Flexible Spending Accounts

What’s a Flexible Spending Account?

As an employee you have the option to set up a pre-tax Flexible Spending Account (FSA) with ADP to pay for routine out-of-pocket health care or dependent daycare expenses.

 

Health Care FSA

You may contribute a minimum of $100 and a maximum of $2,550 from your pay before taxes each calendar year. 

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. However, if you enroll in Medica HSA, your claims are limited to out-of-pocket costs for eligible dental and vision expenses.

Use the FSA Eligible Expense Search to find out if an item or service is covered. That will help you decide how much to put into the FSA.

 

Dependent Daycare FSA

You may contribute a maximum of $5,000 per household from your pay before taxes each calendar year. 

Use your pretax dollars to pay for eligible expenses provided by a qualified dependent care provider 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.

Use the FSA Eligible Expense Search to find out what types of facilities are covered for dependent care services so you can decide how much to put into the FSA.

 

What’s the Benefit of an FSA?

  • Gives you peace-of-mind. With the money set aside, you’ll be ready for large health-related costs such as the need for new prescription glasses, or for your weekly daycare costs.
  • Easy to use. You’ll receive a debit card for your health care FSA. It’s as easy to use as the bankcard you use every day.  Or you can submit your health and dependent daycare claims online or by using a phone app.
  • Saves money on taxes. A FSA saves you money by lowering the taxes deducted from your paycheck. Because your FSA contributions are taken out before taxes are considered, you lower your income and your tax payments too. FSA users save about 30 cents for every dollar deposited into their FSA, depending on their tax bracket.

Here’s an example that shows the tax savings:

Annual Savings* With FSA Without FSA
Annual pay $50,000 $50,000
FSA pre-tax contribution ($2,000) $0
Taxable income $48,000 $50,000
Federal Income, Social Security and Medicare taxes ($10,966) ($11,616)
After-tax dollars spent on eligible expenses $0 ($2,000)
Real Spendable income $37,034 $36,384
Savings with an FSA $650 -- your savings from using an FSA --

* Sample tax savings for a single taxpayer with no dependents. Actual savings will vary based on your individual tax situation. Please consult a tax professional for more information.

  • Find your potential savings. To try an interactive contribution and tax-savings calculator, find and click on FSA Decision Support Tool under Enroll in an FSA; skip the intro; and click on Start Saving on the next page.

 

What is the Use-It-or-Lose-It Rule?

Calculate your expenses and contributions carefully! If you do not use all of the money in your FSA for expenses incurred between the date your coverage is effective and the grace period deadline on March 15 of the following year, you lose the unused portion. All of your claims must be submitted by March 31 of each year.