Health Care Flexible Spending Account Benefits

Amount You Can Elect

If you want to participate in the Health Care FSA, you may elect to contribute up to the annual limit allowed by the IRS, which is $2,700 ($56.25 per pay period, assuming 48 pay periods per year) for 2019. The minimum annual contribution you may elect is $100 (about $2.08 per pay period). You will be required to make contributions equal to the annual contribution amount you have chosen. An equal portion of the annual contribution amount will be deducted from each paycheck.

The full annual amount you elect to contribute to the Health Care FSA is available to you for claims incurred (or paid, for orthodontia claims) at any time during the year. For example, if you elect a $1,200 annual contribution (about $25 per pay period), the full $1,200 is available to you for reimbursement of eligible health care expenses at any time during the year, regardless of the amount that has been deducted from your paycheck so far. 

Carryover

Certain unused amounts remaining in your Health Care FSA as of the end of a calendar year will carry over to the following calendar year.

There are three key things to understand about this feature of your Health Care FSA:

  • If you have unused amounts, you can carry over a minimum of $100 up to a maximum of $500 to the next plan year.
  • Between January 1 and March 31 of the new year, the amount you carried over is held in reserve to be used to reimburse only the expenses you incurred in the prior plan year.
  • Around April 15 of the new year, any remaining carryover amount will be added to your new plan year contributions, and all those funds will be available to reimburse expenses you incur in the new plan year. If you did not make a new annual election, carryover dollars equal to or greater than $100 and up to $500 will be used to create a new annual election; unused amounts less than $100 will not be carried over.

    Carryovers may not be cashed out or converted to any other taxable or nontaxable benefit and will not count toward the annual contribution limit for the new plan year (e.g., $2,700 for 2019) under the Health Care FSA. If you do not elect to re-enroll in the Health Care FSA for the next plan year but remain eligible for the Health Care FSA, you may use any carryover amount from the previous plan year as described in this summary.
        
    The following examples illustrate how the carryover works:

    Example 1 (How Carryover Increases Available Amount)

    This example assumes:

    • You elect to contribute $2,500 for the 2019 plan year, and
    • $800 of your 2018 election remains unused as of the end of 2018.

    Based on these assumptions, this is what the claims administrator will do:

    • Of the unused $800 from 2018, $500 will carry over to 2019. The remaining $300 will be forfeited, as required by law.
    • Between January 1 and March 31, 2019, the $500 carried over will be held to reimburse expenses you incurred in 2018.
    • Around April 15, 2019, any carryover amounts remaining will be added to your $2,500 annual contribution for 2019. All those funds will be available to reimburse 2019 expenses. If none of the $500 was used to reimburse 2018 expenses, a total of $3,000 will be available to reimburse 2019 expenses.

    Example 2 (Carryover Applied to a New Year’s Claim)

    As in Example 1, this example assumes:

    • You elect $2,500 for the 2019 plan year,
    • $800 of your 2018 election remains unused as of the end of 2018, and
    • $500 carries over and $300 is forfeited.

    In addition, this example assumes that you incur a $2,700 expense in January 2019 and file for reimbursement January 31, 2019 and that you do not submit any additional 2018 expenses for reimbursement.

    Based on these assumptions, this is what the claims administrator will do:

    • If the claim meets the eligibility requirements, the entire $2,700 will be approved for reimbursement.
    • You will be reimbursed $2,500 in February from your 2019 contribution election.
    • Around April 15, 2019, you will be reimbursed the remaining $200 from the $500 carryover from 2018. Your remaining balance for 2019 is $300.

    Example 3 (Carryover Applied to a New Year’s Claim, without a Contribution Election for the New Year)

    This example assumes:

    • You do not elect to contribute anything for the 2019 plan year,
    • $100 of your 2018 election remains unused as of the end of 2018, and
    • You incur a $2,700 expense in January 2019 and file a reimbursement claim on January 31, 2019.

    Based on these assumptions, this is what the claims administrator will do:

    • Your claim will be held until the $100 carryover is applied to your account around April 15, 2019.
    • At that time, a $100 election will be added for you from the $100 carryover from 2018, and $100 of your claim will be approved for reimbursement.

    Example 4 (Carryover Under $100, without a Contribution Election for the New Year)

    This example assumes:

    • You do not elect to contribute anything for the 2019 plan year,
    • $99 of your 2018 election remains unused as of the end of 2018, and
    • You incur a $2,700 expense in January 2019 and file a reimbursement claim on January 31, 2019.

    Based on these assumptions, this is what the claims administrator will do:

    • Your claim will be held until the $99 carryover is applied to your account around April 15, 2019.
    • At that time, because the carryover amount is less than the $100 minimum annual contribution, no 2019 election can be created and the claim will be denied. The $99 remaining from 2018 will be forfeited.

    Eligible Expenses

    You can be reimbursed from your account for eligible expenses that were incurred (or paid, for orthodontia claims) during the year of participation and have not been paid by another health care plan. Eligible expenses are considered incurred when the service is performed, not necessarily when it is paid for. These expenses may be for you or your eligible dependents (i.e., generally those dependents you claim on your federal income tax return).

    Eligible health care expenses may include expenses for:

    • Yourself,
    • Your spouse,
    • Any person who is your tax dependent within the meaning of Internal Revenue Code section 152 (without regard to certain limitations on your dependent’s gross income, marital, or filing status under certain Code rules), and
    • Your child who has not attained age 27 by the end of the calendar year in which the expense is incurred.

    Eligible expenses include:

    • Copays and other expenses not paid by the Medical Plan or Prescription Drug Plan (or by another health plan, such as one provided by your spouse’s employer),
    • Vision care, including contact lens solution as well as any expenses for exams, eyeglasses, or contact lenses not paid by the Vision Plan (or by another vision plan),
    • Dental and orthodontia care expenses not paid by the Dental Plan (or by another dental plan),
    • Other medical expenses that would qualify on your federal income tax return as being deductible without regard to the 10% limit.

    For more information about eligible expenses, see "More Information on Health Care FSA Eligible Expenses."

    Expenses That Are Not Eligible

    Examples of expenses that are not eligible for reimbursement from your Health Care FSA include (but are not limited to):

    • Expenses that are eligible for reimbursement by another plan,
    • Cosmetic surgery, except to correct a birth defect, an injury resulting from an accident, or a disfiguring disease,
    • Custodial care, and
    • Drugs that are not prescribed by a doctor.

    Health Care FSA vs. Federal Income Tax Deductions

    Expenses reimbursed through the Health Care FSA are not deductible on your federal income tax return (that is, you cannot use both methods for the same expenses). Generally, the Health Care FSA provides better tax savings than deductions on your tax return, but you may want to consult a qualified tax advisor.

    Terminating Employment During the Plan Year

    If your employment is terminated during the calendar year, your active participation in the Health Care FSA will cease on the day your employment is terminated. You will not be able to incur reimbursable eligible expenses after you terminate employment unless you elect to continue your Health Care FSA participation as permitted through continuation coverage under COBRA, as described in the next section. However, you may file claims for any eligible expenses incurred (or paid, for orthodontia claims) while you were employed, until March 31 of the following year.

    Continuation Coverage Under COBRA

    "Continuation coverage" means your right, or your spouse’s and/or dependents' rights, to continue participation in the Health Care Program if your participation (including your spouse's and/or dependents' participation) otherwise would end. Continuation coverage is not available if you have already submitted claims for the calendar year that are more than the amount you have already contributed.

    If you elect continuation coverage, you may be able to continue to make contributions and incur expenses that are eligible for reimbursement, but you will lose any tax advantages for contributions after termination of employment. You may want to discuss your continued participation with your tax advisor. Your right to continue coverage ends on December 31 of the year in which your participation as an active employee ended, even if you have unused amounts that would have qualified for carryover if you had continued to participate as an active employee.

    For more information about COBRA coverage, see "Continuing Coverage" in the Health Care Program Participation section.