Health Care FSA FAQ

A flexible spending account (FSA) allows you to be reimbursed tax-free for certain health care or dependent day care expenses you pay out of pocket. Because of the special tax advantages FSAs provide, the IRS restricts the amount you can contribute to the account(s) and when distributions can be made from the account(s) and requires FSA plans to follow certain IRS Treasury Regulations.

You are responsible for verifying that expenses you submit for reimbursement meet IRS tax and treasury guidelines. Note: You will be required to provide proper substantiation documentation to Fidelity, Stanford’s FSA administrator.

These accounts provide tax advantages:

• You make contributions from your paycheck before taxes are deducted, which lowers your taxable income. You save money on taxes because the money you set aside is not subject to federal income tax or Social Security tax.
• When you, your spouse or dependent children pay for an eligible expense, you are reimbursed from your FSA account(s) tax free.

If you use the federal income tax deduction, you must spend a certain percentage of your gross income in order to claim the deduction. Remember, any expenses reimbursed from your FSA cannot be deducted for federal income tax.

Note: You can submit claims for reimbursement up until April 30 each year for eligible services received through December 31 of the previous plan year.

Important: You must re-enroll in these accounts every year during Open Enrollment.

IRS rules also require you to make an annual election that does not automatically carryover from year to year. If you want to maintain a dependent day care and/or health care FSA, you must re-enroll each year during annual Open Enrollment. Because you make a new election each year, you have the opportunity to change the amount you elect.

Stanford's FSAs are administered by Fidelity. For questions about how FSAs work, or specific questions about your balance or claims, call Fidelity at 888-793-8733, Monday to Friday, 8 a.m. to 5 p.m., or visit netbenefits.com/stanford.

Stanford Benefits offers two types of FSAs: health care and dependent day care.

Health care FSAs: Although your Stanford health care plans cover a lot of your health care costs every year, you may have some out-of-pocket health care expenses. A health care FSA reimburses eligible expenses not covered by your health care plans (medical, prescription drugs, dental, orthodontia and vision). You can use this account to pay health care expenses for yourself and your dependents, even if your dependents are not covered by a Stanford health plan.

Dependent day care FSAs: Pay for child care for a qualifying child who is your dependent and is under age 13, or adult day care expenses necessary to allow you and your spouse to work, seek employment or attend school full time.

The IRS decides what is and is not an eligible FSA expense. To view a list of reimbursable health care expenses, visit Fidelity's website. For additional information, refer to the IRS website.

Dependent day care expenses may not be reimbursed until the expenses are incurred. According to IRS regulations, dependent day care expenses are incurred when the dependent care services are provided.

If a dependent day care provider requires payment before dependent care services are provided, those expenses cannot be reimbursed at the time of payment. The FSA participant must wait until after the services have been provided to request reimbursement. (Prop. Treas. Reg. 1.125-1)

To participate, you must log in to My Benefits or call the University HR Service Team (650-736-2985) within 31 days of your date of hire, or during annual Open Enrollment.

If you have a life event change (for example, birth or adoption of a child), then you may be able to enroll without waiting for annual Open Enrollment, so long as you enroll within 31 days of the life event. Review Change Your Benefits for more information.

Your FSA becomes effective on your hire date, if you are a new hire, or on the date of a qualifying life event. Contributions to your account begin as soon as administratively possible after you enroll. If you enroll during the annual Open Enrollment, your election will take effect the following January 1 and contributions will start with your first paycheck in January.

Generally, no. Your annual election amount is locked for the entire plan year. The exception is if you have a life event change (for example, you have a baby); you may be able then to enroll without waiting for annual Open Enrollment.

You must enroll within 31 days of the change, but the effective date is the date of the life event. Your new contributions start as soon as administratively possible.

Note: A change to your contribution amount cannot be retroactive. If you increase your amount during a life event, the increase cannot cover claims incurred before the effective date of your increase. Call the University HR Service Team for more information (650-736-2985).

Important: If you decrease your annual election, the amount of the decrease cannot be less than what you have contributed to the plan year to date. When you cease to contribute to the health care FSA due to a life event or termination, you are no longer considered a participant in the plan and can only claim reimbursement for expenses incurred through the end of the month in which you last contributed.

Your reimbursement will automatically be placed in your Fidelity account, which is associated with your debit card. If you would like your funds to go into a bank account, visit the Fidelity website and set up direct deposit by entering your banking information.

For questions about your claims payment, call Fidelity at 888-793-8733, from Monday to Friday, 8 a.m. to 5 p.m. Claims for reimbursement are processed daily. Reimbursement monies are payable to you, not to the provider.

FSA accounts are on a “use it or lose it” basis, although the health care FSA now has a carryover provision (see below). You should be as accurate as you can in estimating your annual eligible expenses so that you do not contribute more to your FSA account(s) than you expect to claim.

The plan year is January 1 to December 31, and you have until December 31 to incur an eligible expense for the plan year. You then have until April 30 of the following year to submit claims for services you received during the plan year. Important: You forfeit any money left in your account at the end of the April 30 filing period, with the exception of the health care FSA carryover amount of $640 (see below).

Health Care FSA Carryover Provision
The IRS now allows health care FSA participants to carryover up to $640 in unused funds from one year to the next. These funds may carryover as long as you remain a benefits-eligible active employee and eligible to participate in a health care FSA. When you cease to contribute to the FSA due to a life event or termination, you are no longer considered a participant in the plan and can only claim reimbursement for expenses incurred through the end of the month in which you last contributed, and any carryover balance may be forfeited.

See also the Health Care FSA Carryover FAQ on Cardinal at Work for information about the carryover.

Yes. The limit may change each year for the health care FSA; current limits are listed on Cardinal at Work.

If you enroll in a dependent day care FSA the annual household maximum is $5,000 per family ($2,500 if you are married and filing separate federal income tax returns).

Note: Each year, FSA plans must pass a non-discrimination test to show they do not favor highly compensated employees regarding eligibility, contributions and benefits. If Stanford’s FSA plans do not pass the test, Stanford may reduce your election(s) during the year if you are a highly compensated employee as defined by the Internal Revenue Code. Stanford Benefits will notify you if it becomes necessary to reduce your contributions.

There is no impact to your health care FSA election. Both you and your spouse may each contribute up to the maximum amounts available, but you cannot submit the same claim to both accounts. You can only be reimbursed once for each claim.

The dependent day care FSA is different. The IRS does not allow you and your spouse to elect a combined amount greater than $5,000 for a calendar year.

An FSA debit card is a convenience feature of the plan that allows you to have access to your account funds for eligible expenses right at the point of service—at the pharmacy counter, doctor’s office or at your child care provider if you enroll in the dependent day care FSA.

When you enroll in either FSA, Fidelity will mail you a debit Visa Card in a plain white envelope.

• If you enroll in a health care FSA, the full current plan year annual election will be loaded onto the debit Visa Card.
• If you enroll in a dependent day care FSA, the contributions you make will be loaded onto the debit visa Card each pay period.

You can use your card with any provider who accepts it. To order additional cards for your dependents, visit the Fidelity website.

The IRS requires the FSA administrator to request proof of payment on some claims to ensure they are part of the list of IRS approved expenses. Be sure to save all receipts when using your debit card. You can send in an itemized receipt and your medical, dental or vision plan’s Explanation of Benefits. The IRS does not allow cancelled checks, credit card statements or balance-due statements as supporting documentation with your claim form.

You can prove your dependent day care expenses meet IRS guidelines by submitting to Fidelity a statement from the dependent day care provider substantiating the dates and amounts for the service. After Fidelity receives the substantiation statement (but not before the dates the services are provided) Fidelity will process your reimbursement request.

You are required to report your dependent care provider’s taxpayer identification number (or Social Security number), name and address on the dependent day care FSA claim form (paper or online) in order for your eligible expenses to be reimbursed.

Stanford’s Child Care Subsidy Grant (CCSG) is simply a Stanford contribution to your dependent day care FSA. If you receive a CCSG, the amount will be included in your total dependent day care FSA annual amount. The combined total cannot exceed the $5,000 annual limit.

During Open Enrollment, you can log into My Benefits to confirm your award amount. Your CCSG award will automatically enroll you in a dependent day care FSA for the following calendar year. Once the CCSG money is in your FSA, you use it as if you had contributed the money and file claims for reimbursement of your dependent day care expenses.

Remember, you forfeit any unclaimed funds at the end of the plan year unless you submit claims by the April 30 deadline. Please refer to the WorkLife page on Cardinal at Work for more information about the CCSG program.

Under Internal Revenue Code Section 213(d) (1), only expenses needed to treat, alleviate or prevent certain medical conditions can be reimbursed from your health care FSA.

In certain circumstances, services/items could be considered “dual purpose” items. These are services/items that are generally known to be used for both a medical condition and for personal, general well-being or cosmetic reasons.

These dual-purpose services/items qualify for reimbursement under a health care FSA only if your doctor provides a Letter of Medical Necessity that certifies the expense is necessary to treat a medical condition. The following are examples of (but not limited to) dual-purpose expenses that require a Letter of Medical Necessity:

• Counseling: Counseling, psychoanalysis or similar therapy must be for the treatment of a specific medical condition and not for the general improvement of mental health, relief of stress or personal improvement. Note: Marriage counseling does not qualify for reimbursement.
• Massage therapy: A massage must be for the treatment of a specific injury or trauma and not for general well-being.
• Cosmetic surgery or other items: Items or procedures directed at improving a patient's appearance that do not meaningfully promote the proper function of the body or prevent or treat illness or disease are not allowable. Examples include face lifts, hair transplants, hair removal (electrolysis), teeth whitening and liposuction. There is an exception, however, for procedures necessary to ameliorate a deformity arising from a congenital abnormality, personal injury from accident or trauma or a disfiguring disease.
• Vitamin/herbal supplements: These are generally not eligible for reimbursement, unless your doctor or other licensed health care provider certifies the supplement is required to treat a medical condition. Note: If the item has a medicinal component to it, a prescription is required, i.e., an over-the-counter (OTC) drug. A prescription is a written or electronic order meeting the legal requirements for a prescription in the state where the expense is incurred. To show that an OTC drug was prescribed, a prescription or other documentation showing that a prescription was issued (e.g., a pharmacist's receipt with the name of the purchaser or patient, the date and amount of the purchase, and an Rx number) is required.

Important: Submitting the Letter of Medical Necessity does not guarantee that the expense will be reimbursed.

Your options depend on whether or not your leave is paid or unpaid.

Paid leave: If you are on a paid leave of absence, you cannot cancel your health care FSA. It stays in place and works just as if you were still at work. Payroll deductions continue, and you can submit any claims that occur while you are on your leave. When you cease to contribute to the health care FSA due to a life event or termination, you are no longer considered a participant in the plan and can only claim reimbursement for expenses incurred through the end of the month in which you last contributed.

If you have a dependent day care FSA, it will be frozen while you are on your leave. You cannot contribute to your account or submit any claims that you incur during your leave. When you return from leave, your account will be reinstated and your contributions will be adjusted so you meet your original election amount by the end of the year.

Unpaid leave: If you go on an unpaid leave, then you have the option of continuing your health care FSA or canceling it.

If you decide to continue your health care FSA you will be billed on an after-tax basis for your contributions. Your account will work the same as if you are not on leave, and you can submit any claims that occur during your leave.

If you decide to cancel your account, you must do so within 31 days from the start of your leave. You cannot submit any claims that you incur while you are on leave. When you return from your leave you will be offered the opportunity to elect coverage again. When you cease to contribute to the health care FSA due to a life event or termination, you are no longer considered a participant in the plan and can only claim reimbursement for expenses incurred through the end of the month in which you last contributed.

Your dependent day care FSA will be frozen. (See explanation under Paid Leave)

Health care FSA: If you have funds remaining in your health care FSA when employment ends, you can decide whether or not to continue participation in the plan.

To discontinue coverage: Any eligible expenses you incur up to the last day of the month in which you halt participation in an FSA or in which your employment ends can be submitted for reimbursement. You have until April 30 of the following year to submit claims.

For example: Your last day of employment or your last contribution is July 15. Your health care FSA continues to July 31. Any eligible expenses you incur up to July 31 may be submitted for reimbursement until April 30 of the following year.

To continue coverage: If you terminate from Stanford, you may be able to enroll in COBRA and continue to pay your remaining health care FSA contributions (plus a 2 percent administration fee) on an after-tax basis. VITA Companies, Stanford’s COBRA administrator, will send you the paperwork. NOTE: If you do not pay VITA Companies, your benefits stop at the end of the last month for which VITA Companies received full payment.

For example: Your last day of employment is July 15. Your health care FSA continues to December 31 as long as you elect and pay VITA Companies the required COBRA premium through December 31. Any eligible expenses you incur up to December 31 may be submitted for reimbursement until April 30 of the following year.

Dependent day care FSA: Your contributions to the dependent day care FSA stop the date your employment ends. You may not continue contributions beyond that date. You can file a claim for reimbursement of eligible expenses you incur up to the end of the year in which you terminate. You will only be reimbursed up to the amount remaining in your account on the date your employment ends.

For example: Your last day of employment is July 15. Any eligible expenses you incur up to December 31 may be submitted for reimbursement until April 30 of the following year, and you will be reimbursed only up to the amount remaining in your account following your final contribution.

If you leave Stanford or halt participation in your FSA, the FSA debit card will be de-activated at the end of the month in which your participation ends. Your debit card will be de-activated even if you choose to continue coverage through COBRA after your employment ends. You will need to pay for services and upload your receipts online or submit claim forms with receipts to receive reimbursement for any eligible expenses you incur.