Use the HRA/FSA Administration Agreement to walk you through these questions that will help you set up your FSA.
1. Which expenses do you want the FSA to cover?
You may choose to offer an FSA that covers health or dependent care, or both.
Health Care: A general-purpose health FSA can be used to pay for qualified out-of-pocket medical, prescription, dental, and vision expenses that are not covered under your health plan. Eligible expenses include those considered deductible by the IRS for Federal income tax purposes.
CDPHP also offers limited purpose FSAs, which allow you to decide which services are reimbursable: medical (covered and non-covered), dental, vision, prescription, or any combination of these options.
Dependent Care: A dependent care FSA allows for reimbursement for child or elder day care in order to allow the subscriber and spouse to work. Once the services have been completed, the enrollee must file a claim for reimbursement. Unlike the health FSA, employees must have funds saved up in their dependent FSA account before they can use them.
2. What pledge amount limits do you want to set?
Annually, employees elect a pre-determined amount to be voluntarily withheld from their pay by their employer (often called a salary reduction agreement). Currently, the most an employee can annually defer under a health FSA is $2,550. Limits are determined by the IRS.
3. How much will you contribute to your employees’ FSAs, if anything?
You can match employee contributions as a percentage, up to a set amount, or just as a set amount. Your match cannot exceed the amount of the employee contribution. You also do not have to contribute to the account.
4. Do you want to allow a 77-day grace period?
You may include a grace period that extends the current plan year by 77 days. Employees have a 90-day run-out period at the end of the plan year to submit claims for expenses that occurred that year. After that, they forfeit any unused funds to the employer. Implementing the grace period means the 90-day run-out begins after the 77-day grace period is over.
5. Do you want to allow employees to carry over $500 of their health FSA into the next plan year?
For health FSAs, you may allow employees to carry over up to $500 into the next plan year. This carryover option cannot be combined with the health FSA grace period. This option is not available for dependent care FSAs.
6. Do you want to offer a debit card?
A debit card is available for all FSA-eligible expenses for health FSAs. It is not available for dependent care FSAs. Please note: If you offer an HRA and a health FSA, your employees will receive one debit card for both.
7. What is your payroll schedule frequency and your first payroll deduction date?
This is the final piece of information we need to ensure your FSA gets set up correctly.