Flexible spending accounts (FSAs) are offered by employers and allow employees to set aside a tax-free amount of money for qualified medical or dependent care expenses. Employees must enroll annually to participate and provide proof of expenses paid to receive reimbursement. FSAs have a “use it or lose it” rule, and maximum amounts may vary by employer and FSA type. Eligible expenses include copays, prescription drugs, insurance deductibles, and child or elder care expenses. To receive reimbursement, employees must file a claim with their employer and provide proof of payment.
An employee receives a flexible spending account (FSA) reimbursement through an employer-sponsored spending account. To receive reimbursement, the individual must have accrued qualified medical or dependent care expenses, according to the rules of the US Internal Revenue Service (IRS). Employers generally offer two types of flexible spending accounts , and employees must enroll in either program to receive coverage in a given year. An employee can obtain reimbursement from the FSA by presenting the employer with written proof of expenses paid.
To qualify for a refund from the FSA, the employee must “elect” annually to participate in an employer-sponsored FSA. The FSA, which comes as part of most benefits packages offered by some companies each year, is a spending account that allows an employee to set aside a specified amount of money tax-free. Funds for the FSA are generally deducted from the employee’s salary. Medical care and dependent care options are two types of FSAs.
A health care flexible spending account can be used to pay for health insurance copays and prescription drugs, among other expenses. A dependent care FSA can be used for child or elder care expenses, for example. Spending account maximum amounts may vary by employer, FSA type and plan year. All funds placed in the FSA must be used before the end of the year or they will be lost, also known as the “use it or lose it” rule.
In addition to copays and prescription drugs, health-related expenses that are eligible for reimbursement from the FSA include insurance deductibles, dental and vision expenses, and psychiatric and chiropractic services. Expenses that are eligible under a dependent care FSA include daycare or other services for children under 13 years of age. Other allowable expenses include those for disabled or sick dependents who cannot care for themselves. The qualifying person must also be in the employee’s home for at least eight hours a day.
An employee must file a claim with the employer to receive reimbursement from the FSA for health or dependent care expenses. To be reimbursed from the FSA under the healthcare option, the employee must provide a written statement from a third party showing the amount of the expense, proof that it has been paid out-of-pocket, and that the amount has not yet been reimbursed . For example, a pay stub or doctor’s bill can be submitted as part of a claim. The employee may also be required to sign a statement certifying that the expense is not eligible for reimbursement under any other coverage.
To receive reimbursement for a dependent care FSA, the employee must also provide the employer with a written statement indicating the amount of the expense and proof of payment. The expense must not have been previously reimbursed or be eligible for reimbursement under another plan. A sample proof includes an invoice from a day care provider. FSA reimbursement amounts vary based on the expenses the employee accrued during the plan year.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
