What’s an FSA?
A Flexible Spending Account (FSA) is an employee benefit that allows employees to use pre-tax dollars to pay for out-of-pocket health insurance or dependent insurance expenses. We currently offer two types of FSAs: Healthcare and Dependent Care FSAs.
In an FSA, an employee enrolls during open enrollment period and elects how much they'd like to set aside pre-tax. The total amount then gets deducted evenly from each paycheck for the remainder of the year. Employees can then use these funds for different IRS approved expenses.
How does a Healthcare FSA work?
A Healthcare FSA can cover medical, dental or vision expenses that you would otherwise pay for out-of-pocket, including co-pays and deductibles. For a full list of qualified expenses please visit IRS Publication 502.
With the Healthcare FSA, there's a 2018 limit of $2,650 that you can set aside pre-tax. That means you can decide to set aside any amount between $1 and $2,650 in 2018. You can elect to participate in an FSA during open enrollment and you must elect a contribution amount at that time. You cannot make any changes or opt-out of the FSA later in the year.
How does a Dependent Care FSA work?
A Dependent Care FSA can reimburse you for the work-related cost of care for a qualifying dependent. For a full list of qualified expenses please visit IRS Publication 503.
A qualifying dependent is broadly defined as:
- A tax dependent of yours who is under age 13, or
- Any other tax dependent of yours, such as an elderly parent, who is physically or mentally incapable of self-care and has the same principle residence as you
- A spouse who is physically or mentally incapable of self-care and has the same principle residence as you
If single, you have to work or study full-time in order to qualify for a Dependent Care FSA. If you are married, generally both you and your spouse must work or look for work. One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. Your work can be for others or in your own business or partnership. It can be either full time or part time.
If you're single or married filing separately, the limit on how much you can contribute to your Dependent Care FSA is $2,500. If you're married and filing jointly, the limit on how much you can contribute is set at $5,000.
How do FSAs work with Justworks?
The first step in setting up an FSA with Justworks is for the admin of the company to elect to set it up. They can do this by enrolling through the app under the Benefits section. From Benefits, navigate to "Offer more benefits" and select FSA. We'll then ask for your company name, email, and effective date. Please be aware that the start of an FSA must always be the first of the month).
Justworks will then reach out to all eligible employees notifying them of the new benefits and of their open enrollment period. Employees can only sign up during the open enrollment period.
Employees can decide to start contributing to an FSA directly from their Justworks account. When an enrollment opportunity is present, they will see a banner encouraging them to enroll upon logging in to Justworks. They can also reach the workflow by going to the 'Benefits' tab on the left-hand side menu.
Justworks will then take the total amount an employee would like to contribute towards their FSA and divide that amount by the number of remaining payrolls for the year. Justworks will then automatically debit this amount from each payroll and remit the payment to BenefitWallet.
How Much Does Offering an FSA Cost?
There is a BenefitWallet fee of $3.95 per participating employee, per month. This fee must be employer paid and is flat regardless of whether the employee uses one or both types of FSAs.
When can a company start offering an FSA?
All FSAs must start on the first of a month. A company can elect to offer an FSA at any point, but must notify Justworks by the 15th of the month before the effective date of the FSA. Like health insurance, FSAs have an open enrollment period, which must close by the 22nd of the previous month. So for example, if a Company would like to set up an FSA for March 1st, their FSA open enrollment would close on February 22nd.
When can an employee sign-up for an FSA?
Since FSAs run along the calendar year, FSA open enrollment occurs about a month or so before the start of the new year. The open enrollment period is only time to sign-up for an FSA.
During what dates is the FSA effective?
All Justworks plans run on a calendar year, beginning on January 1st and ending on December 31st. If you sign up for a plan mid-year you can therefore submit claims for bills incurred from your effective date through December 31. The effective date is designated by the company and must always be the 1st of the month. All plans end on December 31st regardless of when they start.
Do the FSA funds rollover?
No, funds do not rollover with your FSA through Justworks and BenefitWallet. Unused funds on December 31st will be forfeited. However, employees have until 3/31 to submit a claim for expenses incurred prior to December 31st.
Does the FSA have a grace period?
No, there are no grace periods with this FSA. The last day an employee can possible incur an expense and have it count towards the FSA funds is December 31.
Can a company offer FSAs to employees who don't qualify for health insurance (such as part-time employees working under 30 hours)?
Yes, but in order to do so a company must extend the benefit to all employees in that class. For example, if an employer wanted to offer FSA to part-time employees, they would have to extend this benefit to all part-time employees.
Can an owner participate in FSA?
As a business owner, the IRS states you can’t contribute to an FSA plan if you own 2% or more of the company and are an LLC, PC, sole proprietor, partner, or have a schedule S corporation. If you own a C-corporation, however, you may participate in an FSA plan because the IRS considers you a W-2 common law employee.
Can I sign up later if I don't want to sign-up during open enrollment?
If you'd like to participate in your company's FSA, you must sign up during open enrollment.
Can I change my FSA contribution amount?
You can neither decrease or increase your FSA contribution amount after its effective date.
Can I use my FSA for expenses incurred in the previous year, or any time before my FSA effective date?
No, the first date for which you can submit a claim is the effective date of your FSA plan. For example, if your company started offering FSAs on February 1st, you cannot submit any claims for expenses incurred during January 1st or in the previous year, even if they were billed to you during February.
Can I have a Healthcare FSA if I have an HSA?
No, you cannot have a Healthcare FSA. However, you can have a Dependent Care FSA.
Can my Healthcare FSA cover expenses by my dependents?
Yes, your Healthcare FSA can cover expenses by qualifying dependents, even if they are not currently covered in your employer-sponsored health insurance plan. Qualifying dependents include:
- Your spouse
- Your qualifying child
- Your qualifying relative
When do my FSA funds expire?
All FSA funds expire on December 31st. Justworks' FSA runs on a calendar year (1/1 - 12/31), regardless of when you or your company join.
What happens to the funds I've put in an FSA if I don't use them by December 31st?
Be mindful of the IRS' "Use it or lose it" rule - if you contribute more funds to your FSA than you are able to spend during the plan year, then you will forfeit any unused FSA balance.
What happens if I leave my company?
If your employment is terminated and you have a positive FSA balance, you may not use FSA funds for expenses incurred after your termination date unless you elect COBRA coverage and pay into the FSA (in order to keep the FSA coverage in place long enough to use up any otherwise remaining FSA balance).
I've signed-up for an FSA, how do I use my funds?
If you signed up for a Healthcare FSA, you can use your BenefitWallet issued debit card or you can pay out of pocket and submit a claim. If you use your BenefitWallet card, then all you need to do is go online to upload the necessary documentation to substantiate the claim.
If you paid out of pocket, you must log into BenefitWallet and submit the claim within 30 days. BenefitWallet will reimburse you either via direct deposit or check.
If you signed up for a Dependent Care FSA, it does not have a debit card associated with the account. For Dependent Care FSA, you always have to pay out of pocket and then submit a claim online.
Are my funds available for use immediately?
For the Healthcare FSA, all funds selected will be immediately available to you on day 1. For example, if you elected to defer $500 to your FSA, you could spend all $500 on the first day your plan is effective.
For Dependent Care FSA, you can only use funds as you contribute them into your account. For example, you've elected to defer $2,400 across 24 pay periods, after your first pay period, you will only have $100 (or $2,400/24) available to use.
How long do I have to file a claim?
A claim can be submitted anytime within the plan year and there's a grace period until March 31, 2018 for any expense incurred by December 31, 2017.
How do I log in to BenefitWallet?
In order to log in to BenefitWallet and submit a claim, you first must create an account. Here's how:
- Visit www.mybenefitwallet.com
- Select the “First Time User” button located in the upper right hand corner of the page
- Create your personalized user ID by filling out that form
- Enter your temporary password (your Social Security Number). The first time you log in, you will be required to change your password
- Review and update your account information as needed
- Accept the terms and conditions of Web use
- After you select “Agree” you have opened your account.
Moving forward, you can log in to BenefitWallet with your personalized user ID and your password.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.