FSA IRS Rules & Regulations
In exchange for the tax advantages available when you use the Health Care Spending Account (HCSA) and/or Dependent Care Spending Account (DCSA), the IRS has some special rules.
- The money in your Health Care Spending Account must remain separate from your Dependent Care Spending Account. This means that you may not use dollars from your Health Care Spending Account to pay for dependent care expenses, or dollars in your Dependent Care Spending Account to pay for health care expenses.
- The money in flexible spending accounts cannot be held in interest-bearing accounts by the employer or TPA.
- The annual maximum reimbursement for DCSA is $5000 per family.
- Expenses you have reimbursed from a Flexible Spending Account may not also be deducted on your federal income tax return.
- According to IRS regulations, any amount not used for covered expenses is forfeited. If an HCSA participant has not exhausted all of their money in their HCSA account at the end of the calendar year, the HCSA participant has until March 15th of the next plan year to incur expenses. In addition, if an HCSA participant incurs expenses (between Jan. 1 and Mar. 15) for reimbursement from the prior year, the HCSA participant must pay for the expenses and manually submit a reimbursement form. Debit card expenses are only applied toward the "current" plan year.
- You will have until April 30th to submit all expenses towards your previous plan year.
- You may begin, stop or change the amount of your spending account contributions only at annual open enrollment unless you have an appropriate life event change, such as:
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- Marriage or Divorce
- Birth, adoption or legal guardianship of your child
- Death of a Spouse or Dependent
- Change in your employment status
- Change in your spouse's coverage or job
- Unpaid leave of absence
- Change in Day Care Provider - Resulting in significant changes in cost
- Dependent care expenses must be incurred because you are working. Expenses are subject to verification by written receipt. Your dependent care provider cannot be your tax dependent.
- If expenses are for child care, the child must be younger than age 13 unless disabled.
