Medical Flexible Spending Account (FSA) and Dependent Care Account (Cafeteria Plan – Section 125)

The FSA account allows an employee to set aside a certain portion of their income on a pre-taxed basis to be applied to medical and other qualified expenses as well as dependent care expenses.

 

The money is deducted from the employees’ paycheck on a pre-taxed basis. This allows for employee savings on taxable income and a savings for the employer on payroll taxes.

 

Because reimbursements can be made up to the total contracted amount at any time, caps are usually placed on employee contributions by the employer to prevent loses should an employee leave or be terminated from employment.  

 

Only eligible expenses incurred during the Plan Year are eligible to be considered for reimbursement. An incurred date of service is the date the service is rendered/preformed.

 

These funds can cover medical expenses that are not paid by the employees’ insurance plan, such as deductibles, co-pays, etc. It can also pay dental and vision benefits, prescription drug co-pays and some over the counter drugs and first aid supplies.

 

Medical Flexible Spending Accounts cannot pay for health insurance premiums or cosmetic services or supplies, including cosmetic surgery.

 

FSA’s generally pay for the costs of diagnosis, cure, mitigation, treatment, or prevention of disease.

The IRS caps Dependent Care at $5000. Dependent care expenses cannot be pre-funded. This means that employees can only receive funds for monies that have already been deposited.

 

SIEBA, LTD. can process paper claims as well as allow for instant access to funds via a debit card account.