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When all said and done, an established FSA program can yield more dollars in tax savings than the fees spent to administer the plan. One of OCA’s current FSA clients with 50 participants generated $4,200 in FICA savings which netted the employer a net gain after administrative fees.

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Creative Plan Design Choices: Nearly limitless plan designs, including limited purpose FSAs, Dependent Care FSA, Health FSA, and more.

Preparation of FSA Legal Documents: OCA will create a customized plan document outlining the provisions of an employee benefit plan.

Annual Non-Discrimination Testing (Upon Request): Annual discrimination tests are designed to show that eligibility and plan benefits are applied fairly and consistently, which in turn allows the plan sponsor to avoid unfavorable tax consequences.

Direct Deposit of claim payments: Direct deposit of employee claims is efficient, environmentally friendly, and saves money. Imagine submitting a claim to OCA on a Monday and having the money in your account on that Wednesday. It happens every day! 

Customized Employee Communication Material: Whether it’s a group of two or a group of five thousand, OCA will create customized employee communication material based upon the groups plan design. OCA provides industry expertise with top of the line representation. We represent our clients by educating and assisting employers, employees and their families.  

Client Customer Service: We are committed to our client relationships and it shows from the effort we put forth that our clients’ needs are professionally, courteously and personally satisfied. The client service department is open from 9:00 am to 5:00 pm Eastern time Monday through Thursday and until 4:30 pm Eastern time on Friday.   OCA also provides members 24/7 access to account balances through our website, 24/7 access thru our Interactive Voice Recognition Phone System (IVR) as well as a mobile application on the Android and iPhone. 

Onsite Employee Education Meetings: While employers may see tremendous tax savings by enrolling in a FSA plan, without the proper employee education, the FSA plan is destined to fail. We emphasis upfront education and recommended employee educations throughout the year (i.e. onsite meetings, webinars, or visits to OCA’s office!). 

 

 

Expenses must be for the employee, or tax dependent. Expenses must be incurred (incurred means when the medical care is provided, not when it is billed, charged or paid). Expenses must be incurred during the period of coverage. Substantiation (documentation from the merchant or provider) must include: service provider, description of service, date of service, dollar amount.

Click here for: Health FSA Expense List (For a detailed list of FSA eligible /ineligible services and items you can log into your personal online myRSC.com account)

Due to Healthcare Reform, Over-the-Counter Drugs No Longer Eligible Without a Physician Rx: Under health care reform,  expenses for OTC medicines and drugs (other than insulin) incurred after December 31, 2010 are only reimbursable if the medicines or drugs are prescribed. For purposes of the new restrictions, a prescription for a medicine or drug is a written, electronic, or other order that satisfies the legal requirements for a prescription in that state (including that it be issued by someone authorized to issue prescriptions in that state). To show that an OTC drug has been prescribed, employees must submit the prescription or other documentation, along with the other independent third-party substantiation required under IRS rules.

What types of services qualify for the Dependent Care FSA?

Babysitters: These providers generally care for children of the employee in the employee’s home or in their own homes. They can be grandparents or other relatives, friends, or neighbors. However, payments to certain related individuals are not reimbursable. These include: (1) the employee’s child, stepchild, or eligible foster child who is under age 19 at the close of the taxable year; (2) a qualifying child or qualifying relative of the employee or the employee’s spouse; (3) the employee’s spouse; and (4) the parent (who is not the employee’s spouse) of the employee’s qualifying child under age 13. b. Family Day Care: Family day care is child care provided in the home of the provider. Regulatory requirements may differ from state to state. The provider may be approved, certified, registered, or licensed under applicable state or local laws. Restrictions may be placed, for example, upon how many providers or assistants are required according to the number and ages of the children (e.g., if six children are cared for, then no more than three may be infants). c. Nursery School/Preschool Expenses Allowed: Expenses for nursery school, preschool, or similar programs below the level of kindergarten are considered to be for care. This is the case even though the school also includes an educational component or furnishes other goods or services that are incidental to and inseparably a part of the care (e.g., lunch).

 

A participant may change his or her pre-tax election(s) under certain Qualified Life Event conditions as outlined in your Summary Plan Description/Plan Information Summary, as well as in accordance with the I.R.S. consistency rules. Only certain events would allow an individual to amend their election. Here are some events that may allow the participant to make a change: marriage, death of a spouse, divorce, legal separation or annulment, birth of a child, adoption or placement for adoption of a dependent, or death of a dependent. Election changes must be made within 30 days of the event or during the annual election period by completing a Change of Status form.

If a Flexible Spending participant does not utilize their entire Medical and/or Dependent Care annual election(s) within the plan year and submit within the 90 day Run out Period, the unclaimed portion of that election maybe forfeited!

Good news! Your employer sponsored FSA may have either a 75 day grace period or a $500 carryover option. Due to IRS rules an employer can not offer both for the Health FSA. Please also note that the $500 carryover option does NOT apply to the FSA Dependent Day Care benefit.

FSA Medical $500 Carryover Option: IRS guidance issued in October 2013 allows health FSAs to offer carryovers of unused balances of up to $500 remaining at the end of a plan year, to be used for qualified medical expenses incurred in subsequent plan years.  Offering health FSA carryovers is optional and is an alternative to offering a health FSA grace period-health FSAs allowing carryovers from a plan year cannot also have a grace period with respect to that year. This exception to the use-or-lose rule offers the potential to reduce health FSA forfeitures, which may encourage more employees to participate in health FSAs. It may also ease the year-end spending rush that occurs under many health FSAs.

75 Day Grace Period: IRS rules allow the FSA benefit to have a 75 day Grace Period at the end of the plan year. This will allow you to incur new expenses during the 75 days and use any remaining funds from the previous plan year. For example, if your plan ends on 12/31, you will have until March 15th (or March 14th if it’s a leap year) to incur new expenses and have funds pulled from your previous year’s FSA election.

 

All mySource transactions must be substantiated in order to confirm that all items paid for with pre-tax dollars are eligible under the IRS guidelines. 

Depending on what your mySource card purchase was used for, may or may not necessitate the need for you to submit a claim form and documentation to support your purchase. This is an IRS requirement. For audit purposes, you should always retain your receipts!

Examples of automated substantiation (no follow-up “should” be required):

Purchases that are made at retail stores (i.e. CVS, Target, Wal-Mart) with an federally approved point of sale approval system (IIAS) in place that restricts purchases with your pre-tax dollars to FSA eligible expenses.

Purchases that match a known co-pay amount for health, vision or dental plan you have elected through your employer. If your insurance plan has co-insurance or deductibles, you can use the card to pay for these expenses, but you will ALWAYS be required to provide documentation to substantiate your purchase.Below is an example of a transaction that would require you to submit a claim form and documentation.

Steve goes to his dentist and pays $333 for his portion of the expense for a root canal with his FSA Debit Card. The purchase amount does not match a known co-pay, and therefore it cannot be automatically substantiated.

The following day Steve will receive an email from OCA asking for supporting documentation to ensure that his purchase was a FSA eligible expense.  Steve files a claim form and his invoice from his dentist to OCA for verification. OCA will then verify the expense and resolve Steve’s debit card transaction. OCA will send you an email confirmation that the transaction has been resolved.

If Steve does not submit his documentation within 30 days of receiving email requests from OCA, IRS rules require OCA to temporarily block the mySource card until the documentation is submitted to validate it was eligible for reimbursement.

  • FSA Medical $500 Carryover Option: IRS guidance issued in October 2013 allows health FSAs to offer carryovers of unused balances of up to $500 remaining at the end of a plan year, to be used for qualified medical expenses incurred in subsequent plan years.  Offering health FSA carryovers is optional and is an alternative to offering a health FSA grace period-health FSAs allowing carryovers from a plan year cannot also have a grace period with respect to that year. This exception to the use-or-lose rule offers the potential to reduce health FSA forfeitures, which may encourage more employees to participate in health FSAs. It may also ease the year-end spending rush that occurs under many health FSAs.
  • Over-the-Counter Drugs No Longer Eligible Without a Physician Rx: Under health care reform,  expenses for OTC medicines and drugs (other than insulin) incurred after December 31, 2010 are only reimbursable if the medicines or drugs are prescribed. For purposes of the new restrictions, a prescription for a medicine or drug is a written, electronic, or other order that satisfies the legal requirements for a prescription in that state (including that it be issued by someone authorized to issue prescriptions in that state). To show that an OTC drug has been prescribed, employees must submit the prescription or other documentation, along with the other independent third-party substantiation required under IRS rules.

Under OCA’s cafeteria plan administration, we can offer a full service program that includes a Health FSA program (FSA), Dependent Day Care Program (DCAP) and a Premium Only Plan (POP).

 

Employers choose to implement Flexible Spending Accounts to help their employees save substantial tax dollars, with some tax saving for employers too. The extent to which an employer will experience tax savings and other advantages depends on the type of plan, the nature of the workforce, and in some cases state and local laws. When all said and done, an established FSA program can yield more dollars in tax savings than the fees spent to administer the plan. One of OCA’s current FSA clients with 50 participants generated $4,200 in FICA savings which netted the employer a net gain after administrative fees.

Health FSA

A health FSA is a program that gives employees coverage under which certain expenses may be reimbursed, subject to certain maximum amounts and reasonable conditions. Employees can use a health FSA to pay for medical expenses that are not reimbursed through insurance or any other arrangement. Insurance co-pays, deductibles, eyeglasses, and orthodontia are common examples of health FSA expenses. (Note: Health FSAs are not allowed to reimburse insurance premiums.)

Dependent Day Care Assistance Program (DCAP)

DCAP is a dependent care assistance program that is also an FSA. An employee can use a DCAP to be reimbursed for employment-related expenses that allow the employee and his or her spouse to be “gainfully employed.” Employment-related expenses apply only to certain individuals. Typical DCAP expenses are those incurred to have a babysitter or day-care provider take care of an employee’s child (under the age of 13) while Mom and Dad are both working, or to take care of a spouse or other tax dependent who lives with the employee and is incapable of self-care.

 

Section 125 Premium Only Plan (POP)

A POP plan is simply a program that employers can use to help employees pay for certain expenses, like health insurance, with pre-tax dollars. These plans are one of the most popular benefits around, for good reason. Employees like cafeteria plans because they can buy benefits with pre-tax dollars, giving them more take-home pay. They also get to pay only for the benefits they really want (like ordering lunch à la carte instead of being stuck with the blue plate special—hence the name “cafeteria”). Employers like cafeteria plans because, in addition to having happier employees, they also save on taxes. And once everyone gets the initial hang of it, cafeteria plans are easy to understand and operate.