How the Flexible Spending Accounts Work
Here is the process for setting aside your contributions to the flexible spending accounts:
- You estimate what your uninsured medical and/or dependent care expenses will be for the coming year, and designate that amount on the appropriate enrollment form. You should estimate conservatively because amounts not used for eligible expenses during a year must be forfeited (this is an IRS rule).
- The amount you elect to contribute will come out of your paycheck in equal installments for the number of pay periods you designate.
- The portion of your salary that goes into an account will not count as taxable income, so you have immediate tax savings.
- When you have an eligible expense, you file a claim to get reimbursed. You are responsible for paying providers; reimbursement checks will be made out in your name.
- Under federal law, if you make contributions to a flexible spending account which are not used to pay for eligible expenses incurred during that plan year, you will forfeit the unused balance at the end of the plan year.
- Also, expenses incurred before your participation commences or after you cease participation cannot be reimbursed.