Flexible Spending Accounts
What is a Flexible Spending Account and How Does It Work?
A Flexible Spending Account or FSA is a special account that you put money into before taxes to pay for eligible out-of-pocket health care and dependent daycare expenses. It’s a great way to pay for those expenses because you don’t pay federal income tax or Social Security tax on the money that you put into your FSAs or when you get a reimbursement. That means you could save about 30 cents on every dollar you put into an FSA, depending on your tax bracket.
You choose how much money to put into the account, within certain minimum and maximum limits, and it is taken from your pay—before taxes—in equal installments for the whole year if you enroll during Open Enrollment or the remainder of the calendar year if you enroll mid-year. When you incur an eligible expense, you submit a claim to the FSA administrator for reimbursement.
ADP Benefits Solutions (ADP) is the administrator for the pre-tax Health Care and Dependent Daycare Flexible Spending Accounts. By registering for an account online, you get secure access to your claims so you can view statements and complete claim forms for reimbursement. The next step is to have your bank account information ready and sign up for direct deposit of your reimbursement funds.
Resources for Using Your FSA
- FSA Eligible Expense Search
- Health Care Claim Form (pdf)
- Letter of Medical Necessity (pdf)
- Dependent Daycare Claim Form (pdf)
ADP Customer Service Number: 1-866-697-6077
Health Care FSA
Eligible claims include any health care expenses not covered by your medical and dental plans, such as copays and deductibles. It also includes vision care expenses for prescription eyeglasses and contact lenses; as well as medicines that require a prescription.
Spending Account Card for Health Care FSA
The spending account card, a secure VISA®-branded, prepaid card from ADP with the amount of your election added to the card, gives you direct access to your health care funds. Follow the instructions provided with the card to activate it and be sure to sign your card.
Validation Request Form (VRF) for Card Purchases
The IRS requires all spending account card purchases be validated. Over 90% of these purchases are automatically validated, but the other 10% will need to be validated by submitting documentation. If ADP has your email address in their system, you will receive an email when a VRF is posted to your account; otherwise, a paper VRF will be mailed to your home. Just follow the steps to submit your itemized statements for reimbursement.
Dependent Daycare FSA
Use your pretax dollars to pay for eligible expenses related to care for your child, disabled spouse, elderly parent, or other dependent who is physically or mentally incapable of self-care, so you can work, or if you’re married, for your spouse to work, look for work, or attend school full time.
Deadlines to Incur and Submit Expenses
You may file claims for eligible expenses incurred from your 2016 effective date of coverage through March 15, 2017. Your claims must be submitted by March 31, 2017.
An IRS requirement states that if you do not use all of the money for expenses incurred between your effective date and March 15 of the following year, you lose the unused portion.
Difference Between IRS Guidelines and FSA for Submitting Expenses
According to Pub 502, you can submit dental expenses, medical expenses, and long-term care insurance premiums you paid this year, regardless of when the services were provided, as a deduction on Schedule A. However, none of these expenses are eligible through flexible spending accounts, which administer claims based on dates of service, not on the date that payment is made for an expense.