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Healthcare and Employee Benefits

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Healthcare and Employee Benefits

 

Flexible spending accounts (“FSAs”) let you set aside pre-tax dollars for a choice of nontaxable fringe benefits including health and disability insurance, dependent care assistance, and medical expense reimbursement. Plan contributions avoid federal income and FICA tax. Your employer deducts plan contributions from your paycheck and deposits them into your account until you claim your reimbursements.

When you enroll, you have to choose how much to contribute each pay period. You generally can’t change in the middle of the plan year without a change in your “family status” (marriage or divorce; birth, adoption, or death of a child; spousal employment; change in dependent’s student status; and the like).

You can claim your full year’s reimbursement as soon as you incur qualifying expenses, whether you’ve funded your account or not.

Historically, FSA rules have required you to use your account balance by the end of the year or forfeit it. However, many employers' plans have taken advantage of a subsequent ruling that lets them amend their plans to provide a 2½ month grace period immediately following the end of the year.

  • Health Care Costs. You can contribute up to $2,650 to your account (2018) and use it for most medical expenses, including nonprescription medical devices and drugs.2 However, long-term care coverage and expenses are not eligible.
  • Dependent Care Costs. You can contribute up to $5,000 per year into your dependent care FSA. (If you’re married, the family limit is $5,000 or the lower-paid spouse’s income, whichever is less). You can use your account for “qualified costs” for “qualifying individuals.”

 

-Qualified dependents include children under age 13, incapacitated spouses, or any other incapacitated dependent.

-Qualified costs outside the home include day-care centers, day camps, nursery schools, or care in the home of a babysitter. Qualified costs inside the home include ordinary domestic services such as laundry, cleaning, and cooking plus Social Security, Medicare, and unemployment taxes (the “nanny tax”) on household employees.

-You can’t hire your spouse, child, or other dependent as your day-care provider.

 

 

 

 

 

 

 

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