University Business Policies and Procedures Manual

3650
FLEXIBLE SPENDING ACCOUNTS PROGRAM
Effective Date: January 1, 1990
Revised: 01/01/93, 08/23/99, 05/22/06
Subject to Change Without Notice 

1. General

The University has a Flexible Spending Accounts (FSA) Program which allows eligible employees to set aside a portion of their annual salary to pay qualified unreimbursed medical expenses and qualified dependent care expenses incurred during the year before taxes are calculated. Described herein are policies pertaining to the FSA Program. The FSA Plans booklet explains the Program in more detail and is available from the Employee Benefits Office of the University Department of Human Resources. The Employee Benefits Office is located at the UNM Human Resources Service Center.  

2. Authority

The FSA Program is a fringe benefit authorized by the Internal Revenue Code and regulated by the Internal Revenue Service (IRS). IRS regulations define which expenses qualify for reimbursement under this plan. Nothing in this policy shall impose or limit requirements which may be otherwise imposed by law. Exceptions to the regulations governing this Program cannot be granted by the University. Tax law changes may affect this Program.

3. Flexible Spending Accounts

Employees can participate in the FSA Program by setting aside part of their pay on a before-tax basis to:

• Set up a Medical Reimbursement Account to pay certain qualified medical, dental, prescription, vision, and hearing care expenses for eligible employees or their eligible dependents that are not covered by insurance plans. IRS identifies qualifying medical expenses in Publication 502, which is available from any IRS office. Examples of qualified medical expenses are listed in the FSA Plans booklet. The employee's contribution may not exceed $5,000 per plan year.
  
  
• Set up a Dependent Care Spending Account to reimburse the employee for dependent care at a licensed facility, services from unrelated individuals, care at dependent care centers, and other qualified dependent care expenses. The employee's contribution may not exceed $5,000 per plan year.

The money an employee sets aside for the FSA Program will be subtracted from his or her gross pay before income and Social Security taxes are calculated, thus reducing taxable income. Employees choose how much to contribute. The annual contribution amount chosen is equally divided into pay-period deductions. To be reimbursed for eligible expenses, the employee must submit claims to the University's FSA administrator.

Since individual circumstances vary, participation in an FSA Program does not always mean tax savings. Employees must decide for themselves if the Program is advantageous to them. The Employee Benefits Office can assist an employee in evaluating the benefit of participation.

3.1. Plan Year

The plan year for the FSA Program begins on January 1 and ends on December 31. Continued participation requires active enrollment each year.

4. Eligibility

The following employees are eligible to participate:

• Regular staff employees at .50 or greater FTE.

• Faculty at .50 or greater FTE, for at least one (1) academic year.

• Post Doctoral Fellows at .50 or greater FTE for at least one (1) academic year.

5. Enrollment

Employees may enroll in the Program during the open enrollment period, which normally occurs in November each year. Current participants must re-enroll during the open enrollment period to participate for the following plan year. New eligible employees may enroll in the Program no later than sixty (60) days following the date of employment. Employees may enroll in either one (1) or both of the Flexible Spending Accounts. Participants should carefully estimate their contribution to each of these spending accounts, since this type of plan is regulated by the IRS. The following are important rules to remember:

• Any unused money which the employee has not withdrawn to pay for eligible expenses for the plan year will be forfeited.  There is a 75-day grace period to incur expenses after the end of the calendar year (currently, March 15th).  The employee will have ninety (90) days after December 31st to submit claims with dates of service in the prior year (currently March 31st).
• Once a plan year begins, Medical Reimbursement Account contribution amounts may not be changed until the following open enrollment period.
• Once a plan year begins, Dependent Care Spending Account contribution amounts can be changed during a plan year only if the employee has a qualified change in family or employment status. Any change made must be consistent with the qualifying event.
• Money cannot be transferred between FSA accounts.

5.1. Estimating Expenses

When enrolling during an open enrollment period, employees should estimate their expenses for the following plan year. Employees enrolling at any other time should estimate their expenses for the balance of the current plan year. Since unused balances are forfeited, employees generally should "under" estimate their expenses.

5.2. Changing Your Plan Election

Unless there is a qualified change in family status or employment status, the IRS requires that deductions continue until the last pay period in the plan year. Employees retiring or separating from the University may elect to have a lump sum amount deducted from the final pay check (contact the Employee Benefits Office for details).

5.2.1. An employee's participation in this plan automatically stops:

• when the employee retires or separates from the University;
• when the employee is no longer an eligible employee; or
• as of the end of the plan year (unless the employee re-enrolls during open enrollment).

6. Accessing Accounts for Expenses

There are two ways employees can access their flexible spending accounts for covered expenses.  The employee should use the method that best suits their needs and may use any combination of the two methods.    The money in the Dependent Care Spending Account cannot be claimed until after the payroll deduction.

6.1. Direct Payment

Covered expenses can be paid for directly using a specific debit card issued by the plan administrator.  If the employee's health care provider does not accept the card, the employee may request reimbursement under the procedures described below in Section 6.2. Employees must maintain all required documentation for the covered expenses and may be required to send them to the plan administrator to justify the expenditure.

6.2. Reimbursement

If the covered expense is not paid using the debit card described in Section 6.1. above, the employee may request reimbursement by completing an FSA Medical and Dependent Claims Form and attaching the bill, receipt, or explanation of benefits, and sending or faxing the claim form to the FSA plan administrator. A reimbursement check is generally mailed to the employee within two (2) weeks or employees may request a direct deposit of funds into their checking account.

7. Related Links

FSA Medical Reimbursement Enrollment Form
FSA Dependent Care Enrollment Form
FSA Medical and Dependent Claims Form

Comments may be sent to UBPPM@UNM.edu
http://www.unm.edu/~ubppm