Open a Flexible Spending Account. Health Care Eligible Expenses. Reduce your essential health care expenses by 20% to 40%

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1 Health Care Eligible Expenses Open a Flexible Spending Account The list of eligible health care items is updated frequently by the Internal Revenue Service. If you are uncertain about whether or not an item or service qualifies for reimbursement, you should determine expense eligibility before making the purchase. Also, your employer s plan document may limit eligible expenses for which you may receive reimbursement. General Expenses: Medical plan deductibles Medical plan co-payments Dental Orthodontia expenses Vision care expenses: exams, glasses, contact lenses and lens maintenance solutions, laser eye surgery Routine checkups and physicals Routine medical foot care Services for alcoholism or drug addiction (qualified) Cosmetic surgery (medically necessary) Birth control pills, devices and procedures Private duty nursing services Well baby care and immunizations Tobacco cessation programs (physician prescribed) Occupational/physical therapy Chiropractor expenses for medical care Infertility treatments Psychology and psychoanalysis Weight-loss program (medically necessary) Speech therapy Equipment & Supplies: Back support devices Specialized apparatuses for the sick/physically disabled Orthopedic shoes Special mattress (medically necessary) Repair of special phone equipment for the deaf Hearing aids and batteries Medical Treatments: Acupuncture or related procedures when treating a medical condition Sterilization (reproductive) Whirlpool baths (medically necessary) Prescription drugs Over-the-counter drugs and medicines (qualified) Miscellaneous Items: Braille books Convalescent home (for medical treatment only) Reading therapy for dyslexic child Guide dog and its maintenance Select educational costs for physically and cognitively handicapped children The Value of a Flexible Spending Account A Flexible Spending Account (FSA) allows you to pay for essential health care expenses that are not covered, or are partially covered, by your medical, dental and vision insurance plans. By contributing a portion of your payroll dollars into your FSA on a pre-tax basis, you can save 20% to 40% on the cost of eligible health care items and services. You may also use your FSA contributions to pay for deductibles, co-payment amounts and eligible expenses for which you have no coverage at all. Reduce your essential health care expenses by 20% to 40% Medical, dental and vision plans typically share the expense of health care with the insured. And some benefit packages do not include dental or vision coverage. Taken together, the plan deductibles, co-payment amounts, annual coverage limits and excluded coverages can amount to significant out-of-pocket cost for you. An FSA allows you to pay for these expenses in a tax advantaged manner. Your actual savings will be based on your individual tax rate. FSA contributions are exempt from Federal income tax, Social Security taxes (FICA) and, in most cases, state income tax. This special tax status for FSA contributions is the mechanism that allows you to save money on the health care expenses you must pay for yourself. It s All Yours There is no cost to you to have and use a Flexible Spending Account...no setup fee, no hidden fees. And a special advantage of the ADP Health Care FSA allows immediate access to your entire annual election amount from the first day of the benefit year, before all scheduled contributions have been made. FSA HC 2007

2 Plan Your Contributions The key to getting the most from your FSA is to maximize your contributions based on your anticipated eligible expenses. To plan your contributions, follow these simple steps. Review the list of eligible expenses. Review your health care expenses from last year. Write down any new eligible expenses you anticipate in the new benefit plan year (for example, prescription eyeglasses, new medications, scheduled surgery, loss of dental or vision coverage, orthodontia, etc.). Just consider for a moment the savings...20% to 40% less out of your pocket on things you have to pay for anyway! Be sure to include plan deductibles or some portion of them. Then estimate your cost for each of these uncovered or partially covered eligible expenses. The total of your individual estimates from above is about what you should contribute to your FSA. It may surprise you how much you actually pay out of your pocket each year for health care expenses. It is also important to remember that an FSA is not a savings account. You must use all of your contributions each year or risk losing any unused balance at the end of the plan year. So, plan to contribute what you expect to be able to spend on eligible expenses within the benefit plan year. A contribution planning worksheet is available online and in print to help you plan your contributions. Coverage Eligibility You may enroll in your employer s FSA plan even if you receive health care insurance through your spouse s employer. And your FSA may be used for eligible expenses for all of your qualified dependents. Please remember you must actively re-enroll each year in your Health Care FSA plan. Save 20% to 40% on your health care expenses Receive reimbursement for an extensive list of eligible expenses through simple claims filing Save on purchases not covered by your insurance Reduce your income taxes Fund your account with simple paycheck deductions Purchasing with Pre-Tax Dollars The below examples assume a net tax rate of 30%. Your personal tax rate may be greater or less. Deductibles for Adults (2) Deductibles for Children (2) Eyeglasses (2 pair) Prescription Co-Payments (annual) Laser Eye Surgery Orthodontia and many others... Price Net Cost = Tax Savings $1,000 $1,000 $400 $360 $1,200 $5,000 $700 $700 $280 $252 $840 $3,500 $300 $300 $120 $108 $360 $1,500 Learn more about Flexible Spending Accounts at Opening Your Account It s as simple as to begin contributing to your new Health Care FSA Account Plan your contributions. Use the More About Health Care FSA link at for contribution planning assistance. Enroll in the Health Care FSA during your annual enrollment or new hire election period. Review your account online through the FSA website soon after the plan year begins and at least monthly thereafter. Your payroll contributions to your new FSA account will begin with the new plan year or according to your employer s plan documentation.

3 Open an ADP Dependent Care Flexible Spending Account The Value of a Dependent Care Flexible Spending Account An ADP Dependent Care Flexible Spending Account (FSA) allows you to pay for dependent care expenses at a special tax advantage. By contributing a portion of your payroll dollars into your account on a pre-tax basis, you can save 20% to 40% on the cost of eligible dependent care. Reduce your dependent care expenses by 20% to 40% Your savings will be based on your individual tax rate. FSA contributions are exempt from Federal income tax, Social Security taxes (FICA/FUTA) and, in most cases, state income tax. The tax exempt status for FSA contributions is the mechanism that allows you to save money on your dependent care expenses. It s All Yours There is no cost to you to have and use a Dependent Care Flexible Spending Account...no setup fee, no hidden fees. Purchasing with Pre-Tax Dollars As an example of the value of using pre-tax dollars to pay for dependent care, consider this scenario. The Johnsons have two young children who are placed in regular day care. The annual fee for the day care is $5,000. Assuming the Johnsons have a tax rate of 30 percent, they will save $1,500 by using a Dependent Care FSA to pay for their dependent care expenses! Save 20% to 40% on your dependent care expenses Reduce your income taxes Fund your account with simple paycheck deductions Receive reimbursement for expenses through simple claims filing

4 Plan Your Contributions The key to getting the most from your ADP Dependent Care FSA is to maximize your contributions based on anticipated eligible expenses. To plan your contributions, follow these simple steps. Review the list of eligible expenses. Review your dependent care expenses from last year. Write down any changes to your previous dependent care expenses, for example, a fee increase or any new expenses, such as an additional child entering dependent care. Estimate your cost for each dependent care item. The total of your individual estimates from above is what you should contribute to your Dependent Care FSA. Eligible Expenses Following is a partial list of eligible dependent care expenses. If you are uncertain about whether or not a dependent care expense qualifies for reimbursement, you should determine its eligibility before incurring the expense. Also, your employer s plan document may limit eligible expenses for which you may receive reimbursement. Care at licensed nursery schools Day care in your home or outside Before and after school care Day camps Child care centers Babysitter or au pair Eldercare Note: $5,000 is the annual regulatory maximum for dependent care FSA contributions for a household. It is also important to remember that an FSA is not a savings account. You must use all of your contributions each year or risk losing any unused balance at the end of the benefit plan year. Please remember that you must actively re-enroll in your Dependent Care FSA each benefit plan year. Opening Your Account It s as simple as to begin contributing to your new Dependent Care FSA Account Plan your contributions. Complete the enrollment form with your contribution elections. Return your signed enrollment form to your employer. Your payroll contributions to your new FSA account will begin with the new plan year or according to your employer s plan documentation. Learn more about Flexible Spending Accounts at FSA DC 2007

5 The FSA Card Fast Convenient Avoid up-front, out-of-pocket expense The FSA Card is an additional convenience offered by your employer in conjunction with your ADP Flexible Spending Account (FSA). The Card is a useful and easy-to-use tool, similar to a bank account debit card, that allows you to remove funds from your FSA with a simple swipe at a merchant payment terminal. By using the Card to purchase eligible expenses, you avoid paying for a purchase with money out of your pocket. Save Your Receipts The primary value of your FSA Card is to allow you to avoid paying for eligible expenses out-of-pocket, and then submitting a claim for reimbursement. However, because of the special tax status of your FSA contributions, IRS regulations will often require you to submit the receipt for your purchase after the fact as proof of the eligibility of the expense. So, please make a habit of saving all of your itemized purchase receipts. Using the FSA Card The FSA Card may be used in medical and dental offices, hospitals, health care clinics, pharmacies and online pharmacies to purchase the same eligible items and services for which you can submit paperbased claims for reimbursement. And, as credit card technology changes, you will be able to use the Card at a growing number of locations. You Will Receive a Card Automatically If your employer offers the FSA Card as part of your FSA plan, you will receive a Card in the mail. However, you may always choose between using your FSA Card or filing paper-based claims. Should a merchant selling eligible items or services not accept the FSA Card, you will remain able to pay for the eligible expense out-of-pocket and submit a claim for reimbursement from your FSA. Learn more about the FSA Card by logging on at FSA CARD 2007