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What is it, how does it work?

A Flexible Spending Account (FSA) is a benefit provided by your employer that allows you to set aside pre-tax dollars* at the beginning of the plan year to pay for out-of pocket eligible healthcare and dependent care expenses.

By spending pre-tax FSA dollars on these expenses, you get more benefits and you’ll take home more money.

Save up to 40% with an FSA on these eligible out-of-pocket expenses*

  • Healthcare expenses for you, your spouse or your qualifying child or relative
    • Office co-pays
    • Prescription drugs and many over-the-counter (OTC) drugs*, and OTC healthcare products
    • Dental – including child and adult orthodontia
    • Vision care – including laser eye surgery
    • Chiropractic
    • Acupuncture
  • Employment related dependent care expenses
    • Care for your qualifying child under the age of 13
    • Care for your spouse or your qualifying child or relative who is physically or mentally incapable of self-care

* Beginning January 1, 2011, OTC medicines and drugs will no longer be eligible for reimbursement under a health FSA without a prescription.

What would you do with an extra $1,400?

FSA savings comparison – example**
FSA
No FSA
Annual Taxable Income $35,000 $35,000
Out-of-pocket Expenses:
Healthcare $1,000 $0
Dependent Care $2,500 $0
Total Pre-tax Contributions ($3,500) $0
Taxable Income After FSA Contributions $31,500 $35,000
Federal & State Income & Social Security Taxes (40%) ($12, 600) ($14,000)
After-Tax Income $18,900 $21,000
After-Tax Dollars Spent on Health and Dependent Care Expenses $0 $3,500
Take-home Pay $18,900 $17,500
Increased Take-home Pay $1,400 $0

** This example is intended to demonstrate typical tax savings based on a total income tax rate of 40%. Actual savings is based on individual tax situations.
** FSA contributions are deducted before federal and most state taxes. State taxes do apply in New Jersey and may apply in other states. Check with your tax advisor.

Open an FSA in three easy steps

1. Before your employer’s next open enrollment period, determine how much you expect to spend on qualified healthcare (including many OTC products) and dependent care in the coming year.

2. Use FSA calculator to figure out exactly how much you should put into your FSA and calculate your annual savings.

3. Submit your FSA enrollment form with your healthcare and/or dependent care elections during your open enrollment.

Contact your human resources department for additional information about FSAs and how you can take advantage of this valuable benefit.

Additional Information

Your entire annual contribution amount is available immediately at the beginning of the plan year to pay for eligible healthcare expenses.*** However, your total FSA election amount is deducted from your paycheck in equal amounts during the year.
  • So, if you decide to contribute $1,200 for the year, you can use that amount right away and only have $100 deducted from your paycheck each month.

    All of the money in your FSA must be spent by the end of your plan year, since unused funds will not be returned to you or carried over to the following year.

  • Current tax laws allow you to set aside up to $5,000 annually to pay for employment related child daycare or adult dependent care. At 40% off - your savings could really add up.

    What would you do with an extra $2,000?
    ($5,000 X 40% = $2,000)

Want some examples of how you might use your FSA?
*** This applies to healthcare expenses only. Dependent care expenses are reimbursed based on the availability of funds in your account.