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Personal Risk Services Flexible Spending Accounts __________________________________________ Union College September 6, 2005 A Closer Look At Flexible Spending Accounts (FSA’s) What is an FSA? F lexible S pending A ccount

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Personal Risk Services

Flexible Spending Accounts


Union College

September 6, 2005


A Closer Look


Flexible Spending Accounts (FSA’s)


What is an FSA?

  • Flexible Spending Account
  • Allows employees to set aside pre-tax dollars to pay for medical and dependent care expenses.
  • Gives participating employees and employers a tax break

How does it work?

  • Employee decides how much salary to set aside for either un-reimbursed medical or dependent care expenses.
  • Medical and dependent care are two separate elections.
  • The amount is deducted from the paycheck.
  • When out-of-pocket expenses have been paid, a reimbursement is made.

Advantages of participating

In an FSA

  • Un-reimbursed Medical Expenses:
    • Office visit co-pays
    • Co-insurance/deductibles
    • Prescriptions
    • Employer sets maximum to withhold

Advantages of participating

In an FSA

  • Dependent Care Expenses:
    • Day care and after care for a child under the age of 13
    • Care for a disabled spouse or dependent incapable of caring for himself.
    • Summer camp (day or overnight)
    • Federal limit of $5,000

Any Disadvantages of participating

In an FSA?

  • Estimation Error –An employee may over or underestimate their expenses for the year.
  • “Use it or Lose It Rule”–Under regulations issued two decades ago, employees forfeited any unused balances their FSA accounts at the end of a plan year.
  • However, this rule has been eased effective May 18, 2005. The new regulation allows a 2 ½ month (75 days) grace period at the end of a plan year …extending the time frame for an employee to use money left over at June 30.
  • Irrevocable Election Rule- which prohibits modification to an election during the plan year unless there is a qualifying event in status.
examples of ineligible expenses section 105
Un-reimbursed Medical:

Weight loss programs

Health Club fees…swimming lessons

Dancing lessons

Insurance premiums

Dependent care:

Cost of food, clothing and tuition

Cost of babysitting fees by local teenage

Cost of transportation to place where dependent care is given

Examples of Ineligible Expenses(Section 105)


July 1, 2005

The FSA allows


(over-the-counter medicines & products)

examples of acceptable otc s

Contact solution

Ace bandages

Pepcid AC

Cold medications (children/adult)

Examples of acceptableOTC’s
examples of non acceptable otc s




Soaps & lotions

Examples of non-acceptableOTC’s
how are fsa claims paid
How are FSA claims paid?

If there is a medical, dental, or vision claim, the ARM claims system will automatically pay to you any co-pay or co-insurance amounts.

This is done in a weekly “sweep”. Checks are run bi-weekly.

If the claims are co-pays for Rx expense or an OTC, a claim form with receipt must be submitted for reimbursement.

claim forms
A claim form is only required if:

- the provider is unable to bill ARM directly

- the expense is for Rx

- the expense is for OTC items

Forms can be obtained from our website at or from your HR dept.

Claim Forms