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FSAs can provide tax-free help for qualified medical expenses with no administration fee this year
A Flexible Spending Account (FSA) provides another opportunity for you to better control your health care dollars. By tucking away pre-tax dollars from your paycheck, you have an account that’s dedicated for the reimbursement of qualified medical, vision and dental expenses. In addition, the bi-weekly employee administration fee is being paid by the State during the 2016 plan year, providing you with even more opportunities to save.
The state’s FSA program is administered through Key Benefits Administrators. All FSAs offered by the state have a use-it-or-lose-it rule. Money left at the end of the plan year is not rolled over or reimbursed, so plan carefully.
Three types of FSAs: Medical Care, Limited Purpose and Dependent Care
Medical Care and Limited Purpose FSAs allow employees to use pre-tax dollars to cover health care costs for medical, dental, vision, hearing and other out-of-pocket expenses not paid by insurance.
For 2016, the maximum annual contribution for the Medical Care and Limited Purpose FSAs is $2,500.
A Limited Purpose FSA may only be used for dental, vision and preventive care expenses until the minimum deductible of a CDHP is met ($1,300 for single and $2,600 for family, per federal regulations). Once the minimum deductible is met, the Limited Purpose FSA can be used as a Medical Care FSA.
If you are enrolled in a CDHP/HSA, your FSA will automatically become a Limited Purpose FSA. You do not need to meet the minimum deductible to use the funds in your Limited Purpose FSA for dental and vision expenses. You can pay for dental and vision expenses from your Limited Purpose FSA at any point during the year.
Dependent Care FSAs are not front-loaded. Portions of your biweekly pay are put into a pre-tax account to pay for eligible dependent care costs throughout the year. Currently, the maximum annual contribution amount for the Dependent Care FSA is $5,000 ($2,500 if married and filing separate tax returns).
Dependent care costs include most dependent care expenses for eligible children and adults. Dependent care expenses do not include medical expenses and therefore can be used even if you participate in a HSA.