Kazdon, Inc. Comprehensive Outsourcing

Cafeteria Plans Self Funded Ins. HIPAA COBRA Vision Plans HRAs Payroll Savings Accounts Transportation


	What is the advantage of using Flexible Spending Accounts? How do the spending accounts work? How much money can I expect to save in taxes by paying my health care and dependent daycare expenses through the Flexible Spending Account (FSA) plan? Does enrollment in the flexible benefit plan affect any other benefits? Do I have to enroll in my employer medical or dental plan in order to enroll in this plan? How often can I enroll in the plan? What does the IRS have to do with this plan anyway? What does the term "expense incurred" mean? What happens if I forget to sign my claim form? Do I need to list dependents on my claim form? What is the best time for me to check the Web site or telephone information line for payments issued? My coverage was effective July 1 under the flexible benefit plan. Can I submit health care expenses incurred in May? I have a calendar plan year. If I order eyeglasses December 26 and pick them up on January 5, will this be a December claim or a January claim? I have a calendar plan year. If I have a prescription filled December 30, and pick it up on January 2, will this be a December claim or a January claim? I have a calendar plan year. If I have services provided in December, but wait and pay for those services in January, will this be a December claim or a January claim? I have a calendar plan year. My dentist said I need a crown in January, but wants me to prepay for the crown in December. Is this a December claim or a January claim? Can I submit my cancelled check as documentation of my claim? What type of documentation should I submit for a prescription? How long after the end of the plan year can I still file claims? I just realized that I made a mistake in my election. Can I correct it? I've used all my money from my account. Can I now elect to put more money into my account? I just learned that I need to have a tooth crowned. Can I increase my health care election? If I have leftover funds in my health care account, can I transfer those funds to my dependent daycare account? Is corrective eye surgery (LASIK, Radial Keratotomy) eligible for reimbursement? Is massage therapy eligible? Is weight loss treatment eligible? Are dental veneers eligible? My teeth are discolored. Is teeth whitening eligible? Is anger management or marriage counseling eligible? Are stop smoking programs eligible? If I have to travel to the Mayo Clinic out of state for health care, are my travel expenses eligible? Can I pay my spouse's health insurance premiums through my health care Flexible Spending Account (FSA)? If my spouse and I are both employees of my employer, can we claim each other's expenses on our respective accounts? Must my health care expenses be medically necessary in order to qualify? Will I need to submit any additional information to substantiate that the expense being claimed was for medically necessary treatment? I elected to contribute $100 per month, up to $1,200 for the health care Flexible Spending Account (FSA) for the calendar plan year. If I have $100 in my account in January, but incur a $300 expense, how much can I be reimbursed? What happens to my account upon termination of employment? Are health club membership fees/dues eligible if my physician prescribes this to treat a medical condition? Are over-the-counter medicines and drugs eligible expenses? Is there a limit to the amount of over-the-counter( OTC) drugs I may submit for reimbursement? Will I need my physician's prescription or a medical necessity form completed for over-the-counter drugs and medicines I purchase? Are herbal and dietary supplements and vitamins eligible? My enrollment material says my dependent daycare expenses must be "work-related". What exactly does the term "work-related" mean? My child just started kindergarten for which I pay tuition. Is this an eligible dependent care expense? I do volunteer work and take my two small children to daycare while I work. Is this an eligible expense? I just had a new baby and will be home for six weeks. I'm taking my 3-year-old to daycare during this time. Is this an eligible expense? I pay my neighbor to watch my 13-year-old after school. Is this an eligible expense? My 16-year-old daughter cares for my 8-year-old son after school. Can I pay my daughter and file those expenses through my flex plan? If I participate in the dependent care Flexible Spending Account (FSA) plan, do I need to report anything on my personal income tax return at the end of the year? I signed up to contribute $400 per month into my dependent care Flexible Spending Account (FSA) plan. My actual expenses are closer to $500 per month. Should I submit my claim form for $400 or for $500? Can I file dependent care claims at the beginning of the month for that month? If I terminate employment, can I still file claims?

What is the advantage of using Flexible Spending Accounts?

The advantage of this plan is that you do not pay Federal income, or social security taxes on this money. In most states, you don't pay state taxes either. By paying for your benefit coverage's on a pretax basis, and by paying your out-of-pocket health care expenses and daycare expenses through the Flexible Spending Accounts, you can lower the amount of taxes you pay. You add dollars to your spendable income and that means you have more take-home pay and more money in your pocket!

How do the spending accounts work?

It's easy! You decide if you want to use the Health Care and/or the Dependent Care account. This is how it works:

You estimate the amount you will spend on out-of-pocket health care expenses and/or dependent care expenses.
You decide how much you wish to set aside into your Health Care account and/or your Dependent Care account.
The amounts you wish to set aside into your accounts will come out of your paycheck (on a pretax basis) in equal amounts each pay period on a schedule established by your employer.

As you incur health care expenses or dependent care expenses throughout the year, you submit a claim form along with documentation of your expenses, and are then reimbursed from your accounts. You can be reimbursed by check, direct deposit or through your flex debit card.

Since the plans are governed by the IRS, there are specific rules you need to be aware of. The IRS requires that you make your election decision before the new plan year begins each year, or before your effective date if you are newly eligible. The election decision remains in effect for the plan year, unless you have a Qualifying Life Event or status change, such as a marriage, birth, death of a dependent, etc. (Check your employer plan provisions as they may be more restrictive.) Any funds left in your account at the end of the year are forfeited. You can avoid forfeitures if you plan carefully (review prior year's expenses to estimate what you will have the next year, be conservative, and plan only for predictable expenses).

How much money can I expect to save in taxes by paying my health care and dependent daycare expenses through the Flexible Spending Account (FSA) plan?

You can save on Federal and state income taxes (in most states), and social security taxes. Federal taxes generally are 15% to 28%, with social security taxes of 7.65%. Adding these amounts to your state tax will generally bring the savings to at least 30%, and more in some cases.

Does enrollment in the flexible benefit plan affect any other benefits?

Typically, no. Other employer sponsored benefit plans, such as life insurance or disability income, are based on your gross salary prior to any salary reductions. However, you are saving on Social Security taxes so your Social Security retirement benefits may be minimally impacted.

Do I have to enroll in my employer medical or dental plan in order to enroll in this plan?

No, enrollment in other group plans is not required in order to participate in this plan.

How often can I enroll in the plan?

You can enroll in the plan annually. Your employer will notify you each year when it is time to re-enroll.

What does the IRS have to do with this plan anyway?

In short, everything! The plans are sanctioned and regulated by the Internal Revenue Service. Unlike insurance plans, there are no insurance company rules. All procedures followed are required by Federal IRS regulations. Anytime the IRS gives us a “tax-break”, they have certain rules we must follow. Therefore, no exceptions can be made under these plans.

What does the term "expense incurred" mean?

IRS regulations say the expense must be incurred before it can be reimbursed. The IRS specifically defines expense incurred as follows:

Expenses are treated as having been incurred when you are provided with the health care or dependent care that gives rise to the expense, and not when you are formally billed or charged for, or pay for the expense.

What happens if I forget to sign my claim form?

Unfortunately, we'll have to send the claim back to you for your signature. IRS regulations require (in part) that you provide a statement saying the expenses have not been reimbursed, and are not reimbursable elsewhere. This statement is included on the claim form and must be signed by you as the plan participant.

Do I need to list dependents on my claim form?

Yes. Even though your dependents may not be covered under other employer benefit plans, they may be eligible under this plan as your tax dependent.

What is the best time for me to check the Web site or telephone information line for payments issued?

The Web site and telephone information line are updated each weekday evening and you can check your accounts virtually any time, day or night.

My coverage was effective July 1 under the flexible benefit plan. Can I submit health care expenses incurred in May?

No. Expenses need to be incurred (service provided) during your period of coverage. Expenses incurred on or after July 1 could be submitted for consideration.

I have a calendar plan year. If I order eyeglasses December 26 and pick them up on January 5, will this be a December claim or a January claim?

Claims are processed based on the date of service, or the date the order was placed that gave rise to the expense. This would be a December claim.

I have a calendar plan year. If I have a prescription filled December 30, and pick it up on January 2, will this be a December claim or a January claim?

Claims for prescriptions are processed based on the date on the documentation. If the documentation shows December 30, it is a December claim. If the documentation shows January 2, it is a January claim.

I have a calendar plan year. If I have services provided in December, but wait and pay for those services in January, will this be a December claim or a January claim?

Claims are processed based on the date the service is provided, regardless when you pay for the service. This would be a December claim.

I have a calendar plan year. My dentist said I need a crown in January, but wants me to prepay for the crown in December. Is this a December claim or a January claim?

Claims are processed based on the date the service is provided, regardless when you pay for the service. This would be a January claim.

Can I submit my cancelled check as documentation of my claim?

No. Although you can use cancelled checks as documentation when taking a tax credit for medical or dental expenses on your personal income tax return, cancelled checks do not meet the IRS claim substantiation rules. If you have insurance coverage, you must send the claim to your health (medical, dental or vision) insurance plan first. The insurance carrier will process the claim and provide an explanation of benefits (EOB) statement to you showing the amount paid and what you owe. The EOB can be submitted with your flex claim. If you do not have insurance, ask your care provider for an itemized statement that includes their name/address, patient name, date of service, a description of the service or supply, and the dollar amount. For purchases of over-the-counter medicines and drugs, the cash register receipt must clearly identify the merchant name, name of the purchased item, date and amount.

What type of documentation should I submit for a prescription?

The pharmacy receipt (not the cash register receipt), often times called a "script", that includes the pharmacy name, patient name, date the prescription was filled, the name of the drug, and dollar amount should be submitted with your claim. Another easy way to submit prescription expenses is to ask your pharmacy to print a listing of all your prescription purchases for a given time period for each family member and submit with your claim form. Many pharmacies now allow customers to set up accounts online at their Web site and you can print a list of your prescriptions.

How long after the end of the plan year can I still file claims?

Each employer plan is different. Check with your HR/Benefits Department, or your employer's plan description or enrollment material to be sure. Generally, there is a run-out period (this might be 30, 60, 90 or 120 days, for example) during which you can file claims incurred in the prior year. However, don't wait until the last minute to file your claims as you take a chance that you might submit the wrong information and there is no time left for you to re-submit.

I just realized that I made a mistake in my election. Can I correct it?

No. The IRS allows changes only in the event of status changes or Qualifying Life Events such as marriage, divorce, birth, death, etc. Furthermore, your employer's plan may be even more restrictive. Be sure to check the “irrevocability” provisions under your employer-sponsored plan.

I've used all my money from my account. Can I now elect to put more money into my account?

No. The IRS allows changes only in the event of status changes Qualifying Life Events such as marriage, divorce, birth, death, etc. Furthermore, your employer plan may be more restrictive. Be sure to check the “irrevocability” provisions under your employer-sponsored plan.

I just learned that I need to have a tooth crowned. Can I increase my health care election?

If I have leftover funds in my health care account, can I transfer those funds to my dependent daycare account?

No. Each account is separate and distinct. Funds can not be transferred between accounts.

Is corrective eye surgery (LASIK, Radial Keratotomy) eligible for reimbursement?

Yes, corrective eye surgery is an eligible expense. (See IRS Publication 502.) Be sure to check with any insurance coverage you have so you will know if you have coverage available under the plan. Also, be sure you are a candidate for the surgery before funding your account. If you find out you cannot have the surgery, the IRS does not allow you to reduce your election.

Is massage therapy eligible?

In most cases, no. Massage therapy may be eligible only in cases where there is a specific injury or trauma being treated, and your attending physician prescribes the treatment as medically necessary. Massage therapy is not eligible for treatment of stress or depression.

Is weight loss treatment eligible?

Weight loss programs (such as Weight Watchers) may be eligible if you have been diagnosed with a specific medical condition and the program is medically necessary to treat that condition. This does not include programs that help you take off extra weight you accumulated during the holidays, or programs that are for general health or appearance. Those seeking reimbursement for a weight-loss program must provide a "Letter of Medical Necessity" from their attending physician that prescribes the program and the duration, as well as the diagnosis code and description of the disease for which the treatment is medically necessary. Special diet foods, health club memberships and health spas are not eligible.

Are dental veneers eligible?

No. Dental veneers are generally considered cosmetic treatment and are not eligible.

My teeth are discolored. Is teeth whitening eligible?

Teeth whitening is generally a cosmetic treatment and is not eligible.

Is anger management or marriage counseling eligible?

No. Only counseling for the treatment of a diagnosed medical condition is considered eligible.

Are stop smoking programs eligible?

Yes, stop smoking programs (including hypnosis), as well as prescription medicines and over-the-counter stop smoking gum and patches to help you stop smoking are eligible. (See IRS Publication 502.)

If I have to travel to the Mayo Clinic out of state for health care, are my travel expenses eligible?

If primarily for and essential to medical care, some travel expenses may be eligible. You will want to check with your employer or your administrator to be sure. (See IRS Publication 502.)

Can I pay my spouse's health insurance premiums through my health care Flexible Spending Account (FSA)?

Although allowed as a medical deduction for individual taxpayers on their personal income tax returns, insurance premiums are not an eligible expense under IRS Section 125 health care Flexible Spending Accounts (FSAs).

If my spouse and I are both employees of my employer, can we claim each other's expenses on our respective accounts?

You can claim spouse expenses on your own account; and your spouse can claim your expenses on their account. However, you cannot both file for the same expenses under both accounts. In other words, you cannot “double-dip.”

Must my health care expenses be medically necessary in order to qualify?

You can file expenses for medically necessary procedures, as well as some elective medical procedures that treat specific medical conditions. For example, LASIK eye surgery is elective and is treating a medical condition. A chemical peel to correct facial wrinkling is also elective, however, is purely cosmetic and not eligible.

Will I need to submit any additional information to substantiate that the expense being claimed was for medically necessary treatment?

In some cases, you will be asked to provide a "Letter of Medical Necessity" from your attending physician to substantiate your claim. For example, treatments such as massage therapy or weight loss programs that can be for both medical and non-medical reasons may be subject to this requirement. Each claim will be reviewed and you will receive a letter if this additional information is required.

I elected to contribute $100 per month, up to $1,200 for the health care Flexible Spending Account (FSA) for the calendar plan year. If I have $100 in my account in January, but incur a $300 expense, how much can I be reimbursed?

The health care Flexible Spending Account (FSA) will reimburse you $300. You do not have to have the funds in the account in order to be reimbursed.

What happens to my account upon termination of employment?

Your eligibility period to incur expenses will end when you terminate employment. In some cases, you may be allowed to continue your health care account by continuing to make contributions after termination of employment. Your employer will notify you upon termination if this option is available to you.

Are health club membership fees/dues eligible if my physician prescribes this to treat a medical condition?

No. IRC Section 274(a)(3) specifically denies a deduction for membership fees/dues at health clubs or similar organizations. IRS guidance provides that fees for specific medical services (such as on a per-session basis) at a health club might be eligible if the individual is under a physician's care for a specific medical condition, and the physician prescribed the session as medically necessary to treat that condition (e.g., rehab after knee surgery). It is the health club membership dues/fees themselves that are not eligible under any circumstances.

Are over-the-counter medicines and drugs eligible expenses?

Yes. Over-the-counter (OTC) medicine and drugs that are taken orally or applied to the body to alleviate or treat sickness, pain, injuries, or a medical condition such as allergy and cold medications, pain relievers such as aspirin and antacids, are eligible for reimbursement. These items may be in the form of a liquid, pill, or ointment if they contain a drug. Items such as vitamins, herbal and dietary supplements, cosmetic treatments or items that are for maintaining general good health are not included and remain ineligible expenses.

Is there a limit to the amount of over-the-counter( OTC) drugs I may submit for reimbursement?

Yes. The quantity of over-the-counter drugs purchased and submitted for reimbursement must be reasonably able to be consumed during the current plan year. “Stockpiling” of drugs and medicines in anticipation of a medical condition or at plan year-end and then submitting for reimbursement would be an ineligible request.

Will I need my physician's prescription or a medical necessity form completed for over-the-counter drugs and medicines I purchase?

No. Since the items are available over-the-counter, a doctor's drug prescription is not needed. There could be an occasional need for a completed medical necessity form but you will be notified when that is necessary.

Are herbal and dietary supplements and vitamins eligible?

No. Herbal and dietary supplements, as well as vitamins, do not fall within the category of over-the-counter drugs and medicines. They are generally for your over-all good health and are used every day instead of being used for the specific duration of a medical condition.

My enrollment material says my dependent daycare expenses must be “work-related”. What exactly does the term “work-related” mean?

The expenses must be incurred to enable you (and your spouse if married) to be gainfully employed. Gainful employment does not include unpaid volunteer work, or volunteer work for a nominal salary. Also, you cannot include expenses you pay for dependent care while you are off work because of illness. (See IRS Publication 503.)

My child just started kindergarten for which I pay tuition. Is this an eligible dependent care expense?

No. The IRS does not consider educational or tuition expenses as eligible expenses, including kindergarten, first grade and higher. You can claim expenses for before or after school care, or nursery school expenses provided the care is custodial in nature and not educational. (See IRS Publication 503.)

I do volunteer work and take my two small children to daycare while I work. Is this an eligible expense?

No. The expenses must be incurred to enable you to be gainfully employed. Gainful employment does not include unpaid volunteer work, or volunteer work for a nominal salary. (See IRS Publication 503.)

I just had a new baby and will be home for six weeks. I'm taking my 3-year-old to daycare during this time. Is this an eligible expense?

No. IRS regulations state that the expenses incurred must be work-related. The amounts paid while you are off work because of illness are not eligible. (See IRS Publication 503.)

I pay my neighbor to watch my 13-year-old after school. Is this an eligible expense?

No. The individual being cared for must meet the “qualifying person test” as prescribed by the IRS. A qualifying person includes your dependent who was under age 13 when the care was provided and for whom you can claim an exemption. (See IRS Publication 503.)

My 16-year-old daughter cares for my 8-year-old son after school. Can I pay my daughter and file those expenses through my flex plan?

No. You can count work-related payments you make to relatives only if they are not your dependents. Do not count any amounts you pay to:

A dependent for whom you (or your spouse) can claim an exemption Your child who is under age 19 at the end of the year, even if he or she is not your dependent. (See IRS Publication 503.)

If I participate in the dependent care Flexible Spending Account (FSA) plan, do I need to report anything on my personal income tax return at the end of the year?

Yes. You must identify all persons or organizations that provide care for your child or dependent by filing IRS Form 2441-Child and Dependent Care Expenses, (see Instructions for IRS Form 2441), along with your Form 1040 each year (or Schedule 2 for Form 1040A). Consult your tax advisor if you have specific questions.

I signed up to contribute $400 per month into my dependent care Flexible Spending Account (FSA) plan. My actual expenses are closer to $500 per month. Should I submit my claim form for $400 or for $500?

You should file your claim for the actual amount of charges, $500 in this case. You will be paid up to the amount of money in your account (less prior reimbursements), not to exceed $400. The other $100 would be pended and paid once you have additional funds contributed to your account.

Can I file dependent care claims at the beginning of the month for that month?

You can file claims only after the service has been provided, regardless of when you pay for the service. It is recommended that you file claims after the services have been provided, in this case at the end of the month.

If I terminate employment, can I still file claims?

Yes, you can file claims for expenses for qualifying work-related expenses through the run-out period. Expenses can be incurred before or after your employment termination date, but prior to the end of the plan year.