In accordance with applicable MOU provisions, the City of Ontario offers its employees a Flexible Spending Account (FSA) program. This program allows you to pay for out of pocket health/medical expenses and dependent care (Day Care) with pre-tax dollars. Participants must designate the FSA election amount for the 2014 calendar year during this Open Enrollment period. This amount is deducted from your paycheck in equal installments on a pre-tax basis and credited to your FSA account(s). Our third party administrator, Benefit Coordinators Corporation (BCC), will reimburse you through direct deposit or by mailing you a check. You do not pay federal, state income tax or Social Security on FSA expenses.
The U.S. Internal Revenue Service issued Notice 2012-40 on May 30, 2012, with guidance on the $2,500 limit on pretax employee contributions to health care flexible spending accounts (FSAs) under the Patient Protection and Affordable Care Act (PPACA). Over-the-counter medications or supplies are not eligible for reimbursement. Dependent Care account maximum is $5,000 a year.
Sign up for a Flexible Spending Account (BCC)
Federal law prohibits any change in your FSA during the calendar year unless you or your dependent(s) have a qualifying "life event". A qualifying "life event" is marriage, divorce or legal separation, birth or adoption or a dependent, death of a dependent, or a change in your or your spouse's employment status. In addition, the FSA change must be due to and consistent with the "life event" which permits the change. For example, an increase in FSA contribution would be consistent with birth or adoption of a child; a decrease in contribution may not.
CAUTION: When estimating your annual expenses, consider only those that you are reasonably certain to incur. Any amount left in your FSA at the end of the year is forfeited. The account is left open for claims until March 31st of the following year, but expenses must be incurred in the same calendar year in which the payroll deduction occurred.
HEALTH CARE REIMBURSEMENT ACCOUNT
Eligible expenses include health-related expenses not covered by your health plan(s) or reimbursed from any other source, for you or any of your dependents (as defined by IRS regulations). As you incur eligible expenses, you are reimbursed up to the amount of your annual election. The maximum amount allowed is $2,500.
An IRS ruling established that over-the-counter drugs and medicines are no longer allowed to be paid for with pre-tax dollars through FSA.
Health Insurance Premiums are not eligible for FSA Health Care reimbursement. Payroll deductions for the City's group health plans are already made on a pre-tax basis. Therefore, the premiums you pay cannot be reimbursed from your FSA account or deducted on your personal income tax return.
DEPENDENT CARE REIMBURSEMENT ACCOUNT
Eligible expenses include baby-sitter, companion or day-care expenses necessary so that you can work; if you are married, the expenses must be necessary so that both you and your spouse can work. As you incur eligible expenses, you are reimbursed for the amount of expenses, up to the balance in your FSA account. Employees may select up to a maximum amount of $5,000 per plan year.
For "child care" the maximum age for dependent children (as defined by the IRS regulations) is age 13, unless the dependent is physically or mentally unable to care of himself or herself. The dependent must spend at least eight hours per day in your home. "Overnight Camp" expenses are specifically not eligible.
Dependent Care is not restricted to "child care". Expenses you incur to provide companion or day-care expenses to any individual who qualifies as a dependent for IRS purposes can be reimbursed in the FSA program. Generally, any individual who is related to you, your spouse, is unmarried, is a US citizen or resident alien, and is dependent upon you for more than half of their total support can qualify as a "dependent" for purposes of this program. Thus, expenses you incur to provide "day-care" for a parent may be eligible expenses under the FSA program. Check with your tax advisor for specific advice.
According to the terms of the Family Support Act of 1988, there are two tax benefits available for dependent care expenses: a tax credit on your tax return, or income exclusion under an employer-sponsored spending account (FSA). Any expenses reimbursed through an FSA reduce, dollar-for-dollar, the maximum tax credit. This law restricts you to using one or other, but not both. You should consult a tax advisor for an evaluation of your specific circumstances prior to selecting a method for dependent care expense credit.