In exchange for the tax savings offered by the Flexible Spending Accounts, the Internal Revenue Services imposes some important rules:
- The amount you elect to deposit in each of the Flexible Spending Accounts stays in effect for the entire plan year. No changes can be made except under limited circumstances. Flexible Spending Account deposits can be increased, decreased or stopped, but only if you have an eligible change in family or work status. Changes in family and work status may include events like marriage, divorce, birth or adoption of a child, loss of a dependent or a change in your spouse's employment status.
- The amount you deposit in the Flexible Spending Account can be used only for expenses incurred during the eligibility period. An expense is "incurred" when the service is provided, not when you are billed or when you pay for it. The eligibility period for plan year 2010 is January 1, 2010, thru March 15, 2011. Claims may only be submitted until May 31, 2011, for all 2010 services.
- The IRS requires that you forfeit any money left in your accounts. The money cannot be returned to you or carried over the next plan year. Any forfeited amounts will be used to offset the administrative cost of the plan.
- Like most tax-qualified plans Flexible Spending Accounts are subject to certain nondiscrimination tests that may require you to reduce your deposit. If you are affected, you will be notified.
These rules show how important it is for you to plan carefully. Only deposit enough money in the accounts to cover expenses you are sure you will have incurred for the tax year. The worksheets on this page will help you calculate your likely expenses for the year. Keep in mind, even if you forfeit a small amount of money, the tax savings may more than make up for your loss.IMPORTANT NOTE: If you decide to enroll in the Flexible Spending Accounts each year, you must re-enroll in the program EACH year.