Table of Contents
Questions on Flexible Spending Accounts (FSAs)
Using FSAs
Enrolling in FSA



Questions on Health Care Flexible Spending Accounts

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What is a Health Care Flexible Spending Account?

A Health Care Flexible Spending Account, also called a Health Care "FSA", is like a personal bank account in which you can set aside an amount of money on a pre-tax basis to cover eligible health care expenses that are not covered by your health plan.

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How is an FSA funded?

You contribute tan FSA through payroll deductions. Your deductions are made on a pre-tax basis, which means before income taxes and FICA (Social Security). This lowers the amount of taxes you pay.

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Why should I participate in an FSA?

Basically, if you want to save money on your out-of-pocket health care expenses you should seriously consider participating in an FSA. Since your contributions are made on a pre-tax basis your taxable income is reduced by the amount you contribute, and that lowers the amount of taxes you pay. For example, an individual in the 28% federal income tax bracket who pays $2,000 in qualified medical expenses out of an FSA would save $560 in taxes!

Of course, using the Prepaid Benefits Card makes using an FSA simple and automatic!

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What health care expenses may be reimbursed through a Health Care FSA?

The IRS defines eligible health care expenses as expenses you or your dependents incur for the diagnosis, cure, treatment or prevention of diseases, conditions or ailments. Most cosmetic surgeries, unless they are for medical reasons, are excluded.

Please see the IRS Publication 502 [PDF] for details of what expenses are eligible to be reimbursed.

Examples of qualified out-of-pocket health care expenses that are not covered by your benefit plan but are able to be paid for with an FSA include:

  • Copayments
  • Medical statements with a “patient balance due,” e.g., health plan deductibles and coinsurance
  • Dental expenses
  • Eyeglasses and contact lenses
  • LASIK surgery
  • Orthodontics
  • Online and mail order pharmaceuticals
  • Eligible over-the-counter products (OTCs) – Effective 1/1/11, the list of eligible OTC items is changing per the Patient Protection and Affordable Care Act of 2010. Please see following question for details, and contact your plan administrator for more information.
  • Hearing aids
  • Non-covered charges for qualified medical expenses, or provider bills for amounts beyond what insurance pays
  • Health care expenses not paid by insurance (e.g., in vitro fertilization)
  • Cholesterol testing kit
  • Wheelchair rental
  • Acupuncture Oxygen

FSAs can also be used for qualified health care expenses that are covered by your benefit plan, but that you choose not to submit to your plan.

You can use the Prepaid Benefits Card for all these – and more – thereby stretching your health care dollar and making it easy to do so!

Be sure to review your current benefit plan or contact your Plan Administrator for a complete list of eligible expenses.

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What OTCs may be reimbursed through a Health Care FSA?

The Patient Protection and Affordable Care Act of 2010 has changed the rules for the purchase of over the counter (OTC) products using your Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA), or Health Savings Account (HSA) pre-tax funds.

In the past, the IRS has allowed OTC medicine and drugs to be reimbursed using your FSA, HRA, or HSA dollars. However, as of January 1, 2011:

  1. FSA, HRA, or HSA funds can no longer be used to purchase OTC medicine and drugs unless a medicine or drug is prescribed. A “prescription” means a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.

    The OTC items affected include items in the following categories:

    Acid controllers Baby rash ointments/creams Laxatives
    Allergy & Sinus Cold sore remedies Motion sickness
    Antibiotic products Cough, cold & flu Pain relief
    Anti-diarrheals Digestive aids Respiratory treatments
    Anti-gas Feminine anti-fungal/itch Sleep aids & sedatives
    Anti-itch & insect bite Hemorrhoidal preps Stomach remedies
    Antiparasitic treatments


  2. If you have a prescription for an OTC medicine or drug, you must pay out of pocket at point of sale and then submit a manual claim requesting reimbursement. You cannot use your Prepaid Benefits Card for this purchase. (NOTE: Some retail merchants may remove OTC drugs and medicines from their list of eligible items prior to the January 1 effective date, in which case these items will not be approved on the Prepaid Benefits Card at those merchants.)

  3. You can continue to use your FSA, HRA, or HSA funds to purchase OTC items that are not considered a medicine or drug (e.g. bandages, splints, contact lens solution, etc.) Please note that insulin remains an eligible expense with or without a prescription. So, your Prepaid Benefits Card can continue to be used for these purchases.

If you have questions about this OTC change or need more information, please contact your Plan Administrator using the phone number listed on the back of your Card.

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What are some examples of health care expenses that are not allowed to be reimbursed through a Health Care FSA?

Examples Include:

  • Teeth whitening services and products
  • Health clubs
  • Hair transplants
  • Most cosmetic surgeries
  • Expenses that are covered by another insurance plan
  • Insurance premiums or premium contributions

Please go to the IRS web site for a complete list. Always check your employer's benefit plan materials as well.

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Can I change my contribution amount during the year?

Yes, but only under certain circumstances. The IRS regulations allow you to change your election within thirty days of a change in "family status." Family status changes include marriage, divorce, death of spouse or child, birth or adoption of child, and termination of employment of spouse. Always check your employer's benefit plan materials regarding changes.

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What happens if I don't use all the money in my account?

In 2006, the IRS began allowing employers to extend the period for a plan year's purchases up to 2 1/2 months after the plan year. However, employers can choose whether or not to allow this additional grace period. Check with your employer or Plan Administrator to determine a) if they are allowing the grace period for purchases and b) if you can use your Prepaid Benefits Card for these purchases or if you must submit a manual claim. If your employer does not allow the grace period, you must use all your FSA contributions before the end of the plan year or you will forfeit any money left in your account.

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What happens if I have an expense at the end of the year and don't submit it by the end of the plan year?

You will have time after the end of the plan year to file claims for qualified expenses that you incurred on or before the end of the plan year. The deadline for submitting claims is usually three months following the end of the plan year. Always check your employer's benefit plan materials or call your Plan Administrator.

In 2006, the IRS began allowing employers to extend the period for a plan year's purchases up to 2 1/2 months after the plan year. However, employers can choose whether or not to allow this additional grace period. Check with your employer or Plan Administrator to determine a) if they are allowing the grace period for purchases and b) if you can use your Prepaid Benefits Card for these purchases or if you must submit a manual claim. If your employer does not allow the grace period, you must use all your FSA contributions before the end of the plan year or you will forfeit any money left in your account.

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Can I still benefit from an FSA if I don't itemize deductions on my tax return?

Yes. You don't need to itemize deductions to take advantage of this benefit.

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Can I deduct the health care expenses on my tax return that are reimbursed through the health care FSA?

No. You cannot claim a tax deduction for the same expenses that are reimbursed tax-free through your health care FSA. But, keep in mind only health care expenses that are more than 7 1/2% of your adjusted gross income can be deducted from your income taxes, and most people do not have enough expenses to take the deduction. So, in a sense, an FSA eliminates the 71/2% threshold.

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If I become disabled and am only working part-time, can I adjust my FSA account contributions?

Yes. This constitutes a family status change. Always check your employer's benefit plan materials.

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Will I ever need to submit a paper claim form?

You may need to submit a claim form – along with the receipts – if:

  • You make a purchase at a place that does not accept MasterCard
  • You forget to take your Prepaid Benefits Card with you
  • You choose not to use the Card for a particular transaction
  • Your transaction is denied for any reason

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Where do I get a claim form

If, you don't use the Prepaid Benefits Card, then contact your Plan Administrator at the phone number on the back of your Card to obtain a claim form.

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How much money can I set aside in my account?

The maximum is set by your employer and is identified in your employer's enrollment materials





Using FSAs with the Prepaid Benefits Card

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Can I use this account to pay for my spouse's deductibles, copayments or other eligible expenses?

Yes, an FSA can be used to pay for your spouse's eligible expenses. You receive two Prepaid Benefits Cards so your spouse or dependent can sign and use one of them.

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Can I use this account to pay for my dependents' eligible expenses, even if they are covered under a different health plan or I have waived medical coverage for them?

Yes, you can use your account for eligible expenses for anyone who qualifies as your dependent on your tax return. A reminder: You receive two Prepaid Benefits Cards so your spouse or dependent can sign and use one of them. You can also purchase additional Cards for a small fee to suit your unique dependent needs.

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Where can I use my Prepaid Benefits Card?

IRS regulations allow you to use your Prepaid Benefits Cards in participating pharmacies, mail-order pharmacies, discount stores, department stores, and supermarkets that can identify FSA/HRA-eligible items at checkout and accept MasterCard® prepaid cards or Visa® prepaid cards. Eligible expenses are deducted from the account balance at the point of sale. Transactions are fully substantiated, and in most cases, no paper follow-up is needed. You can find out which merchants are participating by visiting the web site on the back of your Card or consulting your Plan Administrator.

Some plan designs may also allow you to use their Cards in pharmacies that have certified that 90% of the merchandise they sell is FSA/HRA-eligible. However, since these pharmacies cannot identify the eligible items at the point of sale, another form of auto substantiation or paper follow-up will be required.

You may also use the Card to pay a hospital, doctor, dentist, or vision provider that accepts MasterCard® or Visa®. In this case, Evolution1 uses its auto-substantiation technology to electronically verify the transaction's eligibility according to IRS rules. If the transaction cannot be auto substantiated, paper follow-up will be required.

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Are there places the Prepaid Benefits Card won't be accepted?

Yes. Your card will not be accepted at locations that do not offer the eligible goods and services, such as hardware stores, restaurants, bookstores, gas stations and home improvement stores.

Cards will not be accepted at pharmacies, mail-order pharmacies, discount stores, department stores, and supermarkets that cannot identify FSA/HRA-eligible items at checkout. The Card transaction may be declined. You can find out which merchants are participating by visiting the web site on the back of your Card or consulting your Plan Administrator.

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How does the Card work in participating pharmacies, discount stores, department stores and supermarkets?
  1. Bring prescriptions, vision products, OTCs and other purchases to the register at checkout to let the clerk ring them up. (Please note: Effective 1/1/11, the list of eligible OTC items is changing per the Patient Protection and Affordable Care Act of 2010. See question above for details, and contact your plan administrator for more information.)
  2. Present the Card and swipe it for payment.
  3. If the Card swipe transaction is approved (e.g., there are sufficient funds in the account and at least some of the products are FSA/HRA-eligible), the amount of the FSA/HRA-eligible purchases is deducted from the account balance and no receipt follow up is required. The clerk will then ask for another form of payment for the non-FSA/HRA-eligible items.
  4. If the Card swipe transaction is declined, the clerk will ask for another form of payment for the total amount of the purchase.
  5. The receipt will identify the FSA/HRA-eligible items and may also show a subtotal of the FSA/HRA-eligible purchases.
  6. In most cases, you will not receive requests for receipts for FSA/HRA-eligible purchases made in participating pharmacies, discount stores department stores or supermarkets.

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Can I use my Prepaid Benefits Card for prescriptions ordered prior to activation of the card?

No. Your Card must be activated prior to the order or purchase date of your prescriptions. You need to wait 1 business day after activating your card to purchase prescriptions at your pharmacy with the Card. For example, if the Card is activated on Tuesday, a prescription can be ordered and picked up on Wednesday.

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Can I use the Prepaid Benefits Card if I receive a statement with a Patient Due Balance for a medical service?

Yes. As long as you have money in your account for the balance due, the services were incurred during the current plan year, and the provider accepts MasterCard® debit cards or Visa® debit cards, simply write the Card number on your statement and send it back to the provider.



Enrolling in FSA

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How do I enroll in an FSA?

Just complete the Enrollment Form provided by your employer and indicate the amount you want deducted from each paycheck.

When can I enroll in an FSA?

You can enroll in the FSA during your employer's annual open enrollment or during the plan year, if you experience a family status change. But remember, if you are eligible for the FSA during open enrollment and you choose not to participate, you will not be eligible to participate in the FSA until the next open enrollment unless you have a family status change. Always check your employer's benefit plan materials.