Flexible Benefits FAQs

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Why use flexible benefits?
Which Taxable Income is Reduced?
Will these Amounts be Taxable at a Later Date?
What is Contribution Conversion?
Can I Change My Contribution Amounts If I find That I'm Contributing Too Much or Too Little Per Pay?
How Do I Find Out Which Expenses Are Eligible for Reimbursement?
How do I submit my expenses for reimbursement?
What is the appropriate documentation for reimbursable expenses?

How will I know when my claim has been paid?
If the charges that I incurred are more than what has been contributed to my account, do I have to wait until the money is in my healthcare account before I can be reimbursed?
I buy supplements from my chiropractor. Can I be reimbursed for the supplements?
Are any over the counter medications eligible for reimbursement?
What is the deadline for incurring eligible expenses?
What is the deadline for submitting my claims for reimbursement?

This overview provides general information in a question and answer format and also includes links to the Flexible Benefits Summary. Flexible benefits are an important part of the Penn State University benefits program. Faculty and staff are encouraged to review regularly and carefully their flexible benefit options.

Why use flexible benefits?

Flexible benefit programs allow participants to exclude from taxable income any money contributed to these plans. The three parts to the Penn State's flexible benefit program are:

Contribution Conversion
Health Care Flexible Spending Account (FSA)
Dependent Day Care Expense Flexible Spending Account (FSA)

Each part of the flexible benefit plan allows you to exclude from taxable income any money contributed to them.

Which Taxable Income is Reduced?

Federal taxable income, Social Security taxable income (FICA), and Pennsylvania local income taxes are reduced with all three parts of flexible benefits. Additionally, Contribution Conversion and Health Care Flexible Spending Accounts also reduce Pennsylvania state taxable income.

Will these Amounts be Taxable at a Later Date?

No. This is not a tax deferral but is a method to legally reduce the amount of your taxable income.

What is Contribution Conversion?

Contribution conversion excludes from federal, Pennsylvania state and local, and FICA (social security) taxable income the amounts that you pay for your University sponsored medical, dental and vision coverage as well as the cost of the first $50,000 of life insurance. The reduction in taxable income is handled by the payroll system resulting in a higher net income. Benefits eligible employees are automatically enrolled in Contribution Conversion.

Can I Change My Contribution Amounts If I find That I'm Contributing Too Much or Too Little Per Pay?

Your ability to make changes to your FSA contributions, other than during the annual reenrollment period, is extremely limited. You have 60 days following one of the changes in family status listed below to change your election concerning participation in either or both of the flexible spending accounts:

Your marriage
Birth or adoption of child(ren)
Your divorce (actual divorce not separation)
Death of a spouse or dependent
Termination or commencement of spouse's employment (Changes to health care flexible spending account is valid only if health benefits provided by your spouse's employer begin or end as a result of the change)
Change in your work hours or your spouse's work hours (Dependent care expenses only)
Change in the cost of dependent care*

Any change in reimbursement account election must, by law, be on account of and consistent with the change in family status. You must complete a Certificate of Change in Family Status and a new Election Form within 60-days following the event in order to modify a Flexible Benefit election.

* In January 2001 the IRS issued final regulations regarding election changes. Increases or decreases in the cost of dependent day care are now recognized as a change in status. If you are enrolled in the dependent day care account and the amount that you pay for daycare increases or decreases during the year, you may adjust your dependent day care deductions accordingly within 60 days of the date of the change.

How Do I Find Out Which Expenses Are Eligible for Reimbursement?

The Flexible Benefits Summary provides examples of eligible and ineligible expenses for health care reimbursement and dependent care reimbursement. The following are examples of eligible and ineligible out-of-pocket expenses:

Eligible Out-Of-Pocket Expenses

Deductibles, copayments and amounts in excess of plan allowances or maximums (as evidenced by an explanation of benefits form) of hospital/surgical/major medical, dental and vision plans
Preventative health care including routine exams, EKG's, other X-ray and lab work that is not covered by your health plan
Prescription medicine copayments
Maintenance Prescription Drug Plan (MPDP) copayment
HMO copayments
Hearing aids, including batteries
Birth control pills
Orthodontia (amount exceeding dental plan benefit)
Lodging away from home primarily for and essential to medical care
Transportation for needed medical care
Dental procedures not covered by insurance
Lasik eye surgery
Contact lens solutions
Over-the-counter medications including antacids, allergy, pain and cold remedies and items designed to treat an injury, such as bandages, antiseptics.

Ineligible Out-Of-Pocket Expenses

Insurance premiums of any type (spouse's group plan, school plan, Medicare premiums, contact lens replacement, etc.)
Expenses for your general health such as health club dues
Purchase or repair of exercise equipment
Cosmetic surgery/procedure which is directed at improving appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.
Over-the-counter items such as vitamins, dietary, minerals, fiber and herbal supplements and dental care items that are designed for general maintenance of good health are not reimbursable.

More specific information is available in IRS Publication 502 (Medical and Dental Expenses) and Publication 503 (Child and Dependent Care Expenses).

NOTE: Publication 502 provides guidance for determining if an expense qualifies as a deduction on your federal income tax. While Health Care FSAs use this publication for guidance, there are some distinct differences between eligible income tax deductions and eligibility for reimbursement from a health care FSA. Some of the more significant differences are:

Insurance premiums of any kind, including lens replacement and Long-Term care coverage are ineligible for reimbursement from an FSA.

Over-the-counter medications that treat or alleviate a specific medical condition (pain relievers, cough and cold remedies, allergy medications) are eligible for reimbursement from an FSA but are ineligible as an income tax deduction.

Eligibility for FSA reimbursements are determined by the date that the service was provided, not when the bill was received or paid. For example, a bill received in January for services provided in the previous year must be reimbursed from funds deposited in the previous year.

How do I submit my expenses for reimbursement?

You will need to complete a flexible benefit request for reimbursement form and attach the appropriate documentation. This form is available in both an interactive format as well as the PDF version.

What is the appropriate documentation for reimbursable expenses ?

Documentation for FSA reimbursement must include:

the name of the person or organization providing the service
the name of the person receiving care or service
the date of the service
a description of the service
the amount being charged to the patient/customer for the service
the Employer Identification Number (EIN) or Social Security Number of the provider of the child care or adult day care services
Health Care Flexible Spending Account (FSA)

The following are examples of appropriate documentation:

Highmark Blue Shield explanation of benefit form for medical treatment
UCCI explanation of dental benefits form
Prescription drug receipts that include the name of the patient, the name of the drug, the date of the prescription was filled, and the amount that the patient paid.
Itemized statement of vision care services, such as lenses, frames and contact lenses.

The following are not acceptable documentation:

Cancelled checks
Credit card receipts
Cash register receipts (except as itemized documentation for eligible over-the-counter medications)

How will I know when my claim has been paid?

Flexible benefit claims are processed each business day and generally are entered into the reimbursement program within 7 to 10 business days of the date that they are received in the Employee Benefits Division. If you are receiving a flexible benefit reimbursement, you will receive a confirmation email of a deposit to your bank account. The email will identify the deposit as flexible benefits. It also will provide you with a link to ESSIC, which will allow you to view your FSA balance and the claims that were paid as well as any information regarding amounts that were not reimbursed.

If the charges that I incurred are more than what has been contributed to my account, do I have to wait until the money is in my healthcare account before I can be reimbursed?

You can be reimbursed your total yearly amount any time during the year.

I buy supplements from my chiropractor. Can I be reimbursed for the supplements?

Over-the-counter items such as vitamins, dietary, minerals, fiber and herbal supplements designed for the general maintenance of good health are not reimbursable from the plan.

Are any over-the-counter medications eligible for reimbursement?

Effective September 3, 2003, many over the counter medications became eligible for reimbursement. This includes antacids, allergy, pain, and cold remedies. Items that are designed for the general maintenance of good health and/or cosmetic items continue to be ineligible for reimbursement. These include vitamins, dietary, minerals, fiber and herbal supplements, toothpaste and cosmetics.

When must reimbursable expenses be incurred?

Eligible expenses must be incurred from January 1st of the year in which the funds are contributed through March 15th of the following calendar year; (Ex. January 1, 2008, through March 15, 2009.)

What is the deadline for submitting my claims for reimbursement?

All FSA reimbursements are due in the Employee Benefits Division office no later than March 31st of the following calendar year.