About the Flex Spending Account
What is the Flex Spending Account?
The Flex Spending Account (FSA) offers three negotiated benefits to state employees—the Health Care Spending Account (HCSA), the Dependent Care Advantage Account (DCAA), and the Adoption Advantage Account. They are types of flexible spending accounts, administered in compliance with sections 125 and 129 of the Internal Revenue Code, that give you a way to pay for your health care, dependent care, or adoption expenses with pre-tax dollars. Enrollment in the FSA is voluntary—you decide how much to have taken out of your paycheck and put into your accounts.
Fees
There are no fees for employees who participate in the FSA program. The FSA is funded by the Office of Employee Relations in cooperation with the state public employee unions. The Legislature and Unified Court System also contribute on behalf of their employees.
FSA Administrator
The State of New York retains the services of an FSA administrator to manage the Flex Spending Account. Total Administrative Services Corporation (TASC) is the FSA administrator.
The FSA administrator reviews and reimburses claims, and provides customer service and accounting services. FSA participants submit all claims for reimbursement directly to the FSA administrator.
Enrollment is done through Bentek on behalf of New York State and TASC.
Why Should I Enroll?
You should enroll to reduce your taxable income for dependent or healthcare expenses you already pay for out-of-pocket. By enrolling in the FSA, you will pay for your dependent care or health care expenses with whole dollars-before federal, state, and social security taxes are taken from your salary. You will also save on your adoption expenses because you will pay lower federal and state (where applicable) taxes due to your pre-tax contributions.
How Does the Flex Spending Account Work?
The FSA is easy to use. You may choose to enroll in any or all three benefit choices. This is how it works:
During the open enrollment period, estimate your out-of-pocket health care, dependent care, or adoption expenses for the calendar year. Based on your estimate, decide how much of your salary you want to set aside in each of the accounts. This is called your annual election. Submit your enrollment application online or by calling the toll-free number before the open enrollment deadline.
Each pay period, a regular portion of your election will be deducted tax-free from your biweekly paycheck. These deductions are taken from your gross pay before your federal, state, social security, and city (if applicable) income taxes are withheld. The deductions are then contributed to your FSA for your use on eligible expenses
Once you are enrolled, you can access your funds to pay for qualified expenses.
If you enroll in more than one FSA benefit, funds can't be transferred between accounts.
Carryover and Grace Period
HCSA Carryover
Unused contributions will carryover to the next plan year for you to use. During the plan year runout period (January 1-March 31), the previous year funds may still be used for previous year expenses. Any remaining funds up to the Internal Revenue Service (IRS) limit from the previous year will then carryover into the current plan year's account balance after the runout period end date. During the runout, the new plan year election will be depleted first, then carryover funds will be accessible for reimbursement. For participants who did not re-enroll, carryover funds will be available after the runout period ends. The IRS carryover limit from 2023 into 2024 is $610 and from 2024 into 2025 is $640.
DCAA and Adoption Grace Period
The grace period allows an additional 2 1/2 months to incur dependent care or adoption-related expenses. You can use any funds remaining in your account after the plan year ends to pay for expenses incurred between January 1 to March 15 of the following year. Claims must be submitted by the March 31 deadline.
Access Your FSA
Effect on Other Benefits
Social Security Tax (Federal Insurance Contributions Act (FICA))
Contributions to the FSA may reduce your social security taxes. If so, based on current social security law, social security benefits at your retirement age may be slightly less as a result of your participation in the FSA program. The effect will be minimal and would likely be offset by the amounts saved in taxes today. If you are concerned about this, contact the Social Security Administration (SSA) at 800-772-1213 or visit SSA Homepage.
New York State Pension
Contributions to the FSA have no effect on your New York State pension contributions or benefits.
Deferred Compensation
Most employees’ contributions to the New York State Deferred Compensation Plan will be unaffected by participation in the FSA program. In some cases, however, participation in the FSA program may affect you. The percentage you contribute to the deferred compensation plan will be applied to a lower salary amount as a result of your FSA contributions. Since such contributions are made as a percentage of salary, your deferred compensation contribution may be lower, depending on the amount of your annual salary and the amount you currently contribute to your deferred compensation plan.
SUNY Deferred Annuity Plan
Contributions to the State University of New York’s tax-deferred annuity plan are not affected by participation in the FSA program.
Please contact your tax preparer, tax attorney or accountant if you have any questions regarding your specific tax situation.
Changing Your Coverage
Am I permitted to make election changes after the plan year begins?
If you have a qualifying life event, you may be able to make a change to your FSA election by submitting a change in status application. Please refer to the respective benefit sections for specific information on qualifying live events; HCSA, DCAA, Adoption.
Submit your qualified life event online at Bentek, the FSA enrollment system for TASC.
Can I enroll during the plan year?
If you have a change in status or qualifying life event that occurs after the open enrollment period ends, you may be able to enroll during the plan year. You may be eligible to enroll if you experience a change in status or qualifying life event. Please refer to the respective benefit sections for specific information on qualifying life events; HCSA, DCAA, Adoption.
Submit your change in status or qualified life event online at Bentek, the FSA enrollment system for TASC.
Appeals Process
If your change in status, claim, or other request is denied, in full or in part, you have the right to appeal the decision by sending a written request to the FSA administrator. Contact customer service for information on how to submit your appeal.
Your appeal must include:
- Completed Appeal Form
- Appeal letter
- A copy of the denied request
- Proof of expenses and other documentation if original was insufficient
- Any additional documents, information, or comments you think may be relevant to your appeal
Your appeal will be reviewed once it and the supporting documentation are received. You will be notified of the results of this review within 30 business days from receipt of your appeal. In unusual cases, such as when appeals require additional documentation, the review may take longer than 30 business days. If your appeal is approved, your account will be adjusted as soon as possible. Appeal decisions are based upon whether your circumstances and supporting documentation are consistent with the FSA rules and IRS regulations governing the plan.
Flex Spending Account FAQs
Will money in the FSA ever be subject to taxes, or is it free from taxes?
Money used for qualified expenses from the FSA is free from taxes.
How much money will I save by enrolling in the FSA program?
Your savings will be based upon your individual income and tax filings.
Does the State guarantee the tax benefits under the FSA?
No. The State cannot guarantee that a participant will receive the intended tax benefits. It is up to each participant to make sure that contributions are made for eligible expenses within the legal and plan limits.
What responsibilities do I have to ensure the intended tax benefits of the program are received?
You should make sure that contributions to the FSA will only be made for eligible expenses, for qualifying individuals, up to the legal or plan maximum, and for services provided in the same plan year the contributions are made.
Will I save more by taking a deduction on my income tax?
You need to determine whether taking a tax deduction is more beneficial than using the FSA. According to the IRS, only medical and dental expenses that exceed 7.5% of your adjusted gross income can be deducted from your income taxes. Most people do not have expenses high enough to qualify for this deduction. For work-related dependent care expenses, the tax credit amount is determined by applying a percentage to your total dependent care expenses. In addition, money set aside through your FSA is exempt from FICA taxes. This exemption is not available on your federal income tax return. When it comes to adoption-related expenses, it is recommended that you only use the FSA for expenses in excess of the tax credit amount. If you enroll in an adoption FSA, you will save on federal and state taxes (where applicable).
If I reside outside of New York State, how will my participation in the FSA be affected?
Most states follow the federal rules; however, some states may tax the FSA contributions. You must comply with the laws of the state where you reside.
Do contributions to my FSA reduce my income for purposes of the Federal Earned Income Tax Credit (EITC)?
Yes. Contributions to your FSA will reduce your earned income for purposes of the Federal EITC. This means that participation in the FSA may affect your EITC.
How do I determine if participating in the FSA would affect my social security benefits?
Participation in the FSA may have a minimal effect on your social security benefits upon retirement. The Social Security Administration (SSA) uses the highest 35 years of salary earned before retirement to calculate your social security benefit. However, if you are concerned, you should call the SSA for further advice at 800-772-1213 or visit SSA Homepage.
What happens if I submit a claim for an amount greater than my FSA balance?
When you submit an eligible claim to the HCSA, you can access your funds at the start of the year. You will be reimbursed up to your full election amount regardless of how much you have contributed to your account. Contributions will continue through payroll deductions throughout the year and claims will continue to be paid until your elected annual contribution amount is met.
Dependent care and adoption claims are paid differently. If you submit a claim and your balance is less than the amount of the claim, you will only be reimbursed for the amount of money available in your account. The remainder will be reimbursed once the money is deposited into your account. This enables you to submit a claim only once and receive reimbursement on an ongoing basis until it is paid in full.
What if I change my mind?
You may not change your mind once the plan year begins, but you can decide not to join next year. There are certain situations, called “changes in status,” or qualifying life event and if they occur in your family during the plan year, you can make a change—you can start, stop, restart, or change your deduction amounts as long as the requested change is consistent with your qualifying event. The change in status application process is paperless. You may file a change in status application online or by calling the FSA administrator at 800-358-7202.
If I underestimate or overestimate my elections, can I transfer money between my FSA accounts?
No, you can use monies only for the purpose for which the election was initially made. IRS Regulations do not allow monies to be transferred between accounts.
How long is my contribution in effect?
Your contribution is in effect until the end of the plan year. Each year you will have the opportunity to re-enroll and select a new annual contribution amount.