Flexible Spending Accounts

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2020 Limited Edition Mid-Year FSA Opportunity 

The IRS has provided guidance that allows employers to offer participants the opportunity to create, increase, decrease, or revoke a 2020 FSA (dependent care or health care) election without a family status change or qualified life event. Active employees who took a previous opportunity in 2020 to change their FSA are still eligible for this opportunity.

Important Note: Per IRS rules, you cannot decrease your FSA election below what you have already deducted from paychecks or spent on claims (whichever is greater) in 2020. Refunds of deducted money are not allowed. Similarly, if you are choosing to increase your existing FSA or create a new FSA, you may only spend those newly added dollars on purchases and expenses after the effective date of your FSA change. For example, you may add money to your Dependent Care FSA for an after-school program that will begin in September, but not for a day camp that already occurred in May. 

Send in your changes before the August 31, 2020 deadline:

First, if you currently have an FSA, check what’s in your FSA balance(s) on your FSA portal from Discovery Benefits, then decide if you want your 2020 annual dollar amount(s) to increase, decrease, or stop completely. No additional documentation is required. Then:

Send your filled form to benefits@umn.edu or by postal mail to UMN Total Compensation, 100 Donhowe Bldg, 319 15th Ave SE, Minneapolis, MN, 55404. Once your form is received, your FSA deduction will be stopped as soon as administratively possible. Depending on the volume of requests we receive and the timing of your form’s arrival, it could take up to 2 pay periods.

What’s a Flexible Spending Account?

You can set up a pre-tax Flexible Spending Account (FSA) to pay for routine out-of-pocket health care or dependent daycare expenses.

As a new employee, you can enroll online through MyU within 30 days of your date of employment or your newly benefits-eligible job. Your Flexible Spending Account starts on the first day of the month following your first day in your new job.

Health Care FSA

You may contribute a minimum of $100 and a maximum of $2,700 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 Discovery Benefits Eligible Expenses 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 Discovery Benefits Eligible Expenses 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 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. Use the personalized FSA calculator help you crunch the numbers to determine the amount of money to set aside from each paycheck and the amount of savings you’ll get back in return.

 

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.

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