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Flex Spending Accounts General Info
Types of Flex Spending Accounts Available
AdvanStaff offers many types of FSA account so employees can lower taxes and take home as much money as possible.
The FSA plan types are as follows:
Increase Your Take-Home Pay by Reducing Your Taxable Income!
A Flexible Spending Account (FSA) allows you to save up to 30% on your eligible healthcare, dependent care, business parking, and commuting expenses every year by using pre- tax dollars.
FSA Frequently Asked Questions
The FSA is offered through your employer and administered by AdvanStaff HR. When you choose to enroll in FSA plan, you decide the dollar amount you want to contribute to each account based on your estimated expenses for the upcoming year. The funds will be deducted pre-tax in equal amounts from each paycheck throughout the plan year. For every dollar you put into these accounts, the more money you save by paying less in taxes.
As you incur eligible expenses, you simply use the supplied VISA to direct pay the service or product provider up to the amount of your annual contribution.
You may also elect to receive a reimbursement directly to your bank account if you decide or can’t use the provided card for direct pay.
At the time of enrollment, or during annual open enrollment, you are eligible to make an annual election on how much to save from each paycheck.
AdvanStaff will deduct those equal amounts each pay period BEFORE taxes are paid, so you wont be paying taxes on the amounts. We will then deposit the amounts into a special account linked to a VISA debit card for you to conveniently use for covered expenses.
Health Savings Accounts (HSAs) are generally funded by the employer and/or the employee.
The IRS sets new limits each year for all types on flexible spending accounts. Elections are always made annually at open enrollment which generally takes place every December for the following calendar year.
Tax-Advantaged Plan Limits and Thresholds
|Flexible Spending Accounts (FSAs)||2021||2020|
|Healthcare FSA Max Election (per year)||$2,750||$2,750|
|Dependent Care FSA Max Election (per year)||$5,000||$5,000|
|Standard Mileage Rate (for Medical Care)||tba||$.17/mile|
|Health Savings Accounts (HSAs)|
|HDHP Min Annual Deductible – Single||$1,400||$1,400|
|HDHP Min Annual Deductible – Family||$2,800||$2,800|
|HDHP Out-of-Pocket Max – Single||$7,000||$6,900|
|HDHP Out-of-Pocket Max – Family||$14,000||$13,800|
|HSA Max Contribution Limit – Single||$3,600||$3,500|
|HSA Max Contribution Limit – Family||$7,200||$7,100|
|HSA Catch-Up Contribution Limit (age 55)||$1,000||$1,000|
The plan year is one full year (365 days) and generally begins on the first of a month. AdvanStaff HRs plan runs for an entire calendar year, January 1 to December 31.
The grace period is 90 days (up until March 31st of the following year) which employees may use up any funds remaining at the end of the plan year.
Allowable expenses must be incurred January 1 – December 31.
All reimbursements must be claimed no later than March 31.
This rule states that any funds remaining in the participating employee’s FSA account at the end of the plan year will be forfeited to the employer. Although the rule is clear, many users of an FSA largely misunderstand the result of the rule: loss of funds can be easily avoided.
Let’s look at an example:
Joe Smith chooses to participate in the Medical FSA and elects to fund $500 for the year. After the plan year and grace period are complete, Joe finds that he spent only $400 of the original $500 he put away. He fears he has lost $100, but due to the taxes he saved on the $500 he has not. Let’s say Joe is in the 28% tax bracket. By putting $500 away in his Medical FSA, he saved $140 in taxes (money that was not taken out of his paycheck and given to the IRS). In sum, even if Joe leaves $100 in his Medical FSA account, he has still saved $40! This vital key issue must be explained completely to potential FSA participants.
Employees who participate in an FSA should determine the amount to fund by looking at the expenses they will incur in a year; this amount is not an arbitrary number.
In this example, let’s say Mary Johnson is married with two children. One child is in daycare, Mary has glasses, and her husband Tom has allergies. When adding up how much to put away in her Medical and Dependent Care FSA accounts, Mary looks ahead for the year and determines that one child is going to need braces (add $2,000), that Mary is going to need glasses (add $500), and that Tom has a regular prescription for allergy medicine every month (add $120: $10 per month co-pay). Adding it all up, she determines her expenses add up to $5,000 for day care and $2,620 for medical expenses. Since the limit on the medical FSA for 2021 is $2,750, Mary will elect $2,750 for the Medical FSA and $5,000 for the Dependent Care FSA. The total amount she will put away toward her FSA is $7,750. These are expenses she knows will be incurred. Once again, at an average 28% tax bracket, Mary will save $2,170 by using her FSA! That is equivalent to getting her child’s braces for free! She has no doubt that she should take advantage of her FSA and save this money.
Cafeteria Plans are qualified, non-discriminatory benefit plans, meaning a discrimination test must be met based on the elections of the participants combined with any contribution by the employer.
You may change your FSA elections during the Plan year only if you experience a change of status such as:
- a marriage or divorce
- birth or adoption of a child, or
- a change in employment status
Refer to the Change of Election Form (available from your employer) for a complete list of circumstances acceptable for changing elections mid-year.