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Reimbursement Accounts

 

Use It or Lose It!
FSAs have a "use it or lose it" policy, which means you forfeit any amounts unused and not reimbursed for services received during the Plan year.

  

...or Flexible Spending Accounts

The State offers you three Reimbursement Accounts that can provide you with a tax break on your predictable out-of-pocket costs:

 

Medical Reimbursement Account* Limited Purpose Medical Reimbursement Account Dependent Care Reimbursement Account

From $60 to $5,000 in pre-tax dollars for the 2008 plan year to pay yourself back for out-of-pocket medical, prescription, dental and vision expenses eligible for deduction under IRS tax rules but not paid by insurance or reimbursed from any other source

From $60 to $5,000 in pre-tax dollars for the 2008 plan year to pay yourself back for out-of-pocket dental, vision and over-the-counter medication expenses eligible for deduction under IRS tax rules but not paid by insurance or reimbursed from any other source

From $60 to $5,000 in pre-tax dollars each year ($2,500 if you're married filing separate tax returns) to cover care for a child, disabled spouse or elderly adult who is dependent on you and needs care so that you (and your spouse if you're married) can work

*Not available if you enroll in a Health Savings Account.
Note: Annual minimum deduction amount for all Reimbursement Accounts is $60.

How FSAs work - Easy as 1 - 2 - 3

  1. You set aside pre-tax dollars from your paycheck.
  2. You submit eligible expenses for reimbursement throughout the year.
  3. You are reimbursed from your FSA for the eligible expenses you submit.

If you pay federal income tax and Social Security tax, this creates about a 20% savings on most of the health or dependent care services you buy. The savings could be more - depending on your income tax rate. And yet, even when you pay no income taxes, the Social Security tax savings is about 7.5% - or $7.50 for each $100 you spend.

How much can I save using an FSA?

If you:

  • Are in the 15% federal income tax bracket (for 2007, generally $7,825 - $31,850 for single, and $15,650 - $63,700 for married filing jointly)
  • Have an eligible expense of $150

Your true cost for that expense would be about:

$176 after-tax because you have to earn about $176 to clear $150 after taxes
$150 pre-tax because the entire $150 is never taxed and goes directly to your expenses

Before enrolling, estimate expenses carefully for the 2008 calendar year, and read about some important considerations for making your FSA choices.

Claiming Your Reimbursement Account Benefits

You claim Reimbursement Account benefits by submitting a claim form and appropriate supporting documentation to PeopleFirst.