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Flex Spending

Flex Spending

Don’t let the government steal your money. Use your before-tax income on blade-free CustomVue LASIK with Lusk Eye Specialists and make a difference in how you look and feel without glasses and contacts.

A Flex Plan (FP) or a Flexible Spending Account (FSA) is a benefit package option developed to provide you with flexibility and choice with coverage and spending on health care including laser vision correction. Unlike the traditional standard benefits package, both FP and FSA benefits give you and your company the opportunity to create the benefits package that will be most beneficial. These plans are usually open to all permanent employees of a company. Many companies permit you to review your benefit choices each year to ensure that they continue to meet your personal circumstances.

FP and FSA are also very attractive because of the fact that your flex plan account is tax sheltered. Each designated pay period, your FP or FSA dollars are withdrawn from your paycheck before taxes, which allows you and dependents to use your expected health expense money without being taxed for it.

Due to IRS regulations, if the amount you have elected for your flexible spending account in a FP or FSA year exceeds the actual expenses created by you in the same Flex Plan year, the excess amount will be forfeited. Excess amounts will not be carried over from one plan year to another plan year. Your employer cannot return any money remaining in your FP or FSA to you.

Because of this policy, you may have a remainder of FP or FSA funds that should be used quickly, and what better way to spend your Flex Plan funds than on the vision you’ve always wanted with blade-free CustomVue IntraLASE LASIK by leading eye surgeon Dr. James Lusk.

Contact Lusk Eye Specialists today and let us help you determine if your Flex Plan or Flexible Spending Account dollars is the best financing option for you.

For more information on your options, contact your company’s human resources department or call Lusk Eye Specialists today before it’s too late! Don’t let your pre-tax dollars go down the drain!

The following information was obtained from the IRS website via the following link: http://www.irs.gov/publications/p969/ar02.html#d0e1635

Flexible Spending Arrangements (FSAs)

A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution. The employer may also contribute.

For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier.

What are the benefits of an FSA? You may enjoy several benefits from having an FSA.

  • Contributions made by your employer can be excluded from your gross income.
  • No employment or federal income taxes are deducted from the contributions.
  • Withdrawals may be tax free if you pay qualified medical expenses. See Qualified medical expenses, later.
  • You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account.

Qualifying for an FSA Health FSAs are employer-established benefit plans. These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. Employers have complete flexibility to offer various combinations of benefits in designing their plan. You do not have to be covered under any other health care plan to participate.
Self-employed persons are not eligible for an FSA.

Flex Spending Caution
Certain limitations may apply if you are a highly compensated participant or a key employee.

Contributions to an FSA

You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. This is sometimes called a salary reduction agreement. The employer may also contribute to your FSA if specified in the plan.

You do not pay federal income tax or employment taxes on the salary you contribute or the amounts your employer contributes to the FSA. However, contributions made by your employer to provide coverage for long-term care insurance must be included in income.

When To Contribute

At the beginning of the plan year, you must designate how much you want to contribute. Then, your employer will deduct amounts periodically (generally, every payday) in accordance with your annual election. You can change or revoke your election only if there is a change in your employment or family status that is specified by the plan.

Amount of Contribution

There is no limit on the amount of money you or your employer can contribute to the accounts; however, the plan must prescribe either a maximum dollar amount or maximum percentage of compensation that can be contributed to your health FSA.

Generally, contributed amounts that are not spent by the end the plan year are forfeited. See Balance in an FSA, later. For this reason, it is important to base your contribution on an estimate of the qualifying expenses you will have during the year.

Distributions From an FSA

Distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage. You must be able to receive the maximum amount of reimbursement (the amount you have elected to contribute for the year) at any time during the coverage period, regardless of the amount you have actually contributed. The maximum amount you can receive tax free is the total amount you elected to contribute to the health FSA for the year.

You must provide the health FSA with a written statement from an independent third party stating that the medical expense has been incurred and the amount of the expense. You must also provide a written statement that the expense has not been paid or reimbursed under any other health plan coverage. The FSA cannot make advance reimbursements of future or projected expenses.

Qualified medical expenses. Qualified medical expenses are those specified in the plan that would generally qualify for the medical and dental expenses deduction. These are explained in Publication 502, Medical and Dental Expenses. Examples include amounts paid for doctors’ fees, prescription and non-prescription medicines, and necessary hospital services not paid for by insurance.

You cannot receive distributions from your FSA for the following expenses.

    Amounts paid for health insurance premiums.
  • Amounts paid for long-term care coverage or expenses.
  • Amounts that are covered under another health plan.

If you are covered under both a health FSA and an HRA, see Notice 2002-45, Part V, which is on page 93 of Internal Revenue Bulletin 2002-28.

Flex Spending Caution
You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the distribution you receive from the FSA.

Balance in an FSA

Flexible spending accounts are “use-it-or-lose-it” plans. This means that amounts in the account at the end of the plan year cannot be carried over to the next year. However, the plan can provide for a grace period of up to 2½ months after the end of the plan year. If there is a grace period, any qualified medical expenses incurred in that period are treated as having incurred in the previous plan year and can be paid from any amounts left in the account at the end of that year. Your employer is not permitted to refund any part of the balance to you.

Employer Participation

For the health FSA to maintain tax-qualified status, employers must comply with certain requirements that apply to cafeteria plans. For example, there are restrictions for plans that cover highly compensated employees and key employees. The plans must also comply with rules applicable to other accident and health plans. Chapters 1 and 2 of Publication 15-B, Employer’s Tax Guide to Fringe Benefits, explain these requirements.