What is a Flexible Spending Account (FSA)?
An FSA is a great way to set aside money on a pretax basis to pay for healthcare expenses for you and your dependents (HCSA) or for care of your child or disabled adult dependent while you work (DCAP), thereby lowering your state and federal tax liability. A chart illustrating how these savings work can be found on the next page.
The IRS determines the rules that govern these plans, but in response to the COVID-19 pandemic, some changes have been made that the GIC would like to make everyone aware of.
New HCSA rule: HCSA funds can now be used to purchase over-the-counter (OTC) medications and some medical supplies without a prescription.
FY2020 Grace Period: If you still have unused funds available from the plan year that ended June 30, 2020, you will now have until June 30, 2021 to incur (date of service/purchase) claims, and until July 31, 2021 to submit those claims for payment. You should have received an email from Benefit Strategies with detailed information, if your FY20 balance was over $5.
FY2021 Changes: As circumstances change in response to the pandemic, you may make a prospective (no 60-day window) change to your elections, raising or lowering your payroll withholding, without a qualifying event. Rules for terminated participants, whether through retirement, layoff, or voluntary/involuntary termination have also been relaxed to allow additional time for members to utilize their withheld funds. These changes are only intended to be in effect for the FY2021 plan year.
To enroll in an FSA, learn more about Health Care and Dependent Care FSAs and view other eligible expenses, go to benstrat.com/gic-fsa.
Even if you are enrolled in one or both FSAs this year, you must re-enroll if you wish to participate in FY22.
You can enroll in a Health Care FSA for as little as $250 or as much as $2,750/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).
How can an FSA save you money?
With an FSA, you set aside money every paycheck on an income tax-free basis. You use this money during the year to pay for eligible expenses — tax free.
|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)|
|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|
Who is eligible and when do I enroll?
Active state employees who are eligible for GIC benefits may enroll in a Health Care and/or Dependent Care FSA.
During the GIC’s spring 2021 Annual Enrollment period, you may enroll in one or both FSAs for the plan year of July 1, 2021–June 30, 2022. You must re-enroll every year.
- New State Employees and Changes in Status: New state employees and employees who experience a qualifying status change 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.
What else do I need to know?
In exchange for the tax savings 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.
- 2½-Month Grace Period: If you still have money left in your FSA at the end of the plan year, you have an additional 2½ months to incur eligible claims and submit them for reimbursement. For the 2022 plan year, you have until September 15, 2022 to incur claims and until October 15, 2022 to submit them.
- Administrative Fee: You pay a $1.00 monthly administrative fee regardless of whether you enroll in one or both FSAs.
Key FSA Dates | Open Enrollment: April 7 - May 5, 2021
|2021 Plan Year||2022 Plan Year|
|Plan year: July 1, 2020 – June 30, 2021||Plan year: July 1, 2021 – June 30, 2022|
|2½-Month Grace Period: July 1, 2022 – September 15, 2022||2½-Month Grace Period: July 1, 2022 – September 15, 2022|
|Claim filing deadline: October 15, 2021||Claim filing deadline: October 15, 2022|