Individual Choice

Flexible Spending Account (FSA)Flexible Spending Account (FSA)

A valuable feature of Individual Choice is the flexible spending account (FSA) option. You are not allowed to have a FSA if you are making contributions to a Health Savings Account. A FSA is an individual account set up for you and funded with your excess College benefit credits and/or before-tax dollars.

The tax-effective use of your College benefit credits and before-tax dollars results in a lower cost to you for these expenses. You can establish two different tax-advantaged flexible spending accounts - a health care flexible spending account and/or a dependent care flexible spending account.

Flexible Spending Account Video

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Health Care Flexible Spending Account

You may use this account to pay out-of-pocket medical expenses such as deductibles, coinsurance, copays, orthodontics, vision and hearing costs, and other goods and services that currently qualify as medical deductions for federal income tax purposes. A few examples:

  • Eyeglasses, contact lenses, and contact lens solution
  • Some over the counter medications
  • Dental treatment
  • Care deemed medically necessary but not covered under the plan

Because expenses reimbursed from this account are paid with before-tax dollars, reimbursed expenses cannot also be taken as tax deductions or tax credits on your federal income tax.

As a result of the Patient Protection and Affordable Care Act of 2010 (PPACA) upheld by the U.S. Supreme Court, effective January 1, 2013, a $2,500 cap will apply to contributions made to health care FSAs. A married couple may contribute up to $5,000, if they are both eligible to participate in a plan. The limit on FSAs for dependent care expenses remains at $5,000.

Please review the information on FSA Qualified Medical Expenses.

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Dependent Care Flexible Spending Account

You may also set up an account to pay for your dependent care expenses. You can use the dependent care FSA only for care needed so that you and your spouse can work outside the home. Internal Revenue Code defines eligible costs as those incurred for the care of:

  • A dependent child under age 13 or a dependent child of any age who is physically or mentally incapable of self-care and who qualifies as your tax dependent, or
  • Someone you claim as a tax dependent because of a physical or mental inability to care for himself or herself, such as an elderly parent or a disabled spouse.

Other requirements to receive reimbursement from a dependent care FSA are:

  • You must report the name, address, and Social Security number or other taxpayer identification number of the care provider on your claim form.
  • The care provider may not also be claimed as your dependent.
  • The reimbursement for dependent care expenses cannot exceed the income of the lower-paid spouse.

The maximum contribution in a calendar year is $5,000. If you are married and file separate tax returns, the maximum dependent care contribution is $2,500 per individual. Please review the information on Child and Dependent Care Expenses.

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Tax Advantages of Flexible Spending Accounts

If you choose to participate, the flexible spending account lets you pay for certain eligible expenses with money reduced from your pay so that it is free from federal, state, and Social Security taxes. Take a look at the following example :

 

With Flexible
Spending Account

Without Flexible
Spending Account

Annual Income:

$30,000

$30,000

Estimated Health Care Expenses:

-$1,500

-$0

Estimated Dependent Care Expenses:

- $2,500

-$0

     

Taxable Income:

= $26,000

= $30,000

Estimated Federal Income Tax:

- $3,199

- $3,799

Estimated Social Security Tax:

- $1,989

- $2,295

Health Care Expenses:

- $0

- $1,500

Dependent Care Expenses:

- $0

- $2,500

Tax Credit For Dependent Care:

+ $0

+ $500

     

Net Pay:

= $20,812

= $20,406

These projections are for illustrative purposes only and should not be assumed to be tax advice. Be sure to consult a tax advisor to determine the appropriate tax plan for your situation.

Use the Aetna FSA Savings Calculator located at : www.aetnafsa.com/fsa/index.php to determine just how much you can save by participating in a Flexible Spending Account. Based on the expenses you expect to have next year, the FSA Savings Calculator will estimate your tax savings.

Tax Credit or Flexible Spending Account?

If you have dependent care expenses, you may be eligible for a tax credit on your federal income tax return. You cannot apply the same expenses to both the flexible spending account and this credit. The amount of dependent care expenses funded through your dependent care flexible spending account will reduce, dollar for dollar, any tax credit that may be available to you on your federal return. Consult a tax advisor to help determine which method best meets your financial needs.

Deciding How Much to Contribute

Before the beginning of each plan year, you must decide how much to deposit in your flexible spending account(s) for the year. In deciding, consider the health-related expenses you routinely incur that are not covered by medical or dental insurance. Also, review the health care options you select for the coming plan year for deductibles, coinsurance, and out-of-pocket maximums.

For the dependent care flexible spending account, review your current year's expenses and anticipate any childcare needs for the upcoming year. You must be able to separate out day care from tuition charges if the child is attending private school. Keep in mind that child care expenses incurred during vacation may not be reimbursed, because they are not necessitated by your employment.

The health care and dependent care flexible spending accounts are completely separate. You have the option of contributing College benefit credits and/or before-tax dollars to either. You are not allowed to transfer money between accounts.

Estimate Carefully

The IRS requires that you use all of the money contributed to your flexible spending accounts within the plan year and forfeit the unused portions. According to Internal Revenue Service regulations, in some circumstances, claims for a qualified domestic partner may not be allowable expenses. Please contact the flexible spending account claims administrator if you have any questions concerning eligible expenses.

Using your Flexible Spending Accounts

Think of your flexible spending accounts as your own personal bank accounts that you can use periodically to reimburse yourself for specific bills. Each plan year, the total amount you designate from your credits or paycheck is deposited in monthly installments into your accounts.

You can use your flexible spending accounts for expenses you incur during the year while you are a plan participant. For example, if you are newly hired and begin participation on April 1, you may only use the flexible spending account to pay for expenses incurred between April 1 and December 31. The IRS specifies that expenses are incurred at the time services are rendered.

If you elect a flexible spending account, you may submit claims for eligible medical and/or dental expenses, regardless of whether or not you have elected Ithaca College medical coverage. However, how you submit claims to the flexible spending account does depend on which plan(s) you are enrolled in. For example:

  • If you are enrolled in the Open Access POS medical plan, and you use an in-network provider, your claim will be automatically submitted to Aetna for processing under the medical plan. Then any unpaid balance that qualifies under the health care flexible spending account will be processed automatically.
  • If you are enrolled in the Open Access POS medical plan, and you are treated by an out-of-network provider, you will need to submit the claim to Aetna only once (provided you use the appropriate claim form). The claim will be processed first under the medical plan. Then any unpaid balance that qualifies under the health care flexible spending account will be processed automatically.
  • If you choose to opt out of the Ithaca College medical plan, you must first have your claim processed by the appropriate insurance carrier. Then you may submit a medical reimbursement claim form directly to Aetna for any unpaid balance that qualifies under the health care reimbursement account.
  • If you are enrolled in any dental plan, the appropriate insurance carrier must first process your claim. Any unpaid balance that qualifies under the health care FSA account may then be submitted to Aetna using a FSA Health Care Reimbursement Form. If you are not enrolled in a dental plan, you may submit eligible expenses that qualify under the health care flexible spending account directly to Aetna by using a medical reimbursement claim form.

Reimbursement payments are processed on a weekly basis. For the health care flexible spending account, you can be reimbursed up to the annual amount you elected to deposit in your account. For the dependent care account, you can be reimbursed up to the amount that has been deposited in your account up to the date the claim is processed.

Keeping Track of Your Accounts

To help keep track of the money in your flexible spending accounts and the bills reimbursed, you may long onto Aetna Navigator. In addition, you will receive a statement each quarter that summarizes the activity in your flexible spending account(s).

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If you leave Ithaca College

If you terminate employment, retire, go on long-term disability or are on an unpaid leave of absence and you have a balance remaining in your FSA, you may submit requests for reimbursement only for expenses incurred during the time you participated in the plan or continued your contributions under the Consolidated Omnibus Budget Reconciliation Act.

If you die with a balance in your flexible spending account(s), your beneficiary may submit a request for reimbursement for expenses incurred by you or a dependent during the time you participated in the plan.

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Forfeiting FSA Contribution

If you have money left in your flexible spending account(s) after the year’s reimbursements have been processed, current federal tax law requires that you forfeit this money. Therefore, you must plan the use of your flexible spending account(s) carefully.

Claims for reimbursement incurred during the calendar year must be received by the FSA plan administrator no later than March 31 of the following year.