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Flexible Spending Account

The Flexfund Flexible Spending Account is used to enter allotment data for eligible employees who wish to set aside an annual amount of salary to be contributed to a flexible spending account. The Flexible Spending Account Program allows employees to arrange for payment of qualifying expenses through biweekly payroll deductions. This arrangement results in the deferral of the following taxes on these payments: Federal Income Tax, Social Security, Medicare (formerly Hospital Insurance Tax (HITS)), and all State income taxes except New Jersey and Pennsylvania.

Flexfund Deductions

Eligible employees may elect to participate in Flexfund at the time of accession or during the open season enrollment period. A separate document must be processed for each Flexfund account. Flexfund deductions are for a term of 1 year beginning with the first pay period in the tax year and ending with the last pay period of the tax year. A new document must be processed at the beginning of each plan year (tax year) indicating the plan code and the total annual amount to be deducted.

Biweekly deductions are the total annual amount divided by the number of pay periods in the plan year. If an employee enrolls after the beginning of the plan year, biweekly deductions are the total amount divided by the number of pay periods remaining in the plan year. If the annual amount is not evenly divisible by the number of pay periods in the plan year, the balances is deducted in the last pay period of the plan year.

Flexfund deductions may be canceled at any time. The cancellation becomes effective the first day of the pay period in which the cancellation is processed, and no Flexfund deduction is made for that pay period. All Flexfund deductions are terminated automatically only upon expiration of the 1-year withholding period.

Insufficient Funds

If an employee is in nonpay status, deductions continue when the employee returns to duty. One missed payment is deducted in the last pay period of the plan year along with the final payment. If two or more payments are missed, the employee must contact the contractor to make arrangements for the payments missed.

Flexfund deductions are considered voluntary allotments for the purpose of establishing priority of deductions in accordance with OPM rules and the Treasury Fiscal Requirements Manual. If an employee has both health care and dependent care deductions and the pay is insufficient to take both deductions, the health care deductions are taken first.

Dependent Care and Health Care Expenses

The Flexible Spending Account (FSA) Program allows employees to pay for certain health and dependent care expenses with pre-taxed dollars. The FSA’s Program consists of two accounts: Dependent Care expenses and Heath Care expenses.

Dependent Care Flexible Spending Account (DCFSA) and Health Care Flexible Spending Account (HCFSA)

All employees who are eligible for Federal Employees Health Benefits (FEHB) participation are eligible to participate in the FSA Program. The FSA Program allows participants to have tax-free money for out-of-pocket health care and dependent care expenses (e.g., deductibles, co-payments, dental care, orthodontics, etc.) deducted from this pay. The money is put into an account and, upon receipt of proper documentation, is reimbursed to the participant after the services are rendered. There are two parts to the FSA Program, Dependent Care Flexible Spending Account (DCFSA) and Health Care Flexible Spending Account (HCFSA).

DCFSA is money used for the care of dependent children under age 13 while the employee is working. DCFSA also covers the care of an adult dependent who is physically or mentally incapable of caring for himself/herself. In case of adult care, the adult being cared for must be claimed as a dependent on the participant’s income tax return. A minimum of $250 and a maximum of $5000 per year ($2500 per year if the employee is married filing separate return) may be contributed to a DCFSA account.

HCFSA is money used to cover health care expenses not paid by the employee’s FEHB or other health insurance carrier. A minimum of $250 and a maximum of $2500 per year may be contributed to an HCFSA account.

Participants must first determine the total amount to be deducted. The amount is then divided by the number of pay periods for that year to determine the deduction(s) to be taken each pay period. The total amount to be deducted must be carefully considered because any unused money is forfeited at the end of each year. Employees have 90 days after the end of the pay year to claim reimbursements for the HCFSA transactions.