Save Money with a Flexible Spending Account
MCPS flexible spending accounts (FSAs) allow you to set aside a specified dollar amount from your gross pay—“pretax”—to pay for qualifying out-of-pocket medical and dependent-care expenses. This amount reduces gross pay and is sheltered from taxes.
You can choose to open a medical FSA, a dependent care FSA, or both. You then indicate the amount to be set aside from your gross pay and deposited into your FSA(s). After paying for qualified expenses, submit a claim reimbursement form to the FSA plan administrator, Benefit Strategies, a third-party vendor. Contact Benefit Strategies at 1-888-401-3539 or via their website.
Curious how an FSA can help you save money? Here are two examples*:
Orthodontics: Anthony’s daughter needs braces next year. The orthodontist says the braces will cost $5,500. Anthony sends the treatment plan to CareFirst and is informed that the company will pay a total benefit of $1,000. Anthony schedules the procedure for the next calendar year and plans his medical spending FSA for the next calendar year, since the Internal Revenue Service requires FSA accounting on a calendar-year basis. Anthony decides to contribute the maximum of $2,750 to his medical FSA. The total tax savings is $842.88, as you can see in Chart 1.
Child care: Angela and Felix both work full time and pay $450 per week for daycare for their two-year-old daughter. Allowing two weeks for vacation, they expect to pay $22,500 (50 weeks @ $450 per week) for daycare in 2021. Angela and Felix use this figure to compare their potential tax savings from an FSA to the income tax credit available for dependent care. They determine that the tax savings from an FSA would be greater than the dependent care tax credit available at their level of income, and then decide to make an FSA election each year until their daughter reaches age 13. By placing $5,000 in a dependent care FSA each year, they expect to realize a total tax savings of $1,532.50 per year, as shown in Chart 2.
*Based on federal tax savings at 15%; state and local tax savings at 8%; and FICA tax savings at 7.65%.
Chart 1: Tax Savings for Anthony
|Amount Sheltered from Taxes||Tax Rates||Tax Savings|
|$2,750||X||Federal Tax Rate of 15%||$412.50|
|X||State and Local Tax Rate of 8%||$220.00|
|X||FICA Rate of 7.65%||$210.38|
Chart 2: Tax Savings for Angela and Felix
|Amount Sheltered from Taxes||Tax Rates||Tax Savings|
|$5,000||X||Federal Tax Rate of 15%||$ 750.00|
|X||State and Local Tax Rate of 8%||$ 400.00|
|X||FICA Rate of 7.65%||$ 382.50|
Helpful FSA Tips
- “Use It or Lose It”
If you have an FSA for 2020, you should review your account on the Benefit Strategies website and make plans to use any remaining balances before March 15, 2021. Qualifying expenses from your medical or dependent care FSAs incurred between January 1, 2020, and March 15, 2021, may be reimbursed from your 2020 plan election. Any unspent 2020 balances will be forfeited under the “use it or lose it” rule after March 15, 2021. All 2020 plan-year FSA claims must be submitted by April 30, 2021.
- Changes to Medical and Dependent Care FSAs
As a result of the COVID-19 pandemic, the U.S. Department of Labor and Internal Revenue Service released new benefit guidelines earlier this year affecting FSA elections, deadlines, and eligible expenses. Be sure to take note of them.
- Keep Your Receipts
You must keep receipts to substantiate all claims made with your FSA debit card or paper submissions. You may be required to submit documentation upon request. All expenditures are subject to audit, per IRS regulations.
- Flexible Spending Debit Cards
When you enroll in a medical FSA, you will receive a Visa debit card, good for making eligible medical purchases such as copayments at your doctor’s office. Your medical FSA debit card is valid for three years. If you currently participate in an FSA and have misplaced your debit card, please contact Benefit Strategies for a replacement. Benefit Strategies charges a $5.00 fee to replace a missing debit card.
Did you know?
While on an approved leave of absence protected by the Family and Medical Leave Act (FMLA), you may choose to re-enroll in an FSA. To do so, complete and submit MCPS Form 450-3, Flexible Spending Account Election, to have your FSA contributions direct billed to you.
Need more information?
For more information about FSAs, please visit our website. There you will find links to claims forms, a list of eligible expenses, an informative booklet: Flexible Spending Accounts: Save Money on Healthcare and Dependent Care!, and a video about FSAs.
In addition, the plan administrator, Benefit Strategies, offers web links to information that can help you decide whether an FSA is right for you. From the Benefit Strategies web page, click on any of the links on the left side of the page. This will provide you with information on FSAs, including videos that explain how FSAs work.
Enroll in Your 2021 FSA!
If you wish to participate in a medical spending and/or a dependent care FSA for 2021, you must submit your 2021 account elections by Friday, November 6, 2020, using the online Benefit Enrollment System (BES). A new enrollment election must be completed yearly, even if you have participated in an FSA in the past.
Visit our Open Enrollment web page to learn more about the online BES.