Healthcare FSA
The Healthcare FSA allows you to set aside pre-tax earnings to pay eligible healthcare expenses for the plan year. By having your estimated expenses deducted from your paycheck before taxes are taken out, you can save money on the taxes you pay.
HOW DOES IT WORK?
You decide how much money you want to set aside for healthcare expenses for the coming plan year. The City of Woodstock will withhold an equal portion of that amount from each paycheck, deducting it from your earnings on a pre-tax basis. Throughout the plan year, you can pay for qualified out of pocket expenses using your FSA debit card or submit a claim form for reimbursement.
WHAT KINDS OF EXPENSES QUALIFY?
Expenses must be medically necessary. You can get reimbursed for items such as:
HOW MUCH SHOULD YOU CONTRIBUTE TO THE HEALTHCARE FSA?
Review provider bills, tax receipts, checkbook register and other records for the past two years to estimate your healthcare expenses.
You may elect to contribute up to $3,050 for the 2023-2024 plan year into the Healthcare FSA.
FSA Contribution Guide
Dependent Care FSA
The Dependent Care FSA allows you to set aside pre-tax money to pay dependent care expenses for the coming plan year. By having your estimated expenses deducted from your earnings pre-tax, you can save money on the taxes you pay.
HOW DOES IT WORK?
Decide how much money you want to set aside for the coming plan year’s dependent care expenses. The City will withhold an equal portion of that amount from each paycheck on a pre-tax basis.
Note: In certain situations, a Dependent Care FSA may not work to your advantage. Lower income families may recognize more tax benefit by not electing to utilize a Dependent Care FSA.
WHAT KINDS OF EXPENSES QUALIFY?
Dependent Care refers to the care of a dependent under age 13, or a mentally or physically disabled dependent of any age. Dependent care must be necessary so that you and your spouse (if applicable) can work. Monthly dependent expenses cannot exceed the income of you or your spouse, whichever is less.
Qualifying expenses include:
- Selected daycare facilities (must be state licensed)
- Summer day camp
- Eligible housekeeping services
- Adult and senior daycare services (subject to IRS limitations)
- Before-school and after-school care
Eligible/Ineligible Dependent Care Expenses
HOW MUCH SHOULD YOU CONTRIBUTE TO THE DEPENDENT CARE FSA?
Review all bills, expense vouchers, tax receipts, checkbook register and other records for the past two years. With this guide, estimate the expenses you may incur for the coming plan year.
You may elect up to $5,000 per year based on current IRS regulations, or $2,500 for married couples filing separately.
Use it or Lose it
THERE ARE SPECIAL RULES THAT APPLY TO THE FSA PLANS
In return for tax-saving advantages, the federal government has certain restrictions on FSA Plans:
- Plan carefully. If you elect the Healthcare FSA account, you will be allowed to rollover up to $610 of unused funds for the following plan year. Any amount over $610 will be forfeited. If you elect the Dependent Care FSA plan, any funds left over at the end of the year will be forfeited. However, with proper planning, no money should be lost. Remember that funds can be used for many over-the-counter items.
- Healthcare and Dependent Care FSA plans are separate – dollars you put into one account cannot be transferred to another.
- Save your receipts. You should save all of your receipts in case you need to verify a purchase or if you were to ever be audited by the IRS.
- You can only change the amount of your contribution if you have a qualifying event or family status change, such as:
- Marriage
- Divorce or legal separation
- Change of employment by spouse
- Birth or adoption of a child
- Death of a child or spouse
- Change in daycare provider (applies to Dependent Care FSA only)
- Change in cost of daycare (applies to Dependent Care FSA only)
The change you make to your FSA must be consistent with the qualifying event that occurred.
Limited Purpose FSA
A Limited Purpose Flexible Spending Account (LPFSA) is a pre-tax benefit used to pay for eligible dental, vision care and post-deductible medical expenses for participants enrolled in a High Deductible Health Plan (HDHP). You may use these funds to pay for eligible expenses incurred by you, your spouse and your qualified dependents.
When you are enrolled in a high deductible health plan, the U.S. Department of Treasury places restrictions on which expenses can be covered by your FSA before your minimum annual deductible is met. It does, however, allow you to participate in a limited purpose FSA. The limited purpose FSA covers only vision and dental expenses. No medical
expenses, including those applied to your medical deductible, pharmacy or even over-the-counter items, are eligible to be reimbursed from a limited purpose FSA.
Why participate in a limited purpose FSA?
While Treasury regulations limit your FSA, there are still good reasons to fund a limited purpose FSA, since you may:
► Have significant vision expenses planned, such as Lasik eye surgery
► Have significant dental expenses planned, such as orthodontics or major restorative work
► Want to avoid spending your HSA, which can accumulate as tax-free investment income
► Not be able to completely fund your high vision or dental expenses in the HSA
► Have other medical uses for your HSA and still want to take advantage of the FSA tax savings for dental and vision expenses
FSA Plan Document
UMR FSA Member Portal
