Flexible Spending Rules

Flexible Spending Account rules are established by the IRS.  You, your employer, and the adminstrator are jointly responsible for knowing and applying these rules. The most important rules pertaining to growing families are:

• Use it or lose it - growing families often have predictable expenses
• Changing elections  - you must have a qualifying event
• Qualifying life events - birth of a child is a qualifying event; a key factor in pre term delivery
  

Growing families have needs to fit FSA rules and regulations like a glove.  Often they have lots of predictable medical expenses they are sure will be spent.  And when surprised with unexpected hospital bills from a stay in Neonatal Intensive Care (NICU) they can change elections to help save money on these expenses.

When you contribute pretax dollars to a Flexible Spending Account, you lower your taxable income; therefore, you generate tax savings and increase your spendable income.   Any reduction in your taxable pay may also lead to a reduction in your Social Security benefits; however, for most employees, the reduction in Social Security benefits is insignificant compared to the value of tax savings today. 

If you contribute dollars to a Flexible Spending Account and do not use all of the monies you deposit, you will lose any remaining balance in the account at the end of the plan year.  A very important thing to remember...the rule exists because the IRS has established strict guidelines on plans with tax savings.  So estimate carefully the amount you want to contribute to the FSA, and only contribute dollars you're confident will be used before the end of the plan year.

A Qualifying Life Event falls into one of the categories below, and allows you to make changes to your annual elections: 

• Change in legal marital status
• Change in number of dependents for example birth of a child
• Change in employment status
• Dependent satisfies (or ceases to satisfy) eligibility requirements
• Change of residence
  

The latest set of cafeteria plan regulations develops a process for determining if a participant is allowed to make a change in election during the plan year.  The two step process is:

1. A change in status must have occured.
2. The participant's election change must be consistent with the status change event