Information on Flexible Spending
Spending Accounts (FSA) enables employees to set aside money, on a pre-tax basis
via salary redirection, to pay for certain expenses. The two types of plans
permitted under Section 125 are the Health FSA and Dependent Daycare
In 2013, the Affordable Care Act (ACA) made revisions to FSA guidelines that
state an Employer must offer a qualified group medical plan in order to offer an
FSA for its employees that reimburses medical expenses. In order to offer
an FSA, an Employer must also offer a group medical plan that meets ACA
standards for excepted benefits.
Health FSA Account
a Health FSA Account, employees are reimbursed for eligible health care
expenses that are not covered or reimbursed under the employer's health plan.
Typically, eligible expenses include:
deductibles, co-payments and office visit co-pays
dental expenses (cleanings, filings, x-rays, etc.)
orthodontic expenses (braces)
vision expenses (frames, contacts, eye exam, lasik,
hearing needs (hearing aids)
durable medical equipment (crutches, etc.)
- over the counter drugs and medicines
- and much more!
Check out the
Health FSA Account Worksheet for a listing of all the qualified
expenses available to participants.
Or you can review Publication #502.
IRS Publication #502
- Qualified Medical Expenses. BE CAREFUL - not all of the
qualified items are the same as Section 213(d). (Use caution when
(For more detail on eligible expenses, visit
www.irs.gov and review section 213(d).)
set aside an election amount up to an annual maximum determined by the employer.
This election is deducted from the employee's paycheck on a pre-tax basis,
resulting in tremendous tax savings to the employee
(average tax savings between 25-40%!)
Dependent Daycare Account
The Dependent Daycare Account allows for an employee to be reimbursed for
qualified "employment-related" dependent daycare expenses. If in order for the
Employee and the spouse to work they must use a Daycare provider, than they are
eligible to participate.
A qualifying individual is:
A dependent age 13 or younger for whom an employee is
entitled to a dependency exemption, and
the employee's spouse or dependent who is incapable of
A qualifying provider is:
a licensed daycare provider
an individual who claims the payments for services as
income (SS# must be provided for reimbursement)
the Health FSA where the limit is set by the employer, the limit for the
Dependent Daycare Account is a statutory limit on the amount that can be
pre-taxed through a Dependent Daycare Account. The limits are:
- $5,000 if married filing a joint return
- $2,500 if married filing separately as head of household or single
An employee should decide
whether they should participate in the Dependent Daycare Account or take the
dependent care tax credit on their personal taxes. Reimbursement for the
Dependent Daycare Account occurs only as it is deducted from the employee’s
paycheck. They should consult with their CPA or tax advisor on this issue.
Dependent Daycare Account Worksheet for an idea of qualified
(For more detail on dependent daycare eligible expenses, visit www.irs.gov
and review IRS Publication #503.)
IRS Publication #503 - Dependent Expenses
What Option is Better? Dependent Care Credit or Dependent Care FSA?
BMS LLC provides quality third party Claims Administration for Flexible Spending Accounts. The purpose is
the keep the process simple and straight forward - easy for the employee to use.
A few of the services that set BMS LLC apart:
Daily claim processing
Twice a week reimbursement of claims
Employees can choose between a personal
check mailed directly to their home or they can take advantage of direct
deposit of their reimbursement into their checking or savings account by
Comprehensive activity statements sent with
each request for reimbursement
Quality customer service only a phone call,
fax or e-mail away
Access to individual claim accounts online
(Employees can complete a claim online)
Claims accepted via fax, e-mail or regular
Debit Card Available to qualified Employers.
Please review the
Claim Form for submitting your FSA Claims to BMS LLC.
GREAT NEWS! The Use It Lose It Rules still applies but the IRS now allows Employers to adopt the 2 ½ month
grace which allows participants another 75 days after the end of their Plan Year
to incur expenses to deplete any balances left in their previous Plan Year.
firstname.lastname@example.org for more information!