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Flexible Spending Account (FSA) 

HR Service Inc. is a third-party benefits administrator with the experience, knowledge, and expertise to administer FSA or Flexible Spending Account plans. We provide comprehensive administration services to help your company meet compliance requirements. Third-party administrators provide daily administrative tasks and help ensure your account stays compliant with federal, state and local regulations.

  • Enjoy significant tax savings with pre-tax deductible contributions and tax-free reimbursements for qualified plan expenses.
  • Quickly and easily access funds using the prepaid benefits card at the point of sale, or request to have funds directly deposited to your bank account via online or mobile app.
  • Reduce filing hassles and paperwork by using your prepaid benefits card.
  • Enjoy secure access to accounts using a convenient consumer portal available 24/7/365.
  • Manage “on the go” with an easy-to-use mobile app.
  • File claims easily online (when required) and lets the system determine approval based on eligibility and availability of funds.
  • Stay current on balances and actions required with automated email alerts, a convenient portal, and mobile home page messages.

The amount of your pay into an FSA will not count as taxable income so you will have immediate tax savings. A Flexible Spending Account allows reimbursement of qualifying out-of-pocket medical expenses. A Limited Purpose Medical FSA works with a qualified high deductible health plan (HDHP) and Health Savings Account (HSA).

 A limited Flexible Spending Account only allows reimbursement for vision and dental expenses. A Dependent Care Flexible Spending Account allows reimbursement of dependent care expenses, such as daycare) incurred by eligible dependents. An FSA cannot provide a cumulative benefit to the employee beyond the plan year.

Flexible Spending Account Benefits the Employer and Employee

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New Expenses Eligible For Your FSA

 

Participating in a Health Savings Account and Flexible Spending Account can contribute pre-tax funds for hundreds of eligible expenses. Recently, you gained even more flexibility in your ability to save when the CARES Act was signed into law. This new legislation expanded the list of eligible expenses by including popular over-the-counter products, which consumers can now purchase without a prescription. This change went into effect on January 1, 2020, and allows over 20,000 new expenses as eligible moving forward. That’s great news for consumers since the average American shops for over-the-counter medications 26 times yearly.

Five of the most common expenses that are now eligible:

Pain relief medications – there are many reasons to need pain relievers. There are two common types of over-the-counter pain medications: acetaminophen and nonsteroidal anti-inflammatory drugs (NSAIDs), both of which are now among the eligible expenses.

Cold and flu products  –  cold and flu season never goes away. On average, as much as twenty percent of the U.S. population gets the flu each season.  Fortunately, the over-the-counter medicines taken to cope with a severe cough or congestion are now eligible expenses.

Allergy products – Thirty percent of American adults and forty percent of children suffer from allergies. The cost of allergies to the healthcare system is estimated at $18 billion. However, those with allergies can now find relief with their funds in the form of over-the-counter antihistamines and decongestants.

Heartburn medications – Heartburn is among the more common afflictions in this country. Americans spend billions of dollars each year on medicines that treat heartburn. The CARES Act states over-the-counter drugs are eligible without a prescription.

Menstrual products – The CARES Act also included menstrual care products as eligible expenses. Eligible products include tampons, pads, and menstrual sponges.

Hand sanitizers and medical masks are now covered expenses under the plans as long as they are used to prevent the spread of a specific illness such as Covid19.

  • Enjoy significant tax savings with pre-tax deductible contributions and tax-free reimbursements for qualified plan expenses.
  • Quickly and easily access funds using the prepaid benefits card at the point of sale, or request to have funds directly deposited to your bank account via online or mobile app.
  • Reduce filing hassles and paperwork by using your prepaid benefits card.
  • Enjoy secure access to accounts using a convenient consumer portal available 24/7/365.
  • Manage “on the go” with an easy-to-use mobile app.
  • File claims easily online (when required) and lets the system determine approval based on eligibility and availability of funds.
  • Stay current on balances and actions required with automated email alerts, a convenient portal, and mobile home page messages.

The amount of your pay into an FSA will not count as taxable income so you will have immediate tax savings. A Flexible Spending Account allows reimbursement of qualifying out-of-pocket medical expenses. A Limited Purpose Medical FSA works with a qualified high-deductible health plan (HDHP) and Health Savings Account (HSA).

 A limited Flexible Spending Account only allows reimbursement for vision and dental expenses. A Dependent Care Flexible Spending Account allows reimbursement of dependent care expenses, such as daycare) incurred by eligible dependents. An FSA cannot provide a cumulative benefit to the employee beyond the plan year.

The IRS just released 2023 contribution limits for FSAs, commuter benefits, adoption assistance, QSEHRAs, and more.

The new 2023 limits are: 

FSA (medical, limited, and combination FSAs)

$3,050 per year

FSA carryover

$610 per year

Commuter benefits

$300 per month

Adoption assistance

$15,950 per year

QSEHRA

Single $5,850, Family $11,800 per year

HSA (previously announced)

Single $3,850, Family $7,750 per year

Minimum deductible for qualifying HDHP

Single $1,500, Family $3,000 per year

Maximum out-of-pocket expenses for HDHP

Single $7,500, Family $15,000

fsa

Flexible Spending Account Scenario

 

With the use-it-or-lose-it rule and benefit limits, many employees (and some employers) wonder if the tax savings provided by a Flexible Spending Account and Dependent Care Plan are worth the risks and hassles.

As an example, let’s consider the example of Joe Workman, an employee of ABC Company. With doctor’s visits, dental exams, and the annual cost of glasses and an eye exam for his son, Joe usually has about $2,600 in expenses that are eligible under a Flexible Spending Account. Joe and his wife, Beth, both work and have work-related childcare expenses of $1,500 per month ($18,000 per year). Below are two scenarios showing Joe’s net pay after these expenses both with and without an FSA and DCAP:

Joe Workman – Without/With an FSA or DCAP 

  • Annual Income –  $50,000  
  • Pre-Tax Election  – $0/$2,750
  • Pre-Tax DCAP Election –  $0/$5,000
  • Taxable Income –  $50,000/$42,400
  • Annual Taxes –  $7,273/$5,552
  • After-Tax Income – $42,727/$36,848
  • Out-of-Pocket Medical, Dental, Vision Rx – $2,600 
  • Work-Related Childcare –  $18,000/$13,000
  • Net Pay After Taxes and Expenses – $22,127/$23,848 

With an FSA and DCAP for his expected expenses, Joe is “giving himself a raise” of over $1,700 a year! Joe’s company saves on Social Security, Medicare, and unemployment taxes with Joe’s elections as well:

With $2,750 FSA/DCAP  

  • Annual Income –  $50,000 
  • Taxable Income – $42,400
  • Annual FICA and FUTA  – $3,867 / $3,286

With Joe’s FSA and DCAP alone, his company saves over $500 a year in employment costs!

Handling the Risk of Use It or Lose It

Despite these potential savings, many employees (and employers) still don’t want to deal with the potential risks.  As you probably know, participants have to use their election within the plan year towards eligible expenses; any unused funds are forfeited to the plan—this is the infamous use-it-or-lose-it.

Employers have options available that can lessen this risk for employees and make a more attractive option:

  • Employers have had the option to add the $570 rollover to their plan, which allows employees to “roll” up to $570 of an unused balance from one plan year to another. This rolled amount becomes part of the new year balance and is available during the new plan year.
  • Participant education: most employees are unaware of all the potential uses. Using resources such as a list of ordinary eligible expenses or sites like FSA Store can help educate your participants and ensure they use the maximum amount of their FSA possible.
Payroll FSA Calculator

FSA FAQ

A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money in that you use to pay for some out-of-pocket health care costs. Flexible Spending Account is a pre-tax benefit account that you can use to pay for eligible medical, dental, and vision care expenses that aren’t covered by your health insurance plan. You decide how much to contribute to your Healthcare FSA each year, and funds are withdrawn automatically from each paycheck for deposit into your account before taxes are deducted. The total amount you elect to contribute to your Healthcare FSA each year is available on the first day of your plan year.

• You can use funds to pay for certain medical and dental expenses for you, your spouse if you're married, and your dependents.
• You can spend your funds on prescription medications, as well as over-the-counter medicines with a doctor's prescription.
• You can spend funds to pay deductibles and copayments, but not for insurance premiums.
• May also be used to cover costs of medical equipment or products, like Band-Aids.

The limits for 2022 are as follows:

  • FSA (medical, limited, + combination FSAs) $2,850 per year

• With a Flexible Spending Account, you elect to have your annual contribution (up to the $2,850 limit set by the IRS) deducted from your paycheck each pay period, in equal installments throughout the year, until you reach the yearly maximum you have specified.
• The amount of your pay that goes into an FSA will not count as taxable income so that you will have immediate tax savings.
• Allows reimbursement of qualifying out-of-pocket medical expenses.
• Limited Purpose Medical FSA works with a qualified high deductible health plan (HDHP) and Health Savings Account (HSA). A limited FSA only allows reimbursement for vision and dental expenses.
• You receive a reimbursement of dependent care expenses, such as daycare) incurred by eligible dependents.
• The amount of your pay that goes into an FSA will not count as taxable income so that you will have immediate tax savings.
• Qualifying out-of-pocket medical expenses.
• Limited Purpose Medical works with a qualified high deductible health plan (HDHP) and Health Savings Account (HSA). A limited FSA only allows reimbursement for vision and dental expenses.
  • Enjoy significant tax savings with pre-tax deductible contributions and tax-free reimbursements for qualified plan expenses.
  • Quickly and easily access funds using the prepaid benefits card at the point of sale, or request to have funds directly deposited to your bank account via online or mobile app.
  • Reduce filing hassles and paperwork by using your prepaid benefits card.
  • Be comfortable knowing that secure access to accounts is available using a convenient Consumer Portal available 24/7/365.
  • Manage your FSA “on the go” with an easy-to-use mobile app.
  • File claims easily online (when required) and lets the system determine approval based on eligibility and availability of funds.
  • Stay up to date on balances and action required with automated email alerts and convenient portal and mobile home page messages.
  • Get one-click answers to benefits questions. Use it or Roll It Over. And now, up to $570 of your available healthcare Flexible Spending Account balance.

Employees decide on how much to contribute while employers manage the rules of their contribution. The maximum for employee contributions is $2,850; an employer may limit employees to less than that amount. They may also determine the provision for any unused Health FSA balance at the end of the year.
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