Commenter “CF” asked three questions about flexible spending accounts. Here's what I could find. (Standard disclaimers apply, as in this is information only and not personalized financial advice. Feel free to use this as a starting point for your own investigations, but follow this advice at your own risk.)
My company offers supplemental insurance which covers copays, prescription, dental, etc – basically anything medical not covered by our primary insurance. The max. reimbursed is based on your tenure with the company and your salary. My wife’s company offers a FSA, in which we have not participated, but I just want to be sure – I can’t use pre-tax dollars under the FSA to pay for an expense and then get reimbursed by my supplemental insurance, right? I’m sure I know the answer, but haven’t seen it anywhere.
You can't get reimbursed twice for the same expense. Normally you try to get your insurance to pay for stuff before you request reimbursement through your FSA, since the FSA is meant for out-of-pocket expenses. However, in my plan, it looks like I can choose not to get reimbursed through my insurance but instead get reimbursed through my FSA. I recommend that you call a benefits representative for your plan to be sure.
My company was just bought by a larger company who does not offer the supplemental insurance – nothing has been announced, but there’s a good chance it will be removed in 2008. Is that considered a “significant†event, in that we could THEN enroll in my wife’s FSA even though it wasn’t during open enrollment?
I don't think so, but I doubt it would hurt to ask. Typically the “qualifying life events” only pertain to changes in the number of people in your family that are eligible to receive benefits. This means you gain eligible members (birth, adoption, marriage), lose eligible members (death, divorce, separation), eligible members are no longer your dependents, or you or one of your family is no longer eligible to receive health insurance. Besides this, though, there might be an “other” category for all of those varied extenuating circumstances. You should research this, but I think the worst they could do is say no.
One other thing to consider is that there is currently no federally-stipulated maximum withholding limit for health care FSAs. There may be a limit on your company's plan, but none that is dictated by the government. If you're not maxing out your wife's FSA contribution, you can consider doing that or making up the difference with her withholding. Just be sure you do your due diligence, etc.
When using the FSA for child-care expenses, does that disqualify/affect you for the childcare credit on your taxes? If so, what’s the math to figure out which one is more beneficial?
The short answer is yes, your Dependent Care FSA does affect your ability to claim the Child Care Tax Credit on your federal return. The IRS allows a credit of up to $3,000 for one dependent ($6,000 for two or more dependents) for dependent care expenses, depending on your adjusted gross income. My FSA provider has a worksheet that would help me to determine whether using a DCFSA or taking the federal credit is better. Check to see if your provider has a similar worksheet. Also check out IRS Form 2441, Child and Dependent Care Expenses, or consult a professional tax adviser.
Hey, thanks for addressing my questions! Appreciate the info. I checked, and my wife's FSA does have a calculator to compare Child Credit vs. FSA – I'll run the numbers. I'll also check on the "qualifying life event" options as well. Thanks again and Happy Thanksgiving.