Flexible Spending Means Flexible Health Care Choices
With an FSA, participants set aside pre-determined, pre-tax dollars, then use them to pay for eligible medical, dental and pharmacy expenses. Health Care Flexible Spending Accounts are a cost-effective way for participants to manage eligible out-of-pocket expenses not covered by medical plans. The participant pays no taxes on the contributions or the withdrawals.
CIGNA HealthCare offers two types of Flexible Spending Accounts:
Health Care Reimbursement Accounts
For health care expenses not covered by health benefits plan, such as copayments, coinsurance, deductibles or certain vision, hearing or orthodontic care costs. Participants do not need to be in a CIGNA HealthCare health benefits plan to be able to participate in a Health Care Reimbursement Account.
Dependent Day Care Reimbursement Accounts
For non-medical day care expenses for children ages 12 and under, or disabled dependents who satisfy the definition of a "Qualifying Relative" under federal tax law. Dependent day care expenses are reimbursable as long as the provider is not a spouse, another dependent, or your child if age 19 or younger.
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Employer Advantages
All you need to do is make the payroll deductions and report the funds. CIGNA takes care of the rest including accounting, eligibility verification, claim verification, customer service and reimbursement.
An FSA allows an employer to provide a valued benefit to employees - especially as employers are increasing members' cost sharing through higher copays, deductions, etc. It also saves employers money by lowering their Social Security tax liability. Employers must pay 7.65% in Social Security taxes on employees' pay, but employees' Flexible Spending Account contributions are excluded from this tax. Many times the employer's tax savings is greater than the cost to offer the Flexible Spending Account.
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CIGNA offers extra administrative support including:
- Automatic Claims Submission
- Dedicated Account Management Team
- Member Communications: helpful online or print account
- Quarterly Statements: mailed directly to their home
- Member Services: toll-free access for member concerns
- Employer Reports: online monthly reports with FSA summary
- Reimbursements issued weekly, bi-weekly, twice-monthly or monthly.
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The Health Care Reimbursement Accounts and the Dependent Day Care Reimbursement Accounts are two valuable FSA options for your employees. Medical and dental care expenses, copayments, vision care (including eye glasses and contacts), hearing care (including hearing aids) and orthodontic care are just a few allowable expenses. Please see FAQ for a detailed listing of eligible expenses.
As of May 18, 2005, the IRS announced that they will allow employers to modify their Flexible Spending Arrangements (FSAs) to extend the deadline for reimbursement of health and dependent care expenses up to 21/2 months after the end of the plan year. Previously, employees were required to "use-or-lose" FSA funds by the end of the year.
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FAQ
Is FSA available for accounts with less than 200 lives?
Yes, if the account has medical coverage with CIGNA. If FSA is the only product the client has with CIGNA, the requirement is the client must have 2,000 employees or more.
When can employees submit their claim for reimbursement?
According to the IRS, you're entitled to reimbursement of eligible expenses incurred during your period of coverage. The IRS defines "incurred" as when the service was provided, not when you were billed, charged or paid for the service. For example, if your child's day care provider bills you at the start of each month, you receive reimbursement from your Dependent Day Care Reimbursement Account after you've received all day care services for that month, not when you paid that month's bill. Submit your requests in any amount and throughout the plan year. Our reimbursement system accumulates your reimbursable expenses until they reach the minimum check amount designated by your employer. We automatically send you a reimbursement check during the next payment period.Your employer also provides you with the opportunity to submit end-of-year claims during a specified period following the close of the plan year. For example, if your plan year is a calendar year, January 1 to December 31, and you have a doctor's office visit on December 27, you'll be able to submit your copayment receipt in January and receive reimbursement. Also, if you terminate your employment at any time during the plan year, you may submit reimbursement requests for a limited time following termination.
How should an employee comply with federal tax laws under this program?
Reimbursement Accounts are allowed by Section 125 of the Internal Revenue Code and certain restrictions apply.
- Determine which account(s) to join and how much to contribute prior to each plan year.
- You cannot change your contribution amount once you've elected it. The amount of pretax dollars you choose remains in effect for the entire year. You can adjust your contribution only if you have a change in family status, such as the addition or loss of a dependent, or a change in marital status. But you can elect a different amount each year.
- Health Care and Dependent Day Care accounts are separate. Funds may not be transferred between the two, nor can health care expenses be reimbursed from a Dependent Day Care account, or dependent day care expenses from a Health Care account.
- If you don't use it, you lose it: the IRS requires that you forfeit any unused account balances remaining at the end of the year. You cannot carry funds over to the next year.
- Expenses reimbursed from Health and/or Dependent Day Care accounts cannot be claimed as deductions or credits on income tax returns.
- You cannot withdraw funds without an eligible claim.
Many of our employees will have on-going expenses. How do they submit these claims?
Some of your eligible expenses may be ongoing and you may be filing claims for the same amount on a regular basis. Monthly bills for a child's day care costs are an example. To receive reimbursement, the IRS requires that you submit a completed Reimbursement Request Form and receipts each time you have a claim, even though the bill may be repetitive.
What if an employee exceeds their goal amount for the year?
Insufficient funds - If your reimbursement request exceeds your available account balance:
Health Care - you receive reimbursement up to your annual goal amount, even if you have not yet contributed the full amount to your account.
Dependent Day Care - we send you a partial payment, whatever is in your account, and automatically reimburse you for the rest of your claim as we receive additional contributions to your account. We do so until the expense is fully paid or contributions for the plan year stop. You won't need to resubmit that claim.
Can an employee receive IRS tax credits?
As an alternative to a Dependent Day Care Reimbursement Account, the IRS provides tax credits through the Child and Dependent Care Credit (Topic 602) if you rely on dependent day care in order to work.You can either participate in a Dependent Day Care Reimbursement Account or receive IRS tax credits, but not both. So, you need to determine which tax-saving option is most beneficial for your family. Compare the advantages by calculating approximately how much you'll reduce your taxes with each method. Your decision depends on your overall childcare expenses, your household income and filing status. To find out if you qualify for the Child and Dependent Care Credit (Topic 602) and to learn how to calculate your tax savings, visit the IRS Web page on Topic 602, or call the Internal Revenue Service toll-free, 1.800.829.1040, for assistance.
What types of expenses can employees use their FSA funds for?
Health Care Expenses
Dependent Daycare Expenses
Can our employees obtain an online form to request reimbursement from health care and dependent day care flexible spending accounts?
Yes. We provide both Health Care and Dependent Day Care reimbursement forms
What retailers automatically recognize FSA-eligible items at the register?
Inventory Information Approval System (IIAS) Participating Merchants
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