Flexible Spending Account FAQs

Account Basics

What is a Flexible Spending Account (FSA)? 

An FSA is a valuable employee benefit that allows you to have pre-tax dollars withheld from your paycheck to pay for un-reimbursed health care or dependent care expenses. It covers not just your medical expenses, but also the expenses of your spouse and tax dependents. Depending on your tax bracket, you may save up to 30% or more in taxes.

Even with the best health plan, you are likely to have out-of-pocket expenses each year. If you have children and have to pay for child care, a dependent care account can help stretch your hard-earned dollars. There are two types of flexible spending accounts:

  • A Health Care FSA can cover medical, dental or vision expenses that you would otherwise pay for out of pocket. Common qualified expenses that a health care FSA will usually cover include the deductible, coinsurance or copayment amounts for your health plan, eye glasses or contact lenses, dental work and orthodontia, medical equipment, hearing aids and chiropractic care. Many over the counter drugs, such as cold and allergy medicines, pain relievers and antacids, can also be reimbursed through an FSA. Your employer may limit what expenses your plan reimburses; please contact your Human Resources office for more information. For a list of eligible expenses please, see Qualified Medical Expenses.
  • A Dependent Care FSA (also know as a Dependent Care Assistance Program (DCAP)) covers employment-related expenses for child care. Qualified expenses must be for services that allow for you to be able to go to work. Typical expenses under this account include charges for day care, nursery school and elder care (though not if it is for medical care) for your legal tax dependents. For a complete list of eligible expenses, please see Qualified Dependent Care Assistance Program Expenses.

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What are the benefits of an FSA? 

Your biggest advantage is the tax savings. Every dollar you set aside in your account reduces how much you pay in income taxes. Plus, you can be reimbursed for qualified expenses that you are already paying for!

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How does an FSA work?

  • Funding. You, the employee, typically contribute a pre-determined amount to your account. In some cases, your employer may also contribute to employee FSAs. (Please contact your Human Resources office for a copy of your employer’s contribution schedule.)
  • Accessing Funds. When you have an eligible health care expense, pay for them with your payment card, or pay out-of-pocket and request reimbursement online. Remember to always keep your receipts.
  • Requesting Reimbursement/Substantiating Purchases. Log on to your online account and visit the Account Claim Center. If your payment was out-of-pocket, you will need to submit a request for reimbursement, then print out your fax cover sheet and fax the cover sheet with your receipts to the number shown on the form. If the purchase was using a payment card, you may skip the request for reimbursement and simply print out the pre-filled form and fax the cover sheet with your receipts to the number shown on the form. Please remember that credit card receipts, non-itemized cash register receipts and cancelled checks are not acceptable forms of documentation.
  • Claims Processing. We will promptly process your request and reimburse you either by check or direct deposit if you sign up for that feature. Please note that you will receive your money sooner if you use direct deposit. See Claims FAQs for more information.
  • Account Management. Log in to your online account regularly to check your account balance and access health education tools.

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Is a Flexible Spending Account (FSA) the same as a Health Reimbursement Arrangement (HRA)?

No. One of the main differences between the FSA and the HRA is the source of funding. HRAs are funded solely through employer contributions while FSAs are typically funded by the employee, usually through pre-tax, payroll deductions. However, you can have both accounts. If you have both an FSA and an HRA, then expenses eligible under both accounts will usually be reimbursed through the FSA first, then default to the HRA. Contact your Human Resources office for the specifics of your plan.

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Eligible Expenses

What types of expenses are eligible for reimbursement with an FSA? 

The rules for funding and accessing funds in an FSA are legislated by the IRS and mandated to be used for health care expenditures only, but there are literally thousands of products and services that meet the approved health care expenditures requirements in Section 213(d) Medical Expenses as defined in the IRS code.

Qualified medical expenses are defined as: copayments or coinsurance, dental care costs, vision care costs, prescriptions medications and some over-the-counter medications. Your employer may limit what expenses your plan reimburses; please contact your Human Resources office for more information. For a general list of approved health care expenditures, please refer to Qualified Medical Expenses.

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What types of expenses are not eligible for reimbursement with an FSA?

Health Care FSA: Services that are typically not eligible or reimbursable include:

  • Skin or teeth bleaching/whitening;
  • Health club dues;
  • Hair transplants;
  • Electrolysis;
  • Cosmetic surgery or treatments of any kind; and,
  • Contract fees for maintenance/replacement of contact lenses or eyeglasses.

Dependent Care FSA: Services that are typically not eligible or reimbursable include:

  • Child support payments;
  • Fees for services that have yet to occur (e.g., summer day camp deposits);
  • Kindergarten tuition;
  • Meals or transportation; and,
  • Overnight camp, registration and/or activity fees.

Please refer to Qualified Medical Expensesto find a general list of non-eligible expenses.

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What happens if I use the account for a non-eligible expense? 

If you file a manual request for reimbursement of a non-eligible expense, the request will be denied. If you used the payment card and the expense is deemed ineligible after the expense is already paid, you will be required to reimburse your account for that transaction. If you fail to reimburse the account, you may be required to pay income taxes.

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Contributions and Tax Information

How much can I contribute to my FSA?

For a Dependent Care FSA, you may not contribute more than $5,000 according to IRS regulations.

Beginning January 1, 2017, Health FSA contributions are limited by the IRS to $2,600 each year (the limit prior to 2017 was $2,550). The limit is per person; a husband and wife may each contribute up to the limit. The limit may be adjusted annually to account for inflation increases.

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Can I transfer money from my Dependent Care FSA to my Health Care FSA (or vice versa)?

No, this is not allowed.

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How does participating in the Dependent Care account differ from using other tax credits relating to dependents? 

Reimbursements under the dependent care account must be for employment-related expenses, and IRS regulation Section 129 Dependent Care Assistance Programs regulates what expenses may be reimbursed. Employment-related means an expense for dependent care that allows you and your spouse, if applicable, to be gainfully employed.

The Dependent Tax Credit is an alternative to using a Dependent Care account and is a credit against tax liability. IRS Publication 503 Child and Dependent Care Expenses contains detailed information for determining whether a taxpayer may claim the Dependent Care Credit. For some employees, the Dependent Care Credit may be more advantageous than participating in the Dependent Care FSA, and care should be used in determining which method to select.

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What happens if I do not claim all the money in my account? 

The IRS regulates Flexible Spending Accounts under IRC 125. According to the IRS guidelines, funds that are not claimed during the plan year are forfeited to the plan. This is called the “use it or lose it” clause. Funds are not transferable from one plan year to another and they are not available for other benefits. The unused funds are retained by the plan sponsor, your employer, and can be used to offset administrative costs of the plan.

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Can I use the Dependent Care FSA if my provider doesn’t report the income to the IRS? 

No. Therefore, we must have your provider’s social security number or Employer Identification Number in order to process dependent care claims.

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What information is reported to the IRS?

We do not supply information to the IRS related to an individual FSA. The plan sponsor, your employer, may be required to file an IRS form 5500 which includes participation and total disbursement information (does not include individual FSA information) and your participation in the Dependent Care Assistance Program will be reported on your W2 at the end of the year by your employer.

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Health Insurance Coverage

What if I am not covered under my company’s health insurance plan?

You and your family can still participate in the Health Care and Dependent Care Flexible Spending Accounts.

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Can I enroll in a Health Care FSA to reimburse my spouse’s deductible and copayment expenses?

Yes. All eligible out-of-pocket expenses incurred by you and your qualified dependents can be reimbursed by your Health Care FSA, even if such dependents are not enrolled in your employer’s health plan.

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Who are qualified dependents? 

Dependents must be either your spouse or someone you can claim as an exemption for federal income tax purposes.

To be covered through your Dependent Care FSA, the individual must meet one of the following criteria:

  • Your dependent under age 13 for whom you would be entitled to a deduction under IRS Code 151(c);
  • Your dependent who is physically or mentally incapable of caring for him or herself; or,
  • Your spouse who is physically or mentally incapable or caring for him or herself.

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Using Your Account

How will I be able to access my FSA funds?

You will receive a payment card to access your FSA. You can also pay for eligible expenses with any other form of payment and request reimbursement from your account.

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How can I find out my account balance and review transactions?

Account Balance and Claims Status information is available three ways:

  • Use the mobile app, CYC mobile, or log on to your online account at any time for balance information. Your mobile and online accounts are secure and updated in real time.
  • Call the Customer Service line at any time for automated balance information.
  • Customer Service representatives are available to assist you via phone or email during extended business hours.

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Can I make changes to my FSA? 

Once an election for the FSA(s) has been made, you cannot change the amount unless you terminate employment with your company or there is an appropriate change in status. Valid changes in status for both Health Care and Dependent Care accounts include:

  • Legal marital status change – marriage, divorce, death of spouse, legal separation or annulment
  • Change in number of dependents – birth, adoption, death of a dependent
  • Employment – change in employment status of employee, spouse or dependent to include termination, switching from part-time to full time or vice versa, return from an unpaid leave of absence
  • Residence – change in the residence of employee, spouse or dependent that changes the service area in which you are located
  • Dependent eligibility – situations where a dependent satisfies or ceases to satisfy the rules for eligible dependents due to the attainment of age, student status, or similar circumstances as provided in the plan
  • Annual election changes for changes in cost of coverage

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If my child turns 13 during the plan year, may I still use my Dependent Care FSA through the end of the plan year? 

No. You are no longer eligible to be reimbursed for care for a child as of age 13, unless they are physically or mentally incapable of caring for themselves. Having a child attain age 13 is a qualifying event and a reason to terminate your participation in the plan.

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What happens if my employment terminates?

For a Dependent Care FSA, your deductions will end when your employment ends. You are eligible to be reimbursed only for services that were received before your termination date, but you can request reimbursement for these expenses through the end of your former employer’s plan year.

Deductions for your Health Care FSA will also end when your employment ends unless your employer is obligated to offer you COBRA continuation and you elect this option. If your employer is not obligated to offer you COBRA and/or you choose not to elect COBRA, you are eligible to be reimbursed for qualified expenses incurred while you were employed and the account was active. Requests for reimbursements should be submitted prior to the end of your employer’s runoff period.