Flexible Spending FAQs

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How do Flexible Spending Accounts work?

Salary reductions designated for child care or medical/dental expenses are accumulated in a "reimbursement account" on behalf of the participant pending submission of claims for reimbursable expenses. (An individual cannot "lump" his or her reduction to correspond to a particular part of the year. Instead, the annual reduction is divided into equal payroll reductions throughout the year.) Expenses are reimbursed until the cumulative total equals the annual amount designated.

What is the grace period extension?

The University has adopted the IRS "grace period extension" by permitting employers to modify Flexible Spending Accounts (FSAs), extending the deadline for reimbursement of health and dependent care expenses. This means employees who have unused balances in their accounts at the end of the year have until March 15 of the following year to incur eligible expenses for medical, dental or child care services.

Those expenses must be submitted no later than April 30 to avoid forfeiting the unused balances. The grace period extension applies only to those who are employed at Yale as of December 31 of the current year.

When can I enroll or make changes to my Flexible Spending Account elections?

Eligible employees may enroll and/or change their Flexible Spending Account election(s) during the Flex Annual Enrollment Period, which runs from November 3, through December 31, 2008. Changes become effective for January 1, 2009. Since Flexible Spending Account election(s) do not carry forward from year to year, employees who wish to participate must complete and submit a new election form each calendar year.

New employees or those who have undergone a change in family status may also enroll and/or appropriately revise their Flexible Spending Account reduction amount(s) within 30 days of their date of hire or qualifying event. Additional requirements may apply.

How much can I expect to save?

Depending on total family income, you are likely to save more than 20% and perhaps up to 40% of your cost. The percentage you save depends on your federal and state tax brackets.

How will I be reimbursed for 2009 claims?

Participants have the option of submitting a paper form or selecting the automatic transfer feature for submitting claims at the same time you enroll for a flexible spending account.
By selecting "yes" to the automatic transfer feature through employee self-service, you authorize Yale to allow both the medical and dental carriers to submit your copay, deductible, coinsurance and prescription information directly to ADP for reimbursement from your medical/dental reimbursement flexible spending account. 

If you decide to submit paper forms, you will need appropriate documentation, which consists of verifiable receipts, itemized statements or other evidence of covered expenses (identifying the name of the person treated, dates and description of services performed and amount of expense). However, cancelled checks and credit card receipts alone are not accepted as appropriate documentation. Upon approval of the expenses, reimbursement is sent directly to the participant. Refer to the ADP website for more information.

Can I receive a refund of my unused balance if my expenses are less than the amount elected for salary reduction?

No. You should calculate your anticipated expenses very carefully. Use the ADP Health and Dependent Care calculators to help you estimate your expenses. You cannot receive a refund if your expenses are lower than your estimate.

Who is a "qualifying dependent" for health care (medical/dental) reimbursement?

For health care (medical/dental), under Section 152, a qualifying dependent includes any individual who, "for the taxable year of the taxpayer, has as his principal place of abode the home of the taxpayer and is a member of the taxpayer's household" AND, for whom, "half of whose support, for the calendar year in which the taxable year of the taxpayer begins, was received from the taxpayer."

Who is a "qualifying dependent" for child/ dependent care?

A qualifying dependent is:

a) a dependent of the participant who is under 13 and for whom the participant may claim a personal exemption, or
b) a dependent (including a person the participant could claim as dependent except that the person has gross income of $3,500.00 or more) who is physically or mentally unable to care for himself or herself, or
c) a spouse who is physically unable to care for himself or herself.

Which expenses are for household services or for the care of a qualifying dependent?

An IRS guidebook about the dependent care tax credit describes types of work-related expenses that qualify for the credit. The expenses described in the following excerpts from that guidebook qualify for reimbursement under the Program:

Expenses for the care of a qualifying person. The main reason for expenses for the care of a qualifying person must be for the person's well-being and protection. This does not include amounts you paid for food, clothing, or schooling. However, if these amounts cannot be separated from the cost of caring for a qualified person, you may take the total cost. For example, if a nursery school or day-care center provides lunch and educational services as a part of their preschool child care services, you may take the entire cost. You may not take the cost of schooling in kindergarten or higher. You must divide the total cost between the cost of caring for the child before and/or after school and the cost of the schooling.

You may take the cost of care provided outside your home if the care was for your dependent under age 13 or for any other qualifying person who regularly spends at least 8 hours each day in your household. Care that is provided outside your home by a dependent day care center can be counted provided the center complies with all the applicable state and local regulations.

A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment or grant for providing services for any of those persons, regardless of whether or not the center is run for profit.

The cost of getting a qualifying person to and from your home and the care location is not considered a work-related expense. This includes the costs of bus, subway, taxi, or private car. (more info Eligible Dependent Care Expenses)

May child/dependent day care expenses be claimed for payments to relatives?

Expenses may not be claimed if the payment is made to a participant's child under 19 or to a dependent for whom a personal exemption deduction is claimed. Expenses may be claimed, however, if the payment is to a relative who is not a dependent, even if he or she lives in the participant's home.

What is the maximum amount of reimbursement for child/dependent day care?

Reimbursable expenses during the calendar year for a participant are limited to the lesser of participant's or the spouse's earned income (if the participant is married) for that year. If the spouse is a full-time student (at least five months a year) or incapable of caring for him or herself, the spouse is treated as having at least $250 of earned income in a month if there is one qualifying individual for whom expenses are claimed, or $500 if there are more than one.

Are payroll premium payments for medical, dental and life insurance automatically tax sheltered?

A To achieve tax savings, Yale employees pay their premiums for medical, dental and the first $50,000 of life insurance with pre-tax dollars. Unless you instruct the University in writing not to do so, salary reductions will be automatically instituted to pay your share of these premiums.

What types of health care expenses qualify?

Any medical or dental expenses that would qualify for purposes of federal income tax deduction would also qualify for reimbursement under this program, such as prescription drugs, doctor visit copays, dental services, chiropractic procedures, eyeglasses and contact lenses, laser eye surgery, hospital and nursing home charges, as well as Yale COBRA insurance premiums. In addition, certain over-the-counter medications are eligible, including antacids (such as Zantac and Prilosec), allergy medicine (such as Claritin), cold medicine and pain relievers used to treat a specific medical condition will qualify.

In general, certain cosmetic medical or dental procedures and non-Yale health insurance premiums are prohibited from the program. Dietary supplements are also ineligible, unless medically necessary to treat a specific illness or injury (doctor's note required). Toiletries are excluded. (more info Eligible Health Care Expenses)