SPRING ARBOR UNIVERSITY FLEXIBLE SPENDING ACCOUNT PLAN SUMMARY FOR 2015 HOW IT WORKS Your flexible spending account (FSA) allows you to redirect a portion of your salary into two specific types of expenses: Dependent care (DDC) (up to $5000) and unreimbursed medical, dental and vision expenses (up to $2500). Prior to the beginning of each plan year, you must elect a specific dollar amount for each type of expense, which will be redirected from your salary. DDC expenses may not be paid from an unreimbursed medical account and vice versa. Redirecting part of your salary into a flexible spending account(s) means that your taxable income will be calculated after the elected amounts for DDC and/or unreimbursed medical expenses are deducted from your salary. You will not pay federal income tax, Social Security tax, state income tax and/or city income tax on the elected amounts. LIMITED USAGE FLEXIBLE SPENDING ACCOUNT IF YOU HAVE AN H.S.A (health savings account): You have the option of participating in a health savings account as well as a limited usage flexible spending account. The IRS rules stipulate that if you have both types of accounts that medical expenses must be paid from your Health Savings Account only. Dental & Vision expenses can be paid by either of these accounts. The flexible spending account should be used first for dental and vision expenses then, if exhausted, use your Health Savings Account. CLOSING OUT YOUR 2014 FLEXIBLE SPENDING ACCOUNT BY 12-31-14 IF YOU ARE ELECTING A HIGH DEDUCTIBLE HEALTH PLAN WITH A HEALTH SAVINGS ACCOUNT FOR 1-1-2015. IRS rules do not allow you to have both a Full Usage Flexible Spending Account and a Health Savings Account at the same time. If you have a 2014 Full usage Flexible Spending Account and electing the High Deductible health plan and Health Savings Account option for 1-1-2015 then the IRS is requiring you to empty your 2014 FSA by 12-31-14. You will not be allowed to take advantage of the 2 ½ month extension. You can elect a Limited usage (dental and vision only) FSA for 1-1-2015. GENERAL RULES AND INFORMATION The following rules apply to both dependent care and un-reimbursed medical spending accounts: Irrevocable Election Rule: IRS rules prohibit the changing and/or revocation of elections prior to the beginning of the next year unless there is a qualifying change in family status (i.e., marriage, divorce, death of a spouse or child, birth or adoption of a child, termination or commencement of employment, etc.) The change in coverage must be on account of and consistent with change in family status. Limitations: IRS rules allow eligible expenses to be incurred from January 1 st through March 15 th of the following year (allowing you 14 ½ months to incur all of your elected monies.) IRS rules allow you to submit receipts for eligible expenses through the end of March for the previous calendar year. Amounts remaining will be left with Spring Arbor University without option of being returned to the employee. Because of this rule, it is important for you to be conservative in estimating your out of pocket medical and DDC expenses for the upcoming year. You should confirm that such expenses are eligible by reviewing IRS publication 502 (medical, dental & vision) and Publication 503 (dependent care). Your employer cannot expand the list of eligible expenses described in the IRS publications. 1
No Transfer: The IRS also prevents you from transferring money between a DDC account and an unreimbursed medical spending account. Other Rules: Additional rules apply under applicable law. These rules are further described in the plan document. DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT (DDC) (Child and Elderly Care) Using a DDC flexible spending account allows you reimbursement for qualified expenses (as defined in IRS Publication 503) related to the care of (1) children age 12 and under (expenses incurred after a child reaches age 13 are not reimbursable even if within the same plan year) and/or (2) incapacitated dependents age 13 or over. To be eligible, the dependent must actually live with you. A custodial parent may be entitled to participate in a dependent care assistance plan even if the other parent is entitled to the tax exemption. A non-custodial parent cannot participate in a dependent care assistance plan even if he or she is entitled to the tax exemption and/or is financially responsible for the child. During any period of time that you or your spouse is not at work (exception for spouse who is full-time student or looking for work), you are not entitled to a reimbursement from your DDC account for that period of time. The DDC benefit is provided only to allow both you and your spouse to work. If either you or your spouse is not working on a daily basis, then you are not eligible for reimbursement. Eligible expenses must satisfy all of the conditions set forth on eligible DDC expenses listed below to qualify for reimbursement under the dependent care plan. You may contribute up to $5,000 each calendar year on a pre-tax basis to pay for eligible dependent care expenses. If you are married but filing separate income tax returns, the most you can contribute is $2,500 annually. Amounts reimbursed under this plan will not be eligible for the dependent care tax credit. Individuals who earn $25,000* or less per year (or who are in the 15% tax bracket) may be better off utilizing the tax credit. For joint returns, this amount may be higher depending on your situation. You must also include the dependent care provider s taxpayer identification (or Social Security) number on your tax return. If you file Form 1040, you must complete Form 2441. (If you file Form 1040A, this information is required on your return.) This is the same reporting requirement that applies if you take the dependent care tax credit. For more specific details on the tax implications of utilizing a dependent care reimbursement plan, you should contact your tax advisor or review IRS Publication 503. You should evaluate the cost effectiveness of this program versus any available dependent tax credit programs. ELIGIBLE DEPENDENT CARE EXPENSES As described in IRS Publication 503, dependent care expenses must meet all of the following conditions to be eligible. 1. The expenses must be incurred for services rendered after the plan start date to receive dependent care expense reimbursement, and during the plan year to which your election applies. 2. Each individual for whom you incur the expense must be: a) A dependent age 12 or under for whom you are entitled to receive a personal tax exemption as a dependent, or b) A spouse or other tax dependent that is physically or mentally incapable of caring for himself or herself. 3. The expenses must be incurred for the care of a dependent (as described above) or for related household services incurred to enable you and your spouse, if applicable, to be gainfully employed. 2
4. If the expenses are incurred for services outside your household, such dependent must regularly spend at least eight hours per day in your home. Charges for overnight stays are not eligible. 5.If the expenses are incurred for services provided by a dependent care center (i.e., a facility that provides care for more than six individuals not residing at the facility), the center must comply with all applicable state and local laws and regulations. 6. The expenses must not be paid or payable to any of your children who are under age 19 at the end of the year in which the expenses are incurred or to an individual for whom you or your spouse is entitled to receive a personal tax exemption as a dependent. 7. Annual reimbursement must not exceed the least of the following limits: a) $5,000 b) $2,500, if you are married but you and your spouse file separate tax returns. c) Your taxable compensation (after your salary reduction under the cafeteria plan) d) If you are married, your spouse s actual or deemed earned income For purposes of (d) above, your spouse will be deemed to have earned income of $200 ($400 if you have two or more dependents described in Paragraph 2 above) for each month in which your spouse is (i) physically or mentally incapable of caring for himself or herself, or (ii) a full time student. 8. You must supply the taxpayer identification number for each dependent care service provider to the IRS with your annual tax return by completing IRS Form 2441. 9. Expenses related to overnight camps and activities are not eligible for reimbursement under the plan. REIMBURSEMENT OF DEPENDENT CARE EXPENSES To obtain a reimbursement from your Dependent Care Flexible Spending Account, proper documentation must be provided with a completed and signed Reimbursement Request form. Reimbursement checks totaling less than $15 will be held until additional requests are submitted totaling more than $15. You may receive a reimbursement only for (the lesser of): The actual amount of the incurred expense The amount deducted from your salary (less reimbursements already paid) at the time a request Is submitted, or The total amount of your plan year election (statutory limits apply). Services performed must be within the plan year and all expenses must have been incurred prior to reimbursement. The IRS defines incurred as when the dependent care is provided and not when the participant is formally billed or charged for or pays for the dependent care. This means that payments for dependent care expenses can be requested but cannot be reimbursed until after the date care is provided. Complete a FLEX ONE Reimbursement Request form available from your employer. You must have the service provider sign the form or attach a receipt from the service provider that includes the following: Name of dependent receiving care Date(s) care was provided (must match reimbursement form), Name of service provider, Social Security or tax identification number of the provider, and Amount of the charge. Copies of canceled checks, credit card receipts or money orders are not acceptable receipts. Due to IRS regulations regarding reporting and disclosure, all reimbursements are made payable to the plan participant. Flex One will not make reimbursements payable to service providers. Example of submitting dependent care expenses on a monthly basis: Dates of Services (DOS) Amount 08/01-08/15 $150 08/16-08/31 $150 3
A reimbursement(s) for DOS 8/01-8/15 would be pended for payment until 08/15 when service was incurred. On 8/15 if deposits were available, you would be eligible for a $150 payment. Claims for DOS 08/16-08/31 would be pended for payment until 08/31 when service was incurred. On 08/31 if deposits were available, you would be eligible for a $150 payment. Dependent care expenses can also be submitted on a weekly basis. The processing of your reimbursement will depend on processing option your employer chooses. Please contact your employer for that information. UNREIMBURSED MEDICAL FLEXIBLE SPENDING ACCOUNT You may have medical, dental and vision expenses during the plan year that are not covered by other plans or you may incur charges above the reasonable and customary limits. Expenses such as those detailed on Page 6 as well as deductibles and co-payments, may be reimbursed from your Unreimbursed Medical Flexible Spending Account. (Insurance premium costs cannot be reimbursed under this account.) IRS CHANGE AS OF JANUARY 1 ST, 2011 APPLIES TO 2015 AS WELL: OTC S (Over The Counter) medicines are not reimbursable unless your claim is accompanied by a doctor s prescription. Over the counter medical supplies such as crutches or contact solution are reimbursable without a prescription. See the list below of eligible and ineligible items and refer to www.irs.gov for additional clarification. Please note that insulin and diabetic supplies are assumed to be by prescription and do not need an accompanied prescription to be reimbursable. To be eligible for reimbursement, medical, dental or vision expenses must: Be incurred by you or a legally recognized eligible dependent during the plan year; Not be reimbursable or paid through a group or individual health plan/policy or from any other source; Constitute a deductible medical expense as described in IRS Publication 502 or subsequent IRS rulings and be submitted along with an explanation of benefits (EOB) or a receipt from the medical service provider or retailer receipt for covered expenses. The IRS does not impose an annual maximum on the amount of annual reimbursement under the un-reimbursed medical expense plan; however, most employers place a conservative limit on annual elections. You may elect to redirect any amount of your salary up to the maximum selected by your employer. If you have questions regarding your company s election maximum, please check with your employer representative. To receive a reimbursement, you must first incur an eligible medical expense and then complete a Reimbursement form. Unlike the dependent care account, your entire elected amount will be available at the beginning of the plan year in your Unreimbursed Medical Flexible Spending Account. Your employer will make the funds available and will regain contributions through your periodic salary redirections (future pledged payroll deductions). Eligible expenses under this program are limited to Section 213 of the Internal Revenue Code. It should be noted that not all items listed in Section 213 and IRS Publication 502 may be eligible within your employer s plan. A partial listing of eligible and ineligible expenses is included on page 6. 4
REIMBURSEMENT OF UNREIMBURSED MEDICAL, DENTAL, VISION EXPENSES To obtain a reimbursement from your Unreimbursed Medical Flexible Spending Account, you must provide proper documentation with a completed and signed Reimbursement Request form. If the expense is covered and/or paid by another health plan, you must first submit the expense to your insurance carrier. You will receive an Explanation of Benefits (EOB) from the carrier indicating any payments made to you or on your behalf by the insurance carrier. This EOB may be attached to a completed Reimbursement form. List all expense items separately on the form. If the expense is not covered by any other health plan, you must attach a receipt for the expense to a completed Reimbursement Request form. Each expense must be listed separately on the Reimbursement Request form. An Explanation of Benefits (EOB) or receipt will be acceptable form of documentation if it contains: Date services were provided or goods received Name of person receiving services or goods Name of person providing services Nature of services provided Amount charged for service or goods Amount paid by other health plan (if applicable). Written Doctor Recommendation (if claiming nutritional supplements or vitamins for a medical condition). Billing Statements or copies of canceled checks, credit card receipts or money orders are not acceptable because they do not include the above information.. All expenses must be deductible medical expenses under IRS Code Section 213. (In some instances, additional information may be required to establish deductibility under IRS Code Section 213.) Your signature on the Reimbursement Request form certifies that the expenses submitted are deductible medical expenses and cannot be reimbursed from any other source or used as a deduction on personal income taxes. By submitting the form, you also agree to allow your employer to use the information included therein to process your claim and agree to release and hold harmless such parties for any liabilities that may arise in connection with such use. Services must be performed within the cafeteria plan year (calendar year), and all expenses must have been incurred prior to reimbursement. The IRS defines incurred as when the medical care that gives rise to the expense is performed, not when you are formally billed, charged for, or pay for the care. ELECTION RENEWAL You will be offered an opportunity during the open enrollment period prior to each plan year to change, continue or drop your participation in the flexible spending account plan. If you do not complete a new salary redirection agreement, your elections will be set to zero for each flexible spending account. Your participation in your premium contribution portion of the plan will remain the same unless changed in writing. If you wish to make changes or begin to participate in flexible spending accounts during the open enrollment period, please see your human resource department representative. 5
Congress Passes HEART Act Giving Tax Breaks to Military Personnel The U.S. Congress has overwhelming passed the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008 which provides tax breaks to military service personnel and their families. Some of the provisions include an exemption for reservists from the use it or lose it rule for unused health care flexible spending account balances. President Bush signed the HEART Act into law on June 17, 2008. GRACE PERIOD EXTENSION The IRS has modified the Flexible Spending Account Plan regulations to establish a "grace" period. The grace period allows participants with remaining Flexible Spending Account balances at year-end to have an additional 2 1/2 months (until March 15) of the following year to incur additional eligible expenses and use prior year funds to pay for these expenses. This provision does not apply to Dependent Care Accounts. Q. How does the grace period work? A. The following example illustrates how it works. Sam contributed $1,000 during 2014 to his Health Care Spending Account. His remaining balance is $300 on Dec. 31. In January 2015, Sam incurs $200 in expenses. He can use the $300 remaining from 2014 to pay for the $200 of expenses he incurred in 2015. If Sam doesn't have additional expenses between Jan. 1 and March 15, he will forfeit the remaining $100. Here's another example: Mary contributed $2,500 to her 2014 Health Care Spending Account. She has a balance of $125 on Dec. 31, 2014. On March 1, 2015, Mary incurs $350 in expenses. She can use the $125 remaining for 2014 to reimburse a portion of her expense. The remaining $225 will be reimbursed using Mary's 2015 contributions. Mary will not forfeit any of her 2014 funds. TERMINATION OF EMPLOYMENT & COBRA No additional deposits can be made to your account(s) after your employment is terminated. Deposits can only be made during your employment through payroll deduction. By accepting COBRA, claims for valid Un-reimbursed Medical, Dental and Vision related expenses incurred during the plan year (including after your termination date) can continue to be submitted until the end of your plan s runoff period (up to the amount of money remaining in your account). COBRA does not apply to Dependent Care. 6
In order to receive reimbursement for medical, dental and vision related eligible expenses incurred after termination, a COBRA election must be made within 60 days of your termination. Contact the Human Resources Department. LIMITED USAGE FLEXIBLE SPENDING ACCOUNT PROVISION: IF YOU HAVE A LIMITED USAGE FLEXIBLE SPENDING ACCOUNT YOUR ELIGIBLE EXPENSES ARE LIMITED TO DENTAL AND VISION EXPENSES INCLUDING COPAYS, DEDUCTIBLES, BALANCE BILLINGS AND OVER-THE- COUNTER DENTAL AND VISION RELATED ITEMS SUCH AS CONTACT SOLUTION. DENTAL RELATED OTC MEDICINES SUCH AS ORAJEL REQUIRE A PRESCRIPTION. ( AS OF 1-1-2011). FULL USAGE FLEXIBLE SPENDING ACCOUNTS ELIGIBLE EXPENSE EXAMPLES: Artificial Limbs (only if reconstructive) Ambulance Service Birth Control Contraceptives Eye Surgery (Lasik) Contact Lens Solution Crutches and Wheel Chairs Prescription Drugs Elastic Hose, Medically Prescribed Eye Glasses / Contact Lenses Acupuncture Chiropractic Care Anesthesia Hearing Devices Hearing Assisting Cat Laboratory Services Physician Services Psychology & Psychiatric Services X-Rays & Imaging Services Oxygen Equipment Surgical Services Seeing Eye Dogs Nursing Care Rental of Medical or Healing Equipment Telephone for Hearing Impaired Insurance Co-Payment and Deductibles Diabetic-related Supplies Smoking Cessation Programs and for drugs prescribed to alleviate nicotine Prescribed Massage Therapy for Specific Body Part- with prescription withdrawal Christian Science Practitioners Transportation Costs for medical care or to a conference for your Chronic medical conditions. False Teeth Lip Reading Services Home health & hospice services Vaccinations Drug or Alcohol inpatient services Acute long-term care services Incidental cost of meals and lodging charged by a medical institution if you are there to receive medical care. Wheel Chairs and Walkers Medical alert bracelets/necklaces Occlusal guards Respiratory treatments Weight Loss Programs for doctor diagnosed diseases including obesity Blood pressure monitor, glucose tester Vitamins prescribed for a specific medical condition. Bandages Reading Glasses Sexual Dysfunction treatments Car Controls for Handicapped usage THE FOLLOWING ARE EXAMPLES OF OVER THE COUNTER ITEMS THAT ARE REIMBURSABLE WITH A DOCTOR S PRESCRIPTION (FOR 2011) Pain relievers (Advil, Aleve, Motrin, Bayer, Excedrin, Tylenol, Nuprin) 7
Diaper rash ointment (Desitin, Balmax) Liniments (BenGay, Tiger Balm, Flexall, Absorbine Junior) Menstrual cycle medication (Midol, Pamprin, Premysyn PM) Migraine (Advil Migraine, Excedrin Migraine, Motrin Migraine) Toothache and teething pain relievers (Orajel, Little Teethers) Anti-itch lotions and creams (Bactine, Cortaid, Hydrocortisone, Calamine Lotion, Benadryl Cream, Lanacort, Lamisil AT, Micatin) Allergy prevention & treatment (Benadryl, Sudafed, Actifed, Claritin) Antihistamines (Actidil, Actifed, Allerest, Benadryl, Claritin, Chlor-Trimeton, Contac, Dimetapp, Drixoral) Anti-fungal (Lamisil AT, Lotramin AF, Micatin) Asthma (Primatene Mist) Eye drops for allergy/cold relief (Ocu-Hist, Clear Eyes, Visine) Cold sore/fever blister (Abreva Cream, Blistex, Carmex) Cough suppressants (Robitussin, Vicks 44, Chloraseptic) Decongestant/nasal decongestant/cold remedies (Advil Cold and Sinus, Afrin, Aleve Cold, Children's Advil Cold, Duration, Dristan, Neo-Synephrine, Nyquil, Tylenol Cold and Flu, Allerest, Alka Seltzer) Antacids and acid reducers (Gas-X, Maaloz, Mylanta, Tums, Rolaids, Pepsid AC, Prilosec OTC, Tagamet HB, Zantac 75) Antidiarrhea and laxatives (Ex-Lax, Pepto-Bismol, Imodium A.D., Kaopectate Motion sickness medicine (Dramamine, Marizine) Wound cremes/anti-infection medications Pediculicide (head lice) (Nix, RID) Wart removal medication (Tinamed, Compound W) Fiber supplements such as Benefiber and Metamucil Glucosamine/chondrotin for arthritis of other medical condition (not reimbursable if taken for overall joint health) Incontinence supplies such as Depends Sleep-aids including sedatives, cpap machines Smoking Cessation OTC s (Nicotine Gum, Nicorette, Nicoderm CQ, Nicotrol Condoms and other contraceptive devices (Trojans, VGF Film, Delfen Contraceptive Foam) Acne medications Pregnancy test or ovulation test kits (Clear Blue Easy, EPT, Clear Plan, First Response) Hemorrhoidal preps 8
FULL USAGE FLEXIBLE SPENDING ACCOUNTS INELIGIBLE EXPENSE EXAMPLES: Elective Cosmetic Surgery Health Club Dues Rogaine Swimming pools, Saunas Household Help Marriage Counseling Exercise Equipment General Massages (not prescribed) Deodorants Feminine hygiene products such as tampons and maxi pads Cosmetics Mouth washes, antiseptics and oral anesthetics Hair removal treatments and waxes Electric toothbrush or Waterpik Vitamins taken to improve overallhealth Medical Insurance Premiums Dancing Lessons Maternity Clothing Swimming Lessons Toothpaste Hygiene Products i.e. Shampoos Diaper Service Scar Removal medications Chapstick or lip balm Face creams, moisturizers, eye creams and wrinkle reducers Weight Loss Food items (i.e. Slim Fast) Shaving cream and razors Teeth whitening kits and powders Cotton balls Funeral or burial expenses For more information, see www.irs.gov Under the Health Care Reform Act as currently written- the maximum amount of contribution for Unreimbursed medical will be $2500 for 1-1-2015. 9