Benefits forGraham County Schools

Flexible Spending Accounts (FSA)


What is a Flexible Spending Account?

A Flexible Spending Account (FSA) is a program that the Federal Government allows your employer to sponsor. With an FSA, you save on a wide variety of everyday medical, dental, vision and day care expenses. It’s a TAX BREAK that’s simple to use and works for all eligible employees. You’re going to have these expenses anyway, so why pay more in taxes than you have to? Your contributions to an FSA are deducted from your salary BEFORE taxes. This allows you (the employee) to save federal, state and social security taxes on the money you use to pay for eligible unreimbursed healthcare and daycare expenses for you and your eligible dependents, which will increase your take home pay.

How It Works

  • At the time of enrollment, you must determine how much you would like to contribute to each account for the coming year. You may participate in the healthcare plan, the dependent day care plan or both.
  • All monies that you put into the FSA will be deducted from your paycheck each pay period BEFORE taxes are calculated.
  • Your spendable income increases because you contribute pretax dollars into the FSA plan. This lowers your taxable income; therefore you pay fewer taxes and increase your spendable income. Depending on your tax bracket, this plan can save you 25% to 40% on qualified, eligible expenses.
Without FSA With FSA
Gross Annual Pay $36,000 $36,000
Pre-Tax FSA Contribution $0 ($2,000)
Taxable Income $36,000 $34,000
Social Security, Federal & State Tax ($8,421) ($7,828)
After-Tax Dollars Spent on Eligible Expenses ($2,000) $0
Available After-Tax Income $25,579 $26,172

Savings with an FSA  $593* or 30%

* Source: Example illustrates potential tax savings based on Federal, FICA and State tax withholding estimates for a single filer; presented for illustration purposes only. Actual savings vary based on your individual tax situation. You may wish to consultant a tax professional for more information on the tax implications of an FSA.

There are two types of Flexible Spending Accounts, the Health Care Flexible Spending Account and the Dependent Day Care Flexible Spending Account. The accounts are created to cover different types of unreimbursed expenses. It is up to you to decide if you wish to participate in a Health Care FSA, Dependent Care FSA or both; however, please note that if you choose to participate in both accounts, the accounts operate independently of each other. Election funds may not be transferred from one account to the other, nor may either account reimburse expenses that are designed for coverage under the other account.

1. Health Care Flexible Spending Account
  • Reimburses eligible health care expenses not covered or reimbursed by other insurance
  • Covers expenses for your and/or your tax dependents; including adult children, through the end of the calendar year in which they turn 26
  • $2,500 maximum is NOT a household limit – your spouse can have a separate Health Care FSA
2. Dependent Day Care Flexible Spending Account
  • Reimburses eligible day care expenses for your:
    – children UNDER age 13
    – dependents on your Federal tax return who are incapable of self-care
  • You (and your spouse, if married) must be:
    – working,
    – looking for work (with income during the year), or
    – attending school full-time
  • $5,000 maximum IS a household limit
    – includes child care subsidy amounts and other FSA dependent day care accounts
    – $2,500 maximum , if married filing separately

1. Health Care Flexible Spending Account

A Health Care Flexible Spending Account (HCFSA) can be used to reimburse eligible health care expenses not reimbursed under any other plan. Covered expenses are for you and/or your tax dependents; including adult children through age 26.  

2. Dependent Day Care Flexible Spending Account

A Dependent Day Care Flexible Spending Account (DCFSA) can be used to reimburse daycare services provided to your children under age 13, as well as for an incapacitated child, parent or spouse. You are eligible if you are a single working parent, you have a working spouse, your spouse is a full-time student for at least five months during the plan year while you are working (refer to the IRS earned income limits for specific contribution levels), or your child, spouse or dependent parent is disabled and unable to provide for his or her own care.

How Do I Get Started?

During your annual open enrollment period, determine how much money you need to set aside for the year to cover your unreimbursed health care and daycare expenses.

Paying for Eligible Expenses

The fastest and easiest way for you to pay for eligible expense is by using your Flex Benefits Card. The Benefits Card allows you to access your Flexible Spending Account to pay for eligible expenses without submitting a claim for reimbursement. The Benefits Card can be used to pay for eligible goods and services covered by your FSA like prescription drug co-pays, office visit co-pays, or deductibles under your health, dental, and vision plans. This card can also be used for allowable dependent day care expenses. The Benefits Card carries the MasterCard® logo and can be used wherever MasterCard® is accepted. Once you swipe the card at an eligible merchant location, the transaction is screened to determine whether there are sufficient funds credited to your FSA account and if it is an eligible expense, then the transaction will be approved. At this point, the merchant will be paid and the amount debited from your FSA account to reflect payment of an approved expense.
Cardholders have access to online claim information and balances You must register first by creating a user account. Simply click on “Register”. A registration page will display with all required values.

  • Employee ID – your social security number with no dashes or spaces
  • Employer ID – leave blank
  • Registration ID – choose card number

You will then be prompted to complete the Secure Authentication Setup process. A step-by-step instruction screen will provide information for each step.
The next time you access your account, simply enter your personal user name and password to login.

Filing Manual Claims

If you do not or cannot use your Benefits Card to pay for an eligible expense, simply pay for the expense out-of-pocket and file your claim with Interactive Medical System for reimbursement. Your employer has a supply of claim forms you can use when you have a claim to be submitted. You can download a claim form our website at Simply complete the form following the claim-filing instructions included on the form to ensure your claim is properly submitted. If the expense is qualified under the Plan and appropriate documentation is submitted, you will receive reimbursement. You can file claims online through your user account, fax claims and the appropriate claim substantiation information to IMS at (919) 562-0021 attention Flex Department, or mail your claims submission to IMS at PO Box 1349, Wake Forest, NC 27588. If you are requesting reimbursement for expenses for which you do not have insurance coverage such as dental, vision, or hearing, simply submit a copy of the bill or receipt with an FSA claim form. The receipt should indicate the date of the services, the services provided, and charges. Claims that are covered by insurance must first be filed with the healthcare plan. After you receive an Explanation of Benefits statement indicating which expenses are eligible for payment and which are not, then submit a copy of the EOB with an FSA claim form to Interactive Medical Systems. Claim should be in our office five working days prior to the scheduled check run for processing.

The “Use It or Lose It” Rule

What happens if there is money left in your account at the end of the year and you have no more reimbursable expenses? Under IRS regulations, the money in your account will be forfeited and will be used to pay for administration costs of this Plan. This is known as the “use it or lose it” feature of an FSA. For this reason, you need to make conservative estimates of your reimbursable expenses prior to each plan year. You have a run-out claims period at the end of each plan year in which to file claims for expenses incurred during the plan year. Note: An expense is “incurred” on the date the participant is provided with the medical care or dependent day care services and not when the participant is formally billed or charged for, or pays for, the services.

Tax Implications

Any reduction in your taxable pay for Social Security purposes may also lead to a reduction in your Social Security benefits. For most employees, the reduction in Social Security benefits will be insignificant compared to the value of paying lower taxes today. Check with your local Social Security office for possible impacts based upon your particular situation.
If you participate in a Dependent Care Flexible Spending Account, you cannot also claim credits on your income tax return for the same expenses. Is it better to utilize the Dependent Care Flexible Spending Account or the federal income tax credit for dependent care expenses? Your individual circumstances and income will determine whether the federal, state (where eligible) and FICA tax savings under the Dependent Care FSA Account provide greater tax benefit than using the federal tax credit. Since individual tax situations vary, it is important for you to determine which approach offers the most favorable tax savings.