Flexible Spending Accounts (FSAs)

A Healthcare Flexible Spending Account (HCFSA) and Dependent Care Account (DCA) may help participants save money on eligible expenses.

FSAs offer convenient pre-tax savings options for employees. If enrolled in an FSA through the employer, the employee chooses how much money to set aside from wages. That money goes into an account on a pre-tax basis. The money may then be used to cover the cost of qualified medical and dependent day care expenses.

Two Account Options

HCFSAs cover unreimbursed healthcare costs, like deductibles or copayments.

Dependent Care Accounts help cover the cost of caring for a qualifying child, relative, or spouse to allow an employee to continue working.

Payroll Tax Savings

While FSAs are a great way for employees to save money, employers may also see payroll tax savings added to their bottom lines.

Up-Front Funding

For HCFSAs, upon receipt of a claim, the entire amount of the participant’s annual election (less previously paid claims) will be available. This is regardless of the participant’s contribution.

Benefits Debit Card

This card eliminates up-front payment and may be available at no additional cost. When a participant has an allowable expense, he or she uses the Benefits Debit Card, and the out-of-pocket portion of the expense will be deducted straight from his or her HCFSA account.*

Uniform Coverage Risk

Regulations require the HCFSA to have the full elected amount available to a participant for reimbursement from the first day of the plan year. This causes a potential loss to the employer. American Fidelity offers insurance to cover the HCFSA risk. The risk policy “insures” the employer’s uniform coverage risk for the HCFSA, up to $2,600 (or $2,650 for plan years after 2017) per participant, for shortages in the plan after the coverage period.

*The Internal Revenue Code (IRC) requires proof of the eligible expenses using itemized receipts or other documentation showing the date of service, person for whom the service was provided, and a description of the expense. Depending on the type of expense, documentation may come in the form of third party itemized statements or an Explanation of Benefits (EOB).