Flexible Reimbursement Accounts (FRA)
• Flexible Benefits Plan Sourcebook (Effective July 1, 2009)
• Information on Over the Counter (OTC) Reimbursement
for Medical Flexible Reimbursement Accounts.
What is it?
Flexible Reimbursement Accounts (FRA) are an IRS approved, employer sponsored benefit that allows you to pay for eligible medical and/or dependent care expenses on a pre-tax basis. You authorize per pay period deposits to your FRA from your salary before taxes. As you incur eligible expenses, you request tax-free withdrawals from your accounts to reimburse yourself. There are two kinds of FRAs:- Medical expense FRA
- Dependent care FRA
Why do I need it?
TO SAVE MONEY! An FRA saves you money by reducing your taxable income. Your contribution to your FRA is deducted from your salary on a pre-tax basis. Over a year's time, you will most likely spend some of your salary on medical or dependent care expenses. You can save money on taxes by contributing that amount directly into your Flexible Reimbursement Account.Unless your itemized medical expenses exceed 7.5% of your adjusted gross income, you cannot claim them on your IRS Form 1040. But you can save taxes by paying for your out-of-pocket medical expenses not covered by your health benefits plan through a tax-free Medical Expense FRA.
What is it at Mason?
Medical Reimbursement Accounts may be used to pay for expenses that are not covered under your medical, dental, vision and prescription plans. Items such as co-payments, deductibles, some over-the-counter medications that you would otherwise pay for out of your pocket with after-tax dollars can be paid for with your medical reimbursement account. This will not only save you money, but will give you access to your entire reimbursement account on the first day of the fiscal year. The maximum annual amount which may be put in a medical reimbursement account is $5,000.Dependent Care Reimbursement Accounts may be used to reimburse yourself for expenses incurred in the care of your child (age 12 years or under), disabled spouse, elderly parent, or other dependents who are physically and/or mentally incapable of self-care so that you (and your spouse) can work or actively seek work. The maximum annual amounts which may be put in a dependent care flexible reimbursement account are:
- $2,500 for an employee who is married and is filing a separate tax return.
- $5,000 for an employee who is married and is filing a joint return or who is single with dependents.
For both medical and dependent care reimbursement accounts:
- The minimum payroll deduction is $10 per pay period.
- A monthly administrative fee of $3.67 will be deducted from your salary on a pre-tax basis for one or both accounts (Medical and/or Dependent Care). Whether you have one account or both, the fee will be $3.67 per month.
- Enrollment is not automatic and is only for the current plan year. If you wish to participate next plan year, you must re-enroll during the annual open enrollment period.
- Employees may enroll within 31 days of their hire date or within 31 days of a life event change.
- "Use It or Lose It" Rule - Any money contributed to these accounts during the plan year must be used during the plan year -- any balances remaining are forfeited. Employees may file reimbursement claims until 90 days after the end of the plan year.
For Separating Faculty and Staff
You may be reimbursed for eligible FRA expenses incurred through the end of the month in which you separate. You have a three-month run-out period (through September) at the end of the plan year to apply for reimbursement.