Flexible Spending Accounts FAQ

The Human Resources staff is available to help with any questions you have about Flexible Spending Accounts and enrollment. Please feel free to contact us by phone (831-2171) or e-mail (hrhelp@udel.edu).

Q. Why should I enroll in an FSA?
A. With an FSA, your out-of-pocket health, dental or vision expenses and/or dependent care expenses are paid with tax-free dollars. FSAs are exempt from federal taxes, Social Security (FICA) taxes and, in most cases, state income taxes. You can typically save an average of 30 percent on all of your eligible expenses 

Q. What is a Health Care FSA?
A. A Health Care FSA is an account that provides you, your spouse and your eligible dependents with pretax reimbursement for qualified health care expenses that are not covered by insurance.

Q. What expenses are eligible for reimbursement?
A. Health Care FSA Health care plan deductibles, co-payments, prescription glasses, orthodontia, certain over-the-counter supplies are eligible if incurred while you are a participant in the plan.

  • Expenses are treated as having been incurred at the time the medical care was provided, not when you are formally billed, charged, or pay for the medical expenses.

  • You cannot receive reimbursement for future or projected expenses.

  • All submitted expenses are reviewed for eligibility according to Internal Revenue Code Section 125 guidelines.

Q. Are Breast Pumps and/or lactation supplies eligible for reimbursement?
A. The Internal Revenue Service has concluded that breast pumps and supplies that assist lactation are medical care under § 213(d) of the Internal Revenue Code because, like obstetric care, they are for the purpose of affecting a structure or function of the body of the lactating woman. Therefore, if the remaining requirements of § 213(a) are met (for example, the taxpayer's total medical expenses exceed 7.5 percent of adjusted gross income), expenses paid for breast pumps and supplies that assist lactation are deductible medical expenses. Amounts reimbursed for these expenses under flexible spending arrangements, Archer medical savings accounts, health reimbursement arrangements, or health savings accounts are not income to the taxpayer.

Q. How has the Health Care Reform Act changed the purchase of over-the-counter (OTC) drug expensed in regards to Health Care Flexible Spending Accounts? 
Effective January 1, 2011, in order to receive reimbursement for over-the-counter (OTC) drug expenses incurred, you will be required to submit supporting documentation, such as a physician's statement. In the past, you have been able to receive reimbursement for these expenses without any additional documentation. This change applies to OTC medicines and drugs only and does not affect OTC supplies or equipment, or other expense types.
Please contact ASIFlex, 800-659-3035 if you have questions regarding what is considered OTC drug expenses. 

Q. How do I prove that I have purchased an over-the-counter medicine or drug with a prescription so that I can get reimbursed from my health FSA?
A. You should provide the prescription (or a copy of the prescription or another item showing that a prescription for the item has been issued) and the customer receipt (or similar third-party documentation showing the date of the sale and the amount of the charge). For example, documentation could consist of a customer receipt issued by a pharmacy that reflects the date of sale and the amount of the charge, along with a copy of the prescription; or it could consist of a customer receipt that identifies the name of the purchaser (or the name of the person for whom the prescription applies), the date and amount of the purchase and an Rx number.

Q. How does this change affect over-the-counter medical devices and supplies?
A. The new rule does not apply to items for medical care that are not medicines or drugs. Thus, equipment such as crutches, supplies such as bandages, hearing aid batteries and diagnostic devices such as blood sugar test kits will still qualify for reimbursement by a health FSA if purchased after Dec. 31, 2010.

Q. What is a Dependent Care FSA?
A Dependent Care FSA (DCFSA) helps you pay for child or elder care services so you and your spouse can work. Under certain circumstances, the account may be used to help pay for the care of a disabled spouse or dependent. Examples of eligible expenses include:
·  Child or elder care center
·  Nursery or preschool
·  After school care
·  In-home care (for children or adults)

Q. Am I eligible to participate in a Dependent Care FSA?
You are eligible for this benefit if you have a dependent (whose expenses are eligible) who requires care to enable you to work. In addition, you must meet one of the following eligibility criteria:

  • You are unmarried.

  • Your spouse works, is a full-time student, is actively seeking work, or is disabled.

  • You are divorced or legally separated and have custody of your child even though your former spouse may claim the child for income tax purposes.

Your Dependent Care FSA can be used to pay for child care services provided during the period the child resides with you.

Q. Dependent Care FSA
A. Eligible dependent care expenses may include services inside or outside your home by anyone other than your spouse or a person you list as a dependent for income tax purposes or one of your children under the age of 19. Services may be provided at a child or adult care center, nursery, preschool, after school, or summer day camp. Important Notes:

  • Dependent care for a child over 13, overnight camp, baby sitting that is not work-related, schooling in kindergarten and higher grades, and long-term care services are not eligible expenses.

  • All submitted expenses are reviewed for eligibility according to Internal Revenue Code Sections 125 and 129 guidelines.

Q. How do I determine the date my expenses were incurred?
A. A service or expense must be incurred before it is eligible for reimbursement. An FSA expense is considered “incurred” when the service is performed, not when you pay for the service. In addition, the service must be performed during your participation in the plan. Services or expenses incurred before or after your plan participation dates do not qualify for reimbursement.

Q. What happens if I do not use all of the money in my account by the end of the plan year?
A. Federal law governing FSAs specifies that any money remaining in your account at the end of the plan year will be forfeited. This is more commonly known as the use-it-or-lose-it rule. Forfeitures may be used by the University to offset the administrative costs of operating the plan.

Q. Can I change my election amount during the plan year?
A. Your decision to participate in an FSA is binding for the entire plan year, and you may change your election only as permitted by IRS regulations. Generally, to make an FSA election change, you must experience a significant life event such as marriage, divorce, birth, or death in your immediate family. For a Dependent Care FSA only, you may also make election changes that simply correspond with changes in your cost of the care. You may not reduce your election to an amount less than either your year-to-date reimbursements or your year-to-date FSA contributions. A change to your FSA election constitutes the end of your prior election and the beginning of a new election period. Expenses incurred during the period prior to the election change are subject to the initial election amount; expenses incurred during the period after the election change are subject to the new election amount.

Q. What happens to my FSA if I terminate employment?
A. Participation in the FSA ends if you terminate employment. This means only expenses incurred prior to the date your participation in the plan ends are eligible for reimbursement. Claims for expenses incurred prior to your termination date must be submitted within 90 days.

Q. Upon termination from the FSA, may I continue my coverage through COBRA?
A. The University is required by law to provide benefit continuation coverage under COBRA. The health care FSA qualifies under this program. COBRA participation will require that you continue at your current contribution level. The advantage is that you will be able to continue to submit expenses incurred after your termination date. The difference is that you will be paying after-tax dollars plus administration fees.

Note: COBRA will be offered if you have "underspent" your account, but not offered if you have "overspent" your account at the time of termination.

A Dependent Care FSA does not qualify for COBRA. Therefore, any funds remaining in the account after termination and the following 90 days will be forfeited.

Q. What is the grace period?
A.IRS regulations permit a 2½ month grace period (through March 15) for participants to incur expenses that may be reimbursed from contributions made in the preceding year. This provides additional time to take advantage of FSA contributions before the amounts are forfeited under the "use-it-or-lose-it" rule. It is still important, however, to be somewhat conservative when choosing the amount of your FSA contribution; you will lose any balance not used during the plan year and subsequent grace period.