Flexible Spending Account (FSA)

What is an FSA?

A Flexible Spending Account is an employee benefit that allows you to set aside money, on a pre-tax basis, for certain kinds of common expenses. With an FSA, you can reduce your taxes while paying for services you would have to pay for anyway.

This program provides three types of accounts:

  1. A Health Care FSA (HCFSA) allows pre-tax reimbursement of eligible medical costs not covered or reimbursed by insurance, such as co-payments and over-the-counter medicines. This includes expenses incurred by you and/or any dependent you claim on your Federal income tax return.
  2. A Limited Expense Health Care Account (LEX HCFSA) is used in place of HCFSA if you are enrolled in a High Deductible Health Plan with a Health Savings Account (HSA). LEX HCFSA allows you to submit eligible dental and vision expenses only.
  3. A Dependent Care FSA (DCFSA) allows participants to be reimbursed on a pre-tax basis for child care or adult dependent care expenses necessary to allow you or your spouse to work, look for work, or attend school full-time. Eligible family members include a child, up to age 13; and/or a person of any age whom you claim as a dependent on your Federal income tax return and who is mentally or physically incapable of caring for himself or herself.

How Does an FSA Work?

  1. FIRST, you need to determine how much money to allot on an annual basis and make your election(s).
  2. SECOND, our payroll office, the Defense Finance and Accounting Service, will deduct equal installments of the annual allotment you elect. This allotment will be deposited into your FSA account(s).
  3. THIRD, when you incur an eligible expense, you will pay for it out of pocket, and then submit a claim for reimbursement.
  4. FINALLY, your claim will be processed and you will be reimbursed.

Who is Eligible?

If you are currently eligible for enrollment under the FEHB program, (even if you are not currently enrolled) you will be able to elect a HCFSA. However, if you are enrolled in a High Deductible Health Plans (HDHP) with a Health Savings Account (HSA), you cannot enroll in a HCFSA. You have the option of electing a LEX HCFSA.

All employees with qualified dependents may elect to enroll in the DCFSA except temporary employees with no fixed work schedule whose tour of duty is six months or less.

I am Eligible. How Much Can I Contribute?

For the HCFSA and LEX HCFSA, you may elect a maximum annual election of $5,000. For the DCFSA, you may elect a maximum annual election of $5,000 per household or $2,500.00 if married, filing separately. For all accounts, the minimum election must be $250. The allotments will be made before Federal, state and social security taxes are calculated.

Possible forfeitures

Because of the tax advantages of FSAs, the IRS has strict guidelines for its use. One of these guidelines is commonly known as the "use it or lose it" rule. Put simply, if you have not incurred enough eligible expenses during the plan year to equal the annual amount you have contributed to their FSA(s), you will lose the balance remaining in your account(s) when the plan year ends. But, the plan year will be extended through March 15 of the following calendar year if you have not spent down your expenses during the prior year. Also, if you resign during the plan year and you have not incurred enough eligible expenses you will lose the balance remaining.

How Do I Enroll?

The FSA program is administered by SHPS, Inc. You enroll directly with SHPS through their FSAFEDS website or by calling an FSAFEDS Benefits Counselor at 1-877-FSAFEDS (372-3337), (TTY: 1-800-952-0450), Monday through Friday, 9:00 a.m. until 9:00 p.m., EST. Unless you are a new or newly eligible employee, experience a Qualified Life Event (QLE), or qualify for a belated enrollment, you can only enroll in FSAFEDS during the annual open season.

Helpful Links

Questions?

Questions may be directed to FSAFEDS@SHPS.com or contact a customer service representative at 1-877-FSAFEDS (372-3337), (TTY: 1-800-952-0450), Monday through Friday, 9:00 a.m. until 9:00 p.m., EST.

This page was last reviewed on November 5, 2009