What is a Flexible Spending Account Plan?
It’s a benefit provided by your employer that lets you set aside a certain amount of your paycheck into an account before paying income taxes. Then, during the year, you can use funds in the account to pay for qualified expenses. This Plan provides tax savings throughout the year!

What’s the biggest benefit when I participate?
Your biggest benefit is saving on payroll withholding taxes and some social security taxes. That means you’ll save $25 to $40 on every $100 you budget to pay for qualified expenses!

Are there other advantages besides saving money on taxes?
Absolutely! Your Healthcare Flexible Spending Account is like having a tax-free, interest-free loan. All of the money you will contribute for the year is available to you on day one of the plan year – even before any money has been set aside from your paycheck.

What expenses qualify for payment?
Most qualified expenses are for goods or services that you plan to buy anyway. For a full list see the inside of this brochure.

How do I pay for qualified expenses?
There are 3 ways described in this booklet. The easiest is your take care VISA debit card. And what’s best, you don’t have to reach into your pocket when you use the card to pay qualified expenses. By paying with the card, your purchase is deducted from the appropriate balance in your Healthcare Spending Account. All payments will require further verification within 30 days, so please hold on to your receipts.

Do I need to file claim forms?
You will be asked to file a claim form every time you use your card to verify a card transaction was for a qualified expense. Also, if a provider does not accept VISA, you’ll need to file a claim for reimbursement. Filing claims is easy. Just complete a claim form and attach a copy of the bill or receipt. Then, send it to the claims address on the form. Within a short time, your reimbursement will arrive or be automatically deposited in your designated bank account.

How does money get deposited into my account?
Each pay period, the tax-free money you’ve budgeted will be deposited into your Flexible Spending Account.

How do I know how much money is available?
Your balance and other details are always available online at www.customdesignbenefits.com by logging onto MyFlexOnline (logn at left) or by calling 800.598.2929. Remember, for healthcare expenses, amounts up to your full annual election are available on day one of the plan.

Must money be deposited in my account before I pay expenses or file a claim?
No, the entire annual amount you elect for the Healthcare Flexible Spending Account is available on the first day and throughout the plan year. However, only amounts you’ve contributed are available for Dependent Care, Parking/Transit and Adoption Expenses.

I already have health insurance. Why should I participate in the Healthcare Flexible Spending Account (FSA)?
The Healthcare FSA is used to pay for expenses not covered by insurance. These include copays, over-the-counter medications, glasses, contacts, orthodontics, most dental expenses, and prescription drugs, just to name a few.

I don’t use my employer’s health insurance. Can I still save?
Yes! You can still set aside money (before taxes are taken out) to budget and pay for qualified expenses. Remember, a qualified expense paid from this plan cannot be eligible for reimbursement from another plan.

I take a Dependent Care Credit on Form 1040. Will this Dependent Care Benefit save more?
The more you earn, the more you’ll save due to the limits of the deduction on Form 1040. In addition, you’ll also save on the social security tax (FICA) with a Dependent Care Benefit. So don’t wait until April 15th to take the credit. Now you can save taxes on every paycheck! Which option is best for you? Either complete the worksheet in this brochure or visit our website at www.customdesignbenefits.com to link to an easy calculator to determine your savings.

Will the Adoption Assistance Plan save more than taking the credit on my Form 1040?
If you expect to pay more than the annual limit in any one calendar year, you might want to take advantage of both. Take the tax credit on Form 1040 and be reimbursed for additional adoption expenses through this plan. Please note: although you won’t save FICA on contributions to the Adoption Assistance Plan, you will save on federal taxes and most state taxes. Consult your tax advisor for more details.

When are funds for my Adoption Assistance FSA available?
Adoption Assistance FSA reimbursements are available after incurring qualified expenses up to the amount you have contributed from your paycheck(s).

What tax savings are available for Adoption Assistance FSAs?
While you will still owe FICA taxes, the Adoption Assistance FSA allows you to obtain Federal tax savings throughout the year rather than on your tax return.

If I set aside part of my pay, won’t I make less money?
No. For every dollar you set aside to pay for qualified expenses, you save FICA, federal and state (where applicable) withholding taxes. Your net take-home pay will increase by the tax dollars you save. So that when you pay for qualified expenses, they are TAX FREE!

Can I change my contributions during the year?
Yes, but only in certain situations. For the Healthcare FSA and Dependent Care Benefit, you can change your election if you have a change in coverage status or a change in your employment or that of your spouse or a dependent. The Parking and Transit plans allow you to change your election for any reason. Adoption Assistance elections may be changed when initiating or concluding an adoption attempt.

What if I don’t use all of the money in my account?
Generally, contributions not used for the Healthcare FSA or Dependent Care Benefit during the plan year may not be paid to you in cash or used in a later year. See your Flexible Benefits Summary Plan Description for details. For Parking/Transit Plans, any unused contributions will roll forward to the next plan year. Therefore, be sure to carefully budget and calculate your qualified expenses.

What happens to my account if I terminate employment?
You may request reimbursement for qualified expenses incurred prior to your termination. Check your Summary Plan Description for additional rights provided by your employer’s plan.

Are there any negatives that I should know about?
Because you may not pay social security tax on the amount of gross pay you set aside to pay for qualified expenses, your social security benefits at retirement may be slightly reduced. However, most tax advisors recommend taking advantage of current tax-savings opportunities like Flexible Spending Accounts.

What is the purpose of a limited FSA?
A limited FSA is a tax-favored plan that is "permitted other coverage" for health savings account (HSA) eligibility. A limited FSA can only reimburse for dental, vision and preventive care expenses while meeting the deductible of the high deductible health plan (HDHP).

What is an "eligible expense" under the limited health care FSA?
While meeting the deductible of your High Deductible Health Plan (HDHP), eligible expenses for a limited health care FSA are for vision, dental and preventive care. Examples of common out-of-pocket expenses covered by a limited FSA include eye care, such as exams, LASIK surgery, eyeglasses and contact lenses for vision correction, and saline solution; orthodontia and dental work; preventive screenings and periodic health evaluations; prescription medicine for preventive care; and over-the-counter items for dental, vision and preventive care.

Once you meet the deductible of your HDHP and if your plan allows it, your limited FSA becomes a post-deductible FSA. A post-deductible FSA pays all FSA-eligible expenses, just like a traditional health care FSA.  For more information, we recommend that you consult a tax advisor or IRS Publication 969, which provides guidance on the types of expenses that can be reimbursed from a limited FSA. CLICK HERE to access Publication 969.

If I have someone come into my home to take care of my children instead of using a day care facility, do these expenses qualify for a dependent care FSA?
Yes. If the services are necessary in order for you (or, if you are married, you and your spouse) to work, you can include payments made to a babysitter or companion in or outside your home. Expenses will also qualify for a dependent care FSA if you work and your spouse is a full-time student or is mentally or physically incapable of self-care. However, you cannot be reimbursed for payments made to your spouse, the parent of your qualifying child, your child under age 19 (even if not your dependent) or a person whom you claim as a dependent on your tax return.

How much can I contribute to a dependent care FSA?
If you are married and file your tax return jointly with your spouse, then you and your spouse are allowed to contribute up to the lesser of $5000 or the earned income of the lower-paid spouse. (For example, if one spouse had earned income of $4,500 for the year and the other spouse's earned income was $25,000, they may only contribute up to $4,500 to the dependent care FSA.)

If you are married and file separately, you and your spouse are each allowed to contribute up to the lesser of $2,500 of your respective earned incomes.

If you file as single or as head of household, you can make annual contributions up to the lesser of $5,000 or the amount of your earned income. Only the custodial parent may participate in a dependent care FSA.

I am a divorced parent. May I establish a dependent care FSA for child care expenses even if my ex-spouse has already done so?
Yes, if you are the custodial parent. This is true even if the non-custodial parent claims the dependency exemption for that child. In general, the custodial parent is the parent with whom the child lives for more than 50% of the year. The non-custodial parent may not participate in a dependent care FSA because the IRS takes the position that dependent care expenses are not necessary for the non-custodial parent to be gainfully employed.

Can I use the dependent care FSA for elder care? What if my elderly parent remains in his/her own home or a nursing hone but is still my dependent?
You can use the dependent care FSA for elder care expenses so that you (or if you are married, you and your spouse) can work. To claim the expenses:

• Generally, your parent must qualify as your dependent under the tax rules.
• Your parent must be physically or mentally incapable of self-care.
• Your parent must reside in your home for at least half of the year.
• Your parent must usually spend at least eight hours a day in your home.

For additional information CLICK HERE to view IRS Publication 503.

Is it better to use the deduction on my annual tax return or participate in the Dependent Care Account?
For the most part, if your tax bracket is higher than 15%, the Dependent Care FSA is best and if your tax bracket is lower than 15%, the Dependent Care Tax Credit is best.

If you are earning a moderate to high income ($60,000 or above), and particularly if you are filing taxes as "Married, Filing Jointly" (combining incomes with a spouse), the Dependent Care FSA is probably more advantageous. For example, if you have 1 child, the $5000 available through the Dependent Care FSA is better than the credit arising from the limit imposed by the Dependent Care Tax Credit.

Don’t forget! The FSA saves not only income taxes (federal and state), but social security taxes as well. There are no social security tax savings offered by the Dependent Care Tax Credit.  (Note: Your social security benefits could be slightly reduced by paying less social security taxes.)

Some assistance is provided by the IRS Publication 503 "Child and Dependent Care Expenses", which provides full information about the tax credit and offers worksheets and aids for performing the calculation.

CLICK HERE for a table to help you determine which is best for you based on your filing status. Custom Design Benefits is providing this link to general information as a courtesy, it is important that you consult your tax advisor when making your decision.

When are funds for my Dependent Care FSA available?
Dependent Care FSA reimbursements are available after incurring qualified expenses up to the amount you have contributed from your paycheck(s).

Are all transportation benefits paid under one account?
No. Qualified Transportation Benefits are actually funded under two separate accounts – Transit and Parking. A Transit account reimburses for certain expenses incurred traveling to and from work. A Parking account reimburses for work-related parking expenses.

I participate in a car pool to get to work. Is that a covered expense?
No. A car pool is not an eligible Transit expense.

Is mileage a covered expense?
No. Mileage is not a covered work-related expense.

Is the cost of gas to and from work a covered expense?
No. Gas is not a covered expense.

When are funds for my Parking & Transit FSA available?
Parking FSA reimbursements are available after incurring qualified expenses up to the amount you have contributed from your paycheck(s).

Below are additional resources to help you learn about the benefits of FSAs. We are providing links to other resources as a courtesy. Custom Design Benefits is not responsible for the content of these additional resources.

www.mytakecareplan.com

www.irs.gov/publications/p969/ix01.html

www.irs.gov/pub/irs-pdf/p503.pdf  

http://www.mhmresources.com/er_dccvsfsa.htm