A Flexible Spending Account (FSA) is simply the easiest way to keep more of your take-home pay while saving money on your medical and dependent care expenses. It works like an expense account. The money is automatically deducted from your paycheck, so you don't pay taxes on it, and you can use it to pay for daycare, medical and prescription drugs that are not covered by insurance, as well as over-the-counter medicines you buy every day.
Expenses are considered eligible for reimbursement from an FSA if the medical care expenses include amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease and for treatments affecting any part of function of the body. The expenses must be primarily to alleviate or prevent a physical or mental defect or illness; Expenses solely for cosmetic reasons generally are not expenses for medical care. Also, expenses that are merely benficial to one's general health (for example, health spas) are not expenses for medical care.
You may shelter from taxes up to $2,500 for medical expenses and up to $5,000 for dependent care expenses.
A word of caution, any amount that you elect to put aside will be tax sheltered under the rules and regulations of the Internal Revenue Service. Under this plan it is to be strictly understood that any moneys not used cannot be returned to the employee and you will lose those dollars.
Lastly, this election is binding for the Plan Year and may not be changed except for a change in family status as defined in the Internal Revenue Service regulations.
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