Section 125 Flexible Benefit Plan
Section 125 means that you are able to use "pre-tax" dollars to pay for certain benefits that you may have previously paid for with "after-tax" dollars.
Flexible Spending Account Options
If you anticipate spending more than $300.00 on out-of-pocket costs on health care or dependent care expenses during a plan year (from July 1 through June 30), you may be interested in enrolling in one of the Flexible Spending Accounts. * You may elect to enroll in a Flexible Spending Account at the beginning of a benefit plan year ONLY. There are two types of Flexible Spending Accounts:
Health Care Account
Minimum Plan Year Contribution - $300 annually or $25 monthly
Maximum Plan Year Contribution - $2,700 annually or $225.00 monthly
Dependent Care Account
Minimum Plan Year Contribution - $300 annually or $25 monthly
Maximum Plan Year Contribution - $5,000 annually or 416.66 monthly ($2,500 if married filing separately)
What is a Section 125 Flexible Benefit Plan?
A Section 125 Flexible Benefit Plan allows you, the employee, to pay premiums for the benefits that you choose (Medical, Dental, Vision, or Flexible Spending Account) through a salary reduction agreement with the District. Salary reduction means that you are able to use "pre-tax" dollars to pay for the premiums that you may have previously paid for with "after-tax" dollars. This is only available for premiums deducted from your District pay check.
Harrison School District 2 partners with American Fidelity to administer the Flexible Benefit Plan Spending Account programs. The Flexible Spending Account allows you to save money on a pre-tax basis to cover additional eligible healthcare or dependent care expenses. Review American Fidelity's flexible spending site for information on these plans, lists of eligible expenses, as well as a worksheet to calculate potential unreimbursed medical expenses.
Here are some of the details of the Flexible Spending Account programs:
- These pre-tax deductions lower your taxable income, so you pay less income tax.
- The District adopted the carryover provision. This provision allows you to carryover a maximum of $500.00 unused funds into the next plan year. Unused funds remaining as of June 30 each year will be subject to the carryover provision.
- Any unclaimed funds in excess of the $500.00 carryover allowance remaining in your account as of June 30 will be forfeited.
- Visit American Fidelity's website or click HERE for a list of qualified expenses. As part of the healthcare reform legislation, over-the-counter items NO LONGER qualify unless you have a physician's prescription.
- Employees who participate in the medical flexible spending account have two choices for reimbursement - using a FSA debit card or submitting reimbursement claim requests (direct deposit is mandatory for reimbursement requests).
The FSA Debit card is a convenient and fast way to pay for eligible health care expenses at medical and dental offices, hospitals, health care clinics, dedicated pharmacies and online pharmacies. It works similar to a bank account debit card because it removes funds from your Health Care Reimbursement Account. By using the card to purchase eligible expenses, you avoid paying for a purchase with money out of your pocket and waiting for reimbursement. The debit card is only available for qualified health care account purchases and you may be required to submit your receipts for documentation. American Fidelity offers additional Health FSA debit cards for qualified dependents.
There is no fee for the debit card; HOWEVER, direct deposit is mandatory for any reimbursement requests made without using the debit card.
Using the Flexible Spending Account Programs:
- Decide how much money you want to contribute on a monthly basis for the next plan year from July 1 through June 30.
- Be sure to understand what expenses are eligible for reimbursement under the different programs. Visit American Fidelity's web page for a list of qualified expenses, or contact them at 1-800 325-0654 or by email at Flex-Admin@americanfidelity.com.
- As you incur eligible expenses for health care you can either pay for them using your personal funds or with the FSA Debit Card. As you incur eligible expenses for day care, you will pay for them using your personal funds as you cannot use the FSA Debit Card for daycare spending accounts.
- If you used your personal funds to make a purchase then you complete a Request for Reimbursement and submit the form along with a copy of the receipts directly to American Fidelity.
- If you use the FSA Debit Card be sure to save your receipts as you may receive a request to submit proof of eligible expenses directly to American Fidelity and/or the IRS for tax purposes.
- Eligible expenses start the 1st of the month in which the deduction is taken out of your pay check. Based on the District's eligibility policy, if your hire date is August 8, your benefit eligible date would be October 1. All qualified expenses from October 1 through the end of the plan year are eligible. First deduction would be taken from October's pay check.
- Reimbursement cannot be given for prepayment of services. For example, prepayment of orthodontic contract before services are provided or prepayment of dependent day care services. Reimbursement is based on the date you incurred the charges, not when the charges are paid.
Dependent Daycare Flexible Spending Account Program
Under IRS rules, eligible dependents are:
- A qualifying child under age 13 who is a dependent of the taxpayer and has the same principal place of residence as the taxpayer for more than one-half of the year.
- A qualifying dependent of the taxpayer who is physically or mentally incapable of caring for himself or herself, and has the same principal place of residence as the taxpayer for more than one-half of the year.
- A spouse who is physically or mentally incapable self-care and who has the same principle place of abode as the taxpayer for more than one-half of the year.
Additional information regarding the Dependent Daycare Flexible Spending Account program:
- You cannot use the same expenses for both the federal tax credit and a Flexible Spending Account program.
- The IRS requires that you provide the name, address, and social security number or tax identification number of your care provider.
- Dependent daycare contributions must have already been deducted from your pay check and be in your daycare spending account in order to receive reimbursement.
- The IRS requires that the dependent care service must occur before you can submit a reimbursement request.
The plan year for the Health Care Reimbursement and Dependent Daycare Reimbursement Accounts is from July 1 through June 30 of the following year.
- As specified in the plan document,"Claims for reimbursement of Eligible Dependent Care Expenses must be submitted no later than the last day of the third month (September 30) following the last day of the Plan Year (June 30) during which the Eligible Dependent Care Expenses were incurred." Failure to submit claims accordingly will result in any remaining balance being forfeited.
- If you allocate money to both accounts, you cannot use money from one account to cover expenses for the other account.
- Dependents do not include a domestic partner or a domestic partner's eligible children.
You may only change your elections during an Annual Open Enrollment period.
Visit American Fidelity and use their flex health savings account online calculator. Remember to estimate carefully, because what you don't use, you lose!
IMPORTANT NOTE: Flexible Spending Accounts require an annual election. Even if you contributed in the last plan year, you must re-enroll to participate for the next plan year.