Dependent Care FSA 2021 Limit Expansion
The American Rescue Plan Act allows employers to adjust their benefits plans this year to accommodate a new contribution maximum of $10,500 in 2021. The University held a special enrollment period from May 3 through May 14 to allow employees to use the full contribution maximum. After May 14, the maximum monthly contribution to a dependent care account in 2021 will be $875, 1/12th of the expanded maximum. The expansion of the limit is for 2021 only. In 2022 the limit will return to $5,000.
Health Care Flexible Spending Account
Case Western Reserve University offers Health Care Flexible Spending Accounts (FSA) so you can save up to $2,850 in pre-tax dollars for 2022.
Plan your FSA contributions carefully—your maximum annual contribution can’t exceed $2,850. Your deposit amount cannot be changed, stopped or started during the year, except if a Qualifying Life Event occurs. If a balance remains in the account at the end of the year or if the account terminates, the balance will be forfeited.
- The Health Care Flexible Spending Account reimburses you for certain medical care services, equipment and supplies.
- Claims must total at least $50.
- Insurance premiums cannot be reimbursed.
- Over-the-counter drugs obtained without a prescription are not eligible for reimbursement.
- You can be reimbursed for expenses incurred by legal dependents, but spouse-equivalent status is not recognized.
- The account does not earn interest.
- You have until December 31, 2022, to file claims for 2021 and until December 31, 2021 to file claims for 2020
You will receive a Benny Prepaid Mastercard that can be used to pay for qualifying medical expenses. Some expenses will validate automatically. If this is not the case, you’ll receive a letter requesting itemized receipts per IRS regulations. Submit receipts as soon as possible to avoid card suspension.
In lieu of using the Benny Prepaid Mastercard for reimbursement, you can submit a Reimbursement Request form.
- Alcoholism (treatment for)
- Artificial limb
- Birth control pills
- Braille books and magazines
- Car with special hand controls or other equipment for use by a handicapped person
- Christian Science practitioners
- Co-insurance and Co-payments
- Contact lenses
- Dental treatment
- Drug addiction (treatment for)
- Guide dog
- Health club for medical reasons prescribed by a doctor
- Hearing care/aids
- Hospital services
- Laboratory fees
- Lactation supplies
- Learning disability (treatment for)
- Legal fees paid to authorize treatment for mental illness
- Lifetime care (advance payment for a physically or mentally handicapped dependent if you should die or become unable to provide care)
- Medicine nursing homes (for medical reasons only)
- Nursing services
- Over-the-counter drugs
- Psychiatric care
- School for a person with mental or physical disabilities
- Special telephone and television for a deaf person
- Vision care
- X-ray fees
Dependent Care Flexible Spending Account
The university offers an additional type of Flexible Spending Account through which you can save up to $5,000 for the reimbursement of expenses incurred for the care of your children or certain qualifying adults. If you and your spouse file separate tax returns or your spouse uses a separate dependent care spending account, the most you may deposit in your dependent care spending account is $2,500 per year.
Expenses for these qualifying family members are eligible for reimbursement:
- Children under age 13 who qualify as dependents on your federal income tax return
- Other qualifying family members who are physically or mentally incapable of caring for themselves and who qualify as dependents on your tax return
Claims for reimbursement must total at least $50 and are processed weekly by Meritain Health. You will receive an account statement each time you are reimbursed. You have until June 30 of the following year to have claims for reimbursement for the prior year processed.
Direct Deposit of FSA Reimbursements
For your convenience, Meritain Health offers direct deposit of FSA funds into your bank account. When you submit a claim for reimbursement for an eligible FSA medical or dependent care expense, the reimbursement can be directly deposited into your bank account instead of being sent to you in the mail. Following the deposit, you will receive an Explanation of Benefits (EOB) in the mail.
The EOB will give you full detail of the reimbursement. Complete the Meritain FSA Direct Deposit Authorization Form to apply for reimbursement. Include the Group Number 15355 and fax it to Meritain health using the fax number on the form. There is no setup fee or any other direct deposit fees from Meritain, and you will not have to repeat the process unless you change banks or your bank account information changes.
Life Event Changes
If your family or job status changes for reasons specified in Internal Revenue Service regulations, you can start or stop a Dependent Care Spending Account, and under certain circumstances you can change the amount of the deposit. An account can be stopped or started, or the deposit amount can be changed only if the change is consistent with the documented Qualifying Life Event.
Federal Tax Credit
If you have dependent care expenses, you may be eligible for a tax credit on your federal income tax return. However, you cannot apply the same expenses to both a spending account and the tax credit. In general, if your annual family income is $24,000 or more, you will likely have more savings through the spending account. Your particular situation (and your possible eligibility for an earned income tax credit) will determine which method is better for you.
By law, spending account balances do not earn interest. Money deposited in the health care spending account cannot be used for dependent care expenses, and vice versa.
Spending accounts are governed by Internal Revenue Service (IRS) rules. Please refer to IRS guidelines for specifics. In addition, the IRS says that any unspent balance at the end of the year must be forfeited. This “Use or Lose” rule is the trade-off for the tax advantages you enjoy by using the accounts.
In addition, if you terminate your participation in a spending account, only expenses incurred prior to the termination date can be considered for reimbursement. Since this account is to be used for predictable expenses, careful planning should help you avoid any forfeiture. Any money forfeited at the end of the year will be used to offset the costs of administering Benelect.
For expenses to be reimbursed, care cannot be given by anyone you claim as a dependent on your tax return. You can be reimbursed for expenses paid to a relative age 19 or older if you do not claim the person as a dependent. You must submit a receipt from your caregiver, showing the caregiver’s taxpayer ID.
Any amount deposited in your dependent care spending account will be reported on your W-2 form at the end of the year.
The grace period is a two-month period of time at the end of the plan year that allows you extra time to incur expenses and use your remaining Health Care FSA balance. You will need to submit a claim form to receive reimbursement from your prior year FSA during the grace period.
All claims submitted for services provided during the grace period will automatically be processed first against the previous year’s remaining balance. If your claims exceed the available funds from the previous plan year, any excess will be automatically applied to your current FSA election.
If you use your debit card to pay for expenses during the FSA grace period, the purchase will be applied toward your new plan year balance. FSA debit card purchases during the grace period cannot be charged to the balance from the previous plan year.