of $2,600. $100 would be taken out of the employee's biweekly paycheck to pay back the employer.
Yearly Contribution Limits: For the 2021 calendar year, an individual can contribute up to $2,750 per FSA.
Plan Year: Most often one year.
Who is eligible to Contribute? FSAs can only be sponsored by employers and eligibility rules are set by each plan. Employees who work for employers who offer FSA plans may contribute up to the allowed maximum per year. Self-employed individuals and owners of certain types of corporations are not eligible for an FSA.
Who owns the account? An FSA is owned and set up by the employer.
What are the funds that I have access to use? An employee's yearly FSA allocation is available in full on the first day of the plan year, regardless of contributions to date.
When can I change my contributions? FSA users can only change their contributions during their open enrollment periods. Some plans also allow changes to contributions to be made if the account holder experiences a Qualifying Life Event (QLE), such as marriage, divorce, or birth of child.
Special Rules: Employers can choose one of three (or none) options to provide relief for FSA users who would otherwise have to forfeit leftover funds:
1. Runout Date- An extra time that an employee can submit manual claims for services render in the previous plan year to be reimbursed for that previous plan year's funds.
2. Grace Period- Give users 2.5 months after the last day of their plan years to spend down their remaining FSA funds.
3. Rollover- Allow FSA users to move up to $550 (2020) of the previous plan year's contribution into next year's allocation (without counting against the overall contribution limit) to avoid forfeiting money to their employers at year's end.
Please note that a new Covid-19 Relief Bill has made some changes regarding changing your election mid-year, run-out-period, grace period, and rollover. Your employer decides on which type of HCFSAs account they offer. To find out which scenario applies to you, please reach out to email@example.com for help or to your HR benefits team.
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