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Reimbursement Accounts

The state offers you three Reimbursement Accounts (also called Flexible Spending Accounts or FSAs) that can provide you with a tax break on your predictable out-of-pocket costs. Use the chart below to see how the accounts work; then visit the Choice Toolkit where estimator tools can help you decide if the Reimbursement Accounts have value for you.

New retirees and newly eligible COBRA individuals may make arrangements to participate in Medical Reimbursement Accounts through the remainder of the plan year. Participants in the Dependent Care Reimbursement Plan Account may no longer participate. For more details, contact the People First Service Center at 866-663-4735 (for TTY users, at 866-221-0268).

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.

 

Plan Year Grace Period Starting in 2008

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. The state has added a grace period – you may now use what you set aside for the Plan year for services up to March 15 of the following year. See below.

  

How FSAs work - Easy as 1 - 2 - 3

Link to: Compare the four main types of options

You set aside pre-tax dollars from your paycheck.

Link to: Which plans are available in your area

You submit eligible expenses for reimbursement throughout the year.
Link to: Think about your likely medical care needs for the coming year

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 People First.