Flexible Spending Accounts (FSA)
If you are a participant who is actively at work, you can choose to contribute a portion of your compensation to a Flexible Spending Account on a pre-tax basis through the cafeteria plan. The flexible spending account for health care expenses is called the Medical Reimbursement Account (MRA), and the flexible spending account for dependent care expenses is called the Dependent Care Account (DCA). Together they are called reimbursement accounts or FSAs.
You can elect to reduce your salary for a Plan Year (or the remainder of the Plan Year if you are a newly hired eligible employee), through a salary-reduction agreement. The contribution amounts will be deducted pro-rata each month or payroll period from your compensation.
Reimbursement accounts are subject to strict rules and requirements of the Code, under §105, §106, §125 and §129. FSAs can only reimburse you for health care expenses or dependent day care expenses. The Plan maintains FSAs as bookkeeping entries, with the “account balance” representing the amount of your salary reduction contributions that are available to reimburse your eligible expenses.
To participate in the FSAs, you must be enrolled in the Plan and covered by HealthFlex. For each year in which you want to have FSAs, you must make an election to contribute a portion of your salary. If you do not elect an amount for the FSAs in any Plan Year, you are presumed to have made an election to contribute zero dollars. FSA elections do not carry over from one year to the next; they are not “evergreen.” Amounts remaining in your FSAs at the end of a Plan Year do not carry over to the following year, other than in the limited manner permitted by the Grace Period (see below) for the MRA; you forfeit them to the Plan.
FSAs can help you save significantly on the cost of health care and dependent care by allowing you to pay for qualified expenses on a tax-advantaged basis. However, the funds you contribute are subject to certain restrictions in their use, as explained below, and are subject to the “use-it-or-lose-it” rule. When you elect to contribute to the MRA or DCA, you are choosing to contribute that amount over the applicable Plan Year, which is a Calendar Year, not a Conference or appointment year or season. If you enroll in the Plan mid-year and elect to contribute to an MRA or DCA, your election will apply to the remaining portion of the Calendar Year.