Questions & Answers
Q&A
THE FOLLOWING QUESTIONS & ANSWERS were compiled by NARFE’s Federal Benefits Institute experts. NARFE does not provide legal, financial planning or tax advice or assistance.
EMPLOYMENT FLEXIBLE SPENDING ACCOUNT
Q
Several colleagues have encouraged me to use a flexible spending account. I read that they have a “use it or lose it” clause and decided not to set up an account. Could you explain the benefits of this program?
A
Flexible Spending Accounts (FSAs) offer a way for current employees to save money by paying for qualified expenses with earnings that are not subject to federal, state, FICA or Medicare taxes. Simply put, the allotment for FSAs comes out of your paycheck before taxes. For a Health Care FSA (HCFSA) or a Limited Expense Health Care FSA (LEX HCFSA), you can be reimbursed for eligible claims incurred up to your annual allotment (plus any carryover, if applicable). For the Dependent Care FSA (DCFSA), you can only be reimbursed up to the amount in your account at the time your claim is processed. The 2021 minimum was $100 for health care, with a maximum of $2,750 per individual. The DCFSA limit was $5,000 per household. The IRS will soon publish the limits for 2022. 16
NARFE MAGAZINE NOVEMBER 2021
Typically, a DCFSA is used to pay for care of children under age 13, including before- and after-school care, babysitting and other daycare expenses. A DCFSA can also be used for care for your spouse or a relative who is physically or mentally incapable of self-care and lives in your home. Be sure to review all eligible expenses at https://fsafeds.com/explore/ dcfsa/expenses. An HCFSA helps pay for health, dental, and vision expenses for you and your family that are not covered by insurance. Eligible expenses include the usual out-of-pocket expenses for your deductible, copays and coinsurance, but there are other expenses that can be reimbursed that you may not have considered. You may be reimbursed for chiropractic care, acupuncture, counseling and even massage therapy. Continuous
Positive Airway Pressure (CPAP) equipment and supplies, crutches, canes, defibrillators, hearing aids and orthotics are also considered eligible expenses, as well as vision care, including eye exams, contact lenses and supplies, prescription eyeglasses and laser eye surgery. Over-the-counter items such as acne, allergy and sinus medicines; antacids; pain relievers; cough drops; eye drops; hand-sanitizers; insulin testing materials; and sunscreen can be covered. Transportation to and from medical, dental and vision office visits are also covered. Be sure to review all eligible expenses at https://fsafeds.com/ explore/hcfsa/expenses. Employees who use a Federal Employees Health Benefits (FEHB) high-deductible health plan (HDHP) and a Health Savings Account (HSA) can also use a LEX HCFSA for reimbursement of dental and vision expenses only. This option is also available if your spouse is enrolled in a non-FEHB HDHP and has an HSA. You may sign up during Open Season, which is November 8 to December 13 this year, at www.
