Distinguishing the most common types of FSA plans

Distinguishing the most common types of FSA plans

As you may know, a Flexible Spending Account, or FSA, is an account for you to set aside pre-tax dollars to pay for eligible medical, dental, and vision expenses. But did you know there are different types of FSA plans? The first is a Dependent Care FSA, which is ideal to ensure dependent care costs are taken care for either a child under the age of 13 or if a spouse/dependent is unable to care of themselves.

This plan works as long as both spouses or custodial parents are employed. From there, you can contribute up to $5,000 pre-tax dollars per calendar year to pay for expenses such as: day care (child & adult), summer day camp (nursery school & preschool) plus before and after school programs.

The second plan to note is a Healthcare FSA, which is more straightforward. This plan allows you to contribute up to $2,850 annually to pay for eligible medical, dental, prescription, and vision expenses not covered by insurance. With the Healthcare FSA, the entire contribution election is available from day one. All payroll contributions throughout the year will go towards covering that individual’s election.

To familiarize yourself with the different types of FSA plans, check here.  

Distinguishing the most common types of FSA plans

Unused Qualified Parking Compensation Reductions Not Transferrable to Health FSA

The IRS has released an information letter responding to an inquiry from a qualified transportation plan participant whose employer decided to let him work from home permanently due to the COVID-19 pandemic. To avoid losing compensation reduction amounts he had previously set aside for parking, the participant asked whether his unused compensation reductions could be transferred to a health FSA under a cafeteria plan.

The letter explains that unused compensation reduction amounts under an employer’s qualified transportation plan can be carried over to subsequent periods under the plan and used for future commuting expenses, so long as the employee does not receive benefits that exceed the maximum excludable amount in any month. But cash refunds are not permitted, even to employees whose compensation reduction amounts exceed their need for qualified transportation fringe benefits. Furthermore, the Code prohibits cafeteria plans from offering qualified transportation fringe benefits, and IRS rules do not permit unused compensation reduction amounts under a qualified transportation plan to be transferred to a health FSA under a cafeteria plan. The letter also notes that COVID-19-related relief for FSAs gives employers the discretion to amend their cafeteria plans to permit midyear health FSA election changes for plan years ending in 2021.

EBIA Comment: The qualified transportation rules have proven sufficiently flexible to handle most situations resulting from the COVID-19 emergency. Most employers permit benefit election changes at least monthly, and plans can allow current participants to carry over unused balances indefinitely. Compensation reductions set aside for one qualified transportation benefit (e.g., parking) can even be used for a different transportation benefit (e.g., transit) if the plan permits and the maximum monthly benefit is not exceeded. But—as this participant’s request to transfer parking compensation reductions to a health FSA suggests—those options are not always sufficient. Because some risk of loss due to changing circumstances is unavoidable, employers should clearly articulate that risk to employees before they make compensation reduction elections.

Source: Thomson Reuters

Distinguishing the most common types of FSA plans

10 items you didn’t know were FSA-eligible

As you may know, anyone who has a flexible spending account (FSA), can use their contributions to cover doctor visits (preventative, primary care, and specialists) and prescriptions. However, what you might not know is that any saved FSA dollars can also cover these commonly used products and services.

  1. Dental services: including orthodontics
  2. Vision products and services: including corrective procedures such as LASIK
  3.  Therapeutic services: including physical therapy & chiropractic care
  4. Diagnostic procedures: including labs, scans, imaging
  5. Mental health services: including psychiatric care, therapy & counseling
  6. Medical supplies: including bandages, crutches, wheelchairs
  7. Over-the-Counter Medications: such as Tylenol, Advil, Zyrtec
  8. Fertility treatments: such as IVF, or birth control products
  9. Baby care items: such as breast pumps & supplies
  10. Long term care: including nursing services

To learn even more about FSA eligible items, check out our extensive list.

Distinguishing the most common types of FSA plans

How to utilize the FSA Store

The FSA Store is a fantastic outlet for consumers to buy eligible products to fit their FSA account. With over 4,000 products on hand — from thermometers, pregnancy tests, flu & virus kits, blood pressure monitors ­­– it’s a guarantee to find at least one product to enjoy. 

To best utilize the virtual store, search any FSA eligible item you need for purchase. From there, add a promo code to any purchased FSA eligible item. All promo codes can be turned into points for future purchases.

The smallest denomination of points that can be redeemed for later use is 350 ($10) and largest is 1,500 ($50). You cannot redeem fewer than 350 points at a time. Balances under 350 points cannot be exchanged for a partial value dollar reward. Points expire six months (180 days) following your last order date. To learn about all FSA Store eligible items, look here.

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