A flexible spending account allows eligible employees to set aside money, through pre-tax payroll deduction, that can be used for certain out-of-pocket healthcare and dependent care expenses. Employees must plan their yearly amount carefully because there is no reimbursement for unused funds. If there is a balance unused, the Internal Revenue Service (IRS) requires that the employee forfeit the unused balance. However, the Health Care Spending account can be used for certain over-the-counter items, which allows employees to make sure their entire amount is spent yearly.
Health Care Spending Account
Eligible employees can set aside a maximum of $3,000, in pre-tax dollars, each year to cover healthcare expenses not reimbursed by any medical, dental, or vision care plan. All participants in this plan will receive a debit card. This card will make it easier to pay for services such as co-pays for physician office visits, prescription drugs, and designated over-the-counter drugs.
Dependent Care Spending Account
Eligible employees can set aside a maximum of $5,000, in pre-tax dollars, each year to pay for dependent care expenses. In order for expenses to qualify, the daycare must be necessary to allow the employee or spouse to work and/or attend school full-time. The employee can be reimbursed for dependent children under age 13 or a dependent child, spouse, or parent of any age who is physically or mentally unable to care for himself/herself and depends on the employee for support.