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.
With an FSAs, 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 2019 limit of $2,700 that you can set aside pre-tax. That means you can decide to set aside any amount between $1 and $2,700 in 2019. You can elect to participate in an FSA during open enrollment and you must select 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 principal residence as you
A spouse who is physically or mentally incapable of self-care and has the same principal residence as you
If single, you may be reimbursed for expenses incurred due to “gainful employment”, Gainful employment usually means working or looking for work. If you are married, generally both you and your spouse must be gainfully employed 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.
In 2019, 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.
How much does offering an FSA cost?
There is a BenefitWallet fee of $3.50 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.
During what dates is the FSA effective?
All Justworks HSA/FSA 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 started.
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 March 31st to submit a claim for expenses incurred prior to December 31st.
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.
Can an owner participate in an 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.
When do 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.
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.