What is a Flexible Spending Account (FSA)?
A Flexible Spending Account (FSA) is a tax-favored program offered by employers that allows their employees to pay for eligible out-of-pocket health care and dependent care expenses with pre-tax dollars. By using pre-tax dollars, an FSA gives you an immediate discount on these expenses that equals the taxes you would otherwise pay on that money.
In other words, with an FSA, you can both reduce your taxes and get more for your money by saving from 20% to more than 40% you would normally pay for out-of-pocket health care and dependent care expenses with after-tax (as opposed to taxed) dollars.
The Federal Judiciary Flexible Spending Account Program offers two types of FSAs:
- The Health Care Reimbursement Account (HCRA) which can be used to pay for qualified medical costs and health care expenses that are not paid by your Federal Employees Health Benefits (FEHB) plan or any other insurance. PLEASE NOTE: A HCRA cannot be used to pay for any type of insurance premiums, including long-term care insurance premiums.
- The Dependent Care Reimbursement Account (DCRA) is used to pay for eligible dependent care expenses such as child care for children under age 13 or day care for anyone who you claim as a dependent on your Federal tax return who is physically or mentally incapable of self-care so that you (and your spouse, if you are married) can work, look for work, or your spouse can attend school full-time.
Your participation in any FSA is completely voluntary, and it is important to remember that unlike some of your other Federal benefits, your FSA election is only effective for one Benefit Period. In other words, you must enroll each year that you choose to participate. If you do not enroll during Open Season, you will not participate in the next Benefit Period, unless you experience a Qualifying Life Event (QLE) that allows you to make an election outside of Open Season. Open Season runs concurrently with the FEHB Open Season in November and December each year for enrollment in the following year.
The 2017 Benefit Period runs from January 1 through March 15, 2018. This includes a 2 1/2 month grace period from January 1 through March 15 of the following year for HCRA accounts only. During the grace period, eligible expenses incurred from January 1 through March 15 of the following year can be applied towards your prior year's balance. The intent is to help account holders avoid forfeiting any of the funds they deposited in their HCRA accounts. It is important to carefully consider the amount you choose to elect.
The filing deadline for all HCRA and DCRA claims against the prior year account (including claims incurred during the "grace period" for HRCA) is midnight Eastern Standard Time on April 30.
The Federal Judiciary follows Internal Revenue Service (IRS) guidelines to determine eligible expenses and other requirements for participation in an FSA issued under Sections 105, 125, and 129 of the Internal Revenue Code.