What is a Flexible Spending Account (FSA)?
There are two types of FSA plans available to eligible GIC members, a Health Care Spending Account (HCSA), which is used to pay for medical expenses for you and your eligible dependents; and a Dependent Care Assistance Program (DCAP), which can be used to pay for childcare or assistance with disabled adult dependents.
Both of these plans lower your income tax liability by the amount of your deductions. In exchange for the tax savings that these programs offer, the IRS imposes a use-it-or-lose-it rule. This means that you must use all the money in your account by the end of the plan year, or you lose that money, subject to the grace period.
Enrollment & Eligibility
Active state employees who are eligible for GIC benefits may enroll in a Health Care and/or Dependent Care FSA for the upcoming plan year (July 1, 2024 - June 30, 2025) during Annual Enrollment. Even if you are enrolled in one or both FSAs this year, you must re-enroll if you wish to participate in Fiscal Year 2025 (July 1, 2024 - June 30, 2025).
New state employees and employees who experience a qualifying event during the year may enroll in an FSA for partial-year benefits. For the Health Care FSA, new hire participation begins at the same time as other GIC benefits. For the Dependent Care FSA, participation begins on the first day of employment.
Employees who experience a qualifying event during the year may enroll for partial-year benefits. For the Health Care FSA, new hire participation begins at the same time as other GIC benefits. For the Dependent Care FSA, participation begins on the first day of employment.
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Members may also add, change, or stop participation in either or both FSA plans in response to a qualifying event, such as marriage, divorce, birth of a child, change in employment, or (DCAP only) change in childcare provider. You can enroll in a Health Care FSA for as little as $250 or as much as $3,050/year. You can enroll in a Dependent Care FSA for as little as $250 and as much as $5,000/year (or $2,500 if married and filing separate tax returns).
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Administrative Fee: You pay a $1.00 monthly administrative fee regardless of whether you enroll in one or both FSAs.
To enroll in an FSA, learn more about Health Care and Dependent Care FSAs, and view other eligible expenses, go to massfsatasc.com. Additional enrollment instructions can be found on this website; be sure to have your employee ID, agency and department name available.
Note: You must re-enroll every year.
How can an FSA save you money?
With an FSA, you set aside money every paycheck on an income tax-free basis. You can use this money during the year to pay for eligible expenses — tax free.
For example:
| Breakdown of paycheck & deductions | Not participating in HCSA or DCAP plan | Participating in HCSA or DCAP plan |
|---|---|---|
| Gross Yearly Pay | $30,000 | $30,000 |
| HCSA Annual Contribution (Pre-tax) | $0 | ($2,000) |
| DCAP Annual Contribution (Pre-Tax) | $0 | ($4,000) |
| Taxable Income | $30,000 | $24,000 |
| Sample Tax Withholdings of 25% | ($7,500) | ($6,000) |
| Yearly Health Care Expenses | ($2,000 post-tax) | $2,000 (Claims reimbursed) |
| Yearly Daycare Expenses | ($4,000 post-tax) | $4,000 (Claims reimbursed) |
| Net Available Income | $16,500 | $18,000 |
Grace Period
The GIC’s FSA plans have a 2.5 month grace period, with an additional month allowed for claim submissions. This means that you will have until September 15 to incur claims (based on date of service) for a plan year that ended on June 30. You will then have until October 15 to submit those claims for reimbursement. During the grace period from a previous year, if there is also an election for the current year, any available funds from the previous year will be used first to pay for qualifying claims on both FSA plans.
New Health Care Savings Account (HCSA) Rule
HCSA funds can now be used to purchase Over-The-Counter (OTC) medications and some medical supplies without a prescription.