You can set aside money in a flexible spending account (FSA) before taxes are deducted from you pay for certain health and dependent care expenses, lowering your taxable income and increasing your take-home pay.
You may elect to participate in either or both the health care or the dependent care FSA; however, money cannot be transferred between the accounts.
Both FSA benefits are use it or lose it plans. You may not recover money left in either of the accounts after the end of the plan year and grace period.
FSA participation does not continue automatically from year-to-year. You must enroll (or re-enroll) during open enrollment if you wish to participate in the upcoming year.
Cost for participation
Your cost is based on the contribution amounts you elect. In addition to your contribution, you pay a small monthly administrative fee of $1.45.
The annual flexible spending maximum you may elect is:
- $2,750* for health care
- $5,000 for dependent care (or $2,500 if you are married and filing separate tax returns)
When estimating your dependent care expenses, remember you may not have expenses for weeks of vacation, illness, or other times your dependent receives free care. Please note that dependent care is only for children up to age 13.
You select the amount you want to contribute based on expenses you anticipate through December 31 of the following year (due to COVID-19, the grace period to spend your FSA was extended to December 31). Estimate carefully because you cannot recover money left in the account at the end of the plan year and grace period.
Your contributions are equally divided by the pay periods you have in the calendar year and are deducted before federal income or Social Security taxes are withheld.
The IRS requires that all FSA transactions, even those made using a payment card, need to be verified as eligible expenses. While the substantiation process is performed by ConnectYourCare, you may be required to submit receipts or documentation for your transaction.
Learn more about the substantiation process for FSA transactions.
Participation in an FSA is a plan year commitment. During the year, you cannot change the amount you contribute, start participating, or stop making contributions unless you have a qualifying life event. Generally speaking, you cannot lower your contributions.
You can make an election change in the dependent care flexible spending account, but not the health care flexible spending account, due to a change in the cost of dependent care providers.
The health care flexible spending account helps you pay for medical, dental, and vision expenses that are not covered or fully reimbursed by your other benefit plans, such as copayments, coinsurance amounts, deductibles, and amounts above the benefit maximums.
You may submit reimbursement requests for health care expenses regardless of the balance in your account beginning January 1. You will be reimbursed for the entire amount of the eligible expenses up to your annual contribution amount, even before the full contribution has been deducted from your paychecks.
For a complete listing of eligible health care flexible spending expenses, visit www.connectyourcare.com. To register as a new user on the site, you will need your social security number, date of birth, an email address, and your ConnectYourCare payment card number. If you do not have a payment card, just check the box stating that you do not have a card associated with your account.
The health care FSA is for eligible heath care expenses for you and all of the dependents you claim on your federal tax return, not just those dependents covered under a university-sponsored medical plan. You are eligible to enroll in the health care FSA even if you are not in a university medical or dental plan.
The dependent care flexible spending account (FSA) reimburses you for eligible dependent care expenses such as day care and elder care, that enable you (and your spouse, if you are married) to work.
If your account currently does not hold sufficient funds to cover the entire reimbursement, you receive a partial payment. Additional reimbursements are issued automatically after contributions from your next paycheck have been added to the account.
Special rules apply to spouses who are full-time students or incapable of self-care. Expenses reimbursed under this plan may not be claimed as a federal tax credit on your tax return. Contact your tax advisor for additional guidance.
For a full listing of eligible dependent care flexible spending expenses, visit www.connectyourcare.com. To register as a new user on the site, you will need your social security number, date of birth, an email address, and your ConnectYourCare payment card number. If you do not have a payment card, just check the box stating that you do not have a card associated with your account.
FSA participants automatically receive a payment card that allows direct access to FSA funds for eligible health care expenses. You can use the card when you make eligible health care purchases from most merchants who accept credit or debit cards. Because the card deducts funds directly from your FSA account to pay for services and supplies, it eliminates the wait for reimbursement. The card is offered at no additional charge to you and is not tied to or reported against your credit report.
There are a few rules to know about using your card that will save you time and frustration. Here are some tips:
- When you incur an eligible expense, you may use your ConnectYourCare payment card to pay the provider right away.
- If you paid with the payment card, be sure to keep copies of all claims and receipts for seven years, as you do with all tax records. ConnectYourCare or the IRS may request the receipts to audit your account. If ConnectYourCare requests documentation and it is not provided on their request, your payment card will be put on hold.
- Review the acceptable receipts and documentation requirements.
- The card works easily with medical office copayments when the charges are standard copayment amounts.
- Generally, ConnectYourCare may ask for documentation to support non-standard charges or charges that were not processed through a merchant that has a system that verifies the charge's eligibility.
- You may use your payment card to exhaust funds from your 2020 flexible spending accounts after December 31, 2020 through March 15, 2021.
- All 2020 flexible spending claims must be submitted to ConnectYourCare by December 31, 2021.
- If you prefer to pay out-of-pocket and file a claim, visit www.connectyourcare.com.
- New participants receive a ConnectYourCare FSA payment card within a few weeks of enrollment.
Due to COVID-19, the grace period has been extended for 2020 and 2021 FSA participants.
American University's FSA plan provides you with a grace period to spend your FSA contributions. You can be reimbursed for eligible health care and dependent care FSA expenses incurred in a plan year from January 1 through December 31 of the following year.
Plan your end-of year expenditures as all claims and documentation for reimbursements must be received by December 31 of the following year.
- 2020 FSA charges must be incurred and claims with documentation received by 12/31/2021.
- 2021 FSA charges must be incurred and claims with documentation received by 12/31/2022.
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