Flex Card Spending Account 101 A Comprehensive Guide

A flex card spending account is a type of account that allows you to set aside money for specific expenses, such as medical bills or education costs, and use a card to pay for them. This can help you save money and avoid overspending.

With a flex card spending account, you can set aside a certain amount of money each month, and the funds are automatically transferred to the account. You can then use the card to pay for eligible expenses, and the funds will be reimbursed from the account.

The benefits of a flex card spending account include tax savings and reduced administrative burden.

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FSAs, or Flexible Spending Accounts, are accounts that allow you to set aside a portion of your income on a tax-free basis for certain expenses.

You can use FSAs to pay for eligible medical expenses, but they're not just for medical bills - you can also use them for dependent care expenses like daycare or after-school programs.

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FSAs are typically offered through your employer as a benefit, and you can contribute to them through payroll deductions.

The annual contribution limit for FSAs is $2,750, but this can vary depending on your employer's plan.

You'll need to decide how much to contribute to your FSA each year, and you can't change your contribution amount once you've made a decision.

FSAs are use-it-or-lose-it accounts, meaning you'll forfeit any unused funds at the end of the year if you don't spend them on eligible expenses.

It's essential to keep track of your FSA funds and plan ahead to avoid losing any money.

Using a Flex Card Spending Account can bring you significant tax savings. By reducing your taxable income, you'll have more take-home pay to spend on qualified expenses.

According to an example, an individual with an annual pay of $40,000 can save up to $750 in take-home pay by using an FSA. This is calculated by reducing the taxable income from $40,000 to $37,500, resulting in lower federal and social security taxes.

You'll also save on your adoption expenses and reduce your earned income for purposes of qualifying for the Federal Earned Income Tax Credit. This means you'll realize immediate tax savings in every paycheck, making it a great option for those who pay for health and dependent care expenses out-of-pocket.

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Saving money with an FSA or HSA card is a game-changer. You can save up to 30% on expenses like eyeglasses by using your card instead of paying with after-tax dollars.

For example, a $100 pair of eyeglasses costs you $70 when you use your HSA or FSA card, since the money comes out of your pretax account.

The tax savings can add up over time. In one example, using an FSA saved someone $750 in a year by reducing their federal and social security taxes.

Here's a breakdown of how FSAs can save you money:

By using an FSA, you can enjoy a higher take-home pay and more money in your pocket.

Enrolling in the FSA reduces your taxable income for health and dependent care expenses you already pay for out-of-pocket.

You'll save on your adoption expenses because you'll pay lower federal and state (where applicable) taxes due to your pre-tax contributions.

Contributions to your FSA will reduce your earned income for purposes of qualifying for the Federal Earned Income Tax Credit.

You'll realize immediate tax savings in every paycheck, making a big difference in your finances over time.

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Participating in the FSA program may reduce your social security taxes, which could result in slightly lower social security benefits at your retirement age.

If you're concerned about this, you can contact the Social Security Administration at 800-772-1213 or visit their website.

Contributions to the FSA program have no effect on your New York State pension contributions or benefits.

Most employees' contributions to the New York State Deferred Compensation Plan will be unaffected by participation in the FSA program.

However, in some cases, participation in the FSA program may affect your deferred compensation contribution, making it lower due to a reduced salary amount.

The amount of the reduction will depend on your annual salary and the amount you currently contribute to your deferred compensation plan.

Contributions to the State University of New York's tax-deferred annuity plan are not affected by participation in the FSA program.

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Your benefits card is a convenient way to access your health care spending account benefits. It works like a debit card, with your current year election amount loaded onto the card.

There's no annual fee, and you can use it at most retail pharmacies. Just swipe your card to purchase eligible items. You don't need a PIN, so you won't have to remember another four-digit code.

Keep your receipts, as you may need to provide documentation for some purchases. This is especially important to avoid card suspension, which can happen if you don't submit required documentation within 90 days.

If you don't submit documentation within the given time frame, your payment card may be suspended, and you could lose your prior year funds. To avoid this, submit a completed Flexible Spending Account Reimbursement Claim Form.

Note that the debit card can't be used to pay for prior year claims. After January 1, any prior year claims must be submitted online or by paper, as the new program year's funds have been loaded onto your card.

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There are several types of FSAs, each with its own unique characteristics and benefits.

Health care FSAs allow individuals to set aside pre-tax dollars for medical expenses, with a maximum annual contribution limit of $2,750.

Dependent care FSAs enable individuals to pay for childcare or adult care expenses for a dependent, such as a spouse or child.

Transportation FSAs allow individuals to use pre-tax dollars for commuting expenses, including public transportation costs.

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You can contribute up to $3,300 to a health care FSA per year, starting January 1, 2025.

Your employer may choose a lower contribution limit, so be sure to check your plan documents or talk to your Human Resources office for specifics.

The health care FSA contribution limit is per person, meaning each spouse in the household can contribute up to the limit.

The limit may be adjusted annually to account for inflation increases.

Any amount carried over from the previous year will be limited to $660 for the 2026 plan year.

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FSAs can be paired with other accounts to cover additional expenses. A health savings account (HSA) is a great companion to an FSA.

You can use an FSA to pay for expenses not covered by an HSA. For example, pay for dental and vision expenses with an FSA.

An FSA can be used to cover certain medical expenses that an HSA can't.

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The Traditional/Medical FSA is a type of FSA that allows you to set aside pre-tax dollars for eligible medical expenses.

Eligible expenses for this type of FSA include copays, coinsurance, and deductibles. These expenses can add up quickly, so it's a good idea to keep track of them.

Eyeglasses and contact lenses are also eligible expenses, which is great news for anyone who needs to update their prescription. You can even use your FSA to cover the cost of physical therapy or chiropractic care.

Prescriptions are another eligible expense, which can include medications and medical equipment.

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A Limited Purpose LP FSA is a type of flexible spending account that works alongside a Health Savings Account (HSA) to pay for dental and vision care expenses.

You can establish a LP FSA if you have a high-deductible health plan (HDHP) and an HSA. Eligible expenses for Limited Purpose FSAs include out-of-pocket dental and vision expenses such as braces, eyeglasses, and contact lenses.

Each year the IRS sets the maximum contribution limit that members are allowed to elect to their FSA. This means you'll need to check the current limit to determine how much you can contribute.

Funding for a LP FSA works similarly to other FSAs, where you contribute a predetermined amount to your account. Your funds will be available for use on the first day of your plan year.

Save itemized receipts, bills, or statements anytime the payment card is utilized, just like with other FSAs.

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Enrolling in a flexible spending account (FSA) is a straightforward process, and you can find detailed information about it in the FSA Plan Guide.

You can enroll in an FSA through your employer's benefits portal or by contacting their HR department.

The FSA Plan Guide also provides information on how to manage your FSA, including how to track your expenses and submit claims.

You can enroll in an FSA and receive one NCFlex Convenience Card to use for either or both accounts. This card will remain active for several years as long as you remain enrolled in the account(s).

You'll need to use the card to pay for eligible expenses only. You can order additional cards free of charge if you need more. A new card will be mailed to you automatically when your card expires.

To avoid losing any money, use all FSA funds before the end of the Plan Year. You can also use FSAstore.com to purchase FSA-eligible items and make the most of your funds.

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You can find all the information you need to enroll in and manage your flexible spending accounts (FSA) in the plan guide.

The plan guide includes information about how to enroll in and manage your FSA, as well as health savings accounts (HSA) and commuter benefits.

Using your FSA card can help you save time and money, with an average savings of 30% because you're using pretax dollars.

The plan guide is available for the 2025 and 2024 FSA - HSA - Commuter Benefits Plan Guide.

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Under the IRS rules, any unspent balance in your flex card spending account at the end of the calendar year or upon employment termination will be forfeited, unless your employer participates in the carryover.

You'll need to check with your employer to see if they offer the carryover option, which allows a minimum of $50 up to a maximum of $640 to transfer to the next plan year.

Any amount less than $50 or more than $640 is subject to the IRS forfeiture rule, so it's essential to plan ahead and use your funds wisely to avoid losing any money.

Unused contributions will carryover to the next plan year for you to use. This means you can keep the funds in your account even after the plan year ends, as long as you use them for eligible expenses.

The plan year runout period is from January 1 to March 31, during which time you can still use previous year funds for previous year expenses. Any remaining funds will then carryover into the current plan year's account balance after the runout period ends.

You'll need to use your new plan year election funds first, then carryover funds will be accessible for reimbursement. This way, you can make the most of your available funds.

For participants who didn't re-enroll, carryover funds will be available after the runout period ends. This is a great option if you're not re-enrolling in the plan.

The IRS carryover limit for 2024 into 2025 is $640, and $660 for 2025 into 2026. Make sure to keep this in mind when planning your expenses.

You can use any funds remaining in your account after the plan year ends to pay for expenses incurred between January 1 to March 15 of the following year. This is known as the grace period.

Claims must be submitted by the March 31 deadline, so be sure to get your submissions in on time.

If you have money remaining in your Health Care Flexible Spending Account on Dec. 31, a minimum of $50 up to a maximum of $640 will transfer to the next plan year. Any amount less than $50 or more than $640 is subject to the IRS forfeiture rule.

The IRS requires that any unspent balance at the end of the calendar year, or at the end of the month of your employment termination, will be forfeited, unless your employer participates in the carryover.

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If your election change, claim, or other request is denied, you can appeal the decision by sending a written request to the FSA administrator.

Contact customer service for information on how to submit your appeal. They'll guide you through the process.

Your appeal must include several documents, such as a completed Appeal Form, an appeal letter, and a copy of the denied request.

You'll also need to provide proof of expenses and other documentation if the original was insufficient. Any additional relevant documents, information, or comments should be included as well.

Here's a checklist of the required documents:

Your appeal will be reviewed once it and the supporting documentation are received. You'll be notified of the results within 30 business days from receipt of your appeal.

The FSA calculator is a great tool to help you estimate how much to contribute to your Flex Card Spending Account. This can be especially useful if you're unsure about how much to set aside for eligible health and day care expenses.

You can find a list of eligible expenses in IRS Publication 502. This publication can help you determine what expenses qualify for reimbursement through your FSA.

The funds in your Flex Card Spending Account are front-loaded, which means they're available at the start of your plan year. This can be a big plus, as it allows you to plan ahead and make the most of your account.