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What is a Flexible Spending Account?
A Flexible Spending Account (FSA) is a tax-favored program offered by employers that allows their employees to pay for eligible out-of-pocket health care and dependent care expenses with pre-tax dollars. By using pre-tax dollars to pay for eligible health care and dependent care expenses, an FSA gives you an immediate discount on these expenses that equals the taxes you would otherwise pay on that money.
In other words, with an FSA, you can both reduce your taxes and get more for your money by saving from 20% to more than 40% you would normally pay for out-of-pocket health care and dependent care expenses with after-tax (as opposed to taxed) dollars.
FSAFEDS offers three types of FSAs:
- The Health Care Flexible Spending Account (HCFSA), which can be used to pay for qualified medical costs and health care expenses that are not paid by your Federal Employees Health Benefits (FEHB) plan or any other insurance. PLEASE NOTE: A HCFSA cannot be used to pay for any type of insurance premiums, including long-term care insurance premiums.
- The Limited Expense Health Care Flexible Spending Account (LEX HCFSA), only available to employees who enroll in a Federal Employees Health Benefits (FEHB) Program under a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). Eligible expenses are limited to dental and vision care services/products that meet the IRS definition of medical care. By using a LEX HCFSA, you can preserve the funds in your Health Savings Account to use/save for other purposes.
- The Dependent Care Flexible Spending Account (DCFSA), used to pay for eligible dependent care expenses such as child care for children under age 13 or day care for anyone who you claim as a dependent on your Federal tax return who is physically or mentally incapable of self-care so that you (and your spouse, if you are married) can work, look for work, or attend school full-time. For more information, refer to Do I, or my spouse if married, have to earn income during the year to use a Dependent Care FSA (DCFSA)?
Your participation in any FSA is completely voluntary, and it’s important to remember that unlike other Federal benefits, your FSA election is only effective for one Benefit Period. In other words, you must enroll each year that you choose to participate. If you do not enroll during Open Season, you will not participate in the next Benefit Period, unless you experience a Qualifying Life Event (QLE) that allows you to make an election outside of Open Season. Open Season for FSAFEDS runs concurrently with the FEHB Open Season in November and December each year for enrollment in the following year. The FSAFEDS Benefit Period will always run from January 1 of the current Benefit Period through March 15 of the following year. This includes a 2 ½ month grace period from January 1 through March 15 of the following year. During the grace period, eligible expenses incurred from January 1 through March 15 of the following year can be applied towards your prior year's balance. The intent is to help account holders avoid forfeiting any of the funds they deposited in FSA accounts. It is important to carefully consider the amount you choose to elect.
OPM has adopted the grace period on behalf of all agencies and employees that are part of FSAFEDS and has also extended the filing deadline for claims against the prior year account (including claims incurred during the “grace period”) to midnight Eastern Time on April 30.
FSAFEDS follows Internal Revenue Service (IRS) guidelines to determine eligible expenses and other requirements for participation in an FSA issued under Sections 105, 125, and 129 of the Internal Revenue Code.
Click here to use FSA Calculator |