Tax Savings Benefits
Section 125 Flexible Spending Accounts
You can set aside money in a Section 125 Flexible Spending Account (FSA) before taxes are deducted to pay for certain health and dependent care expenses, lowering your taxable income and increasing your take-home pay. Only expenses for services incurred during the plan year are eligible for reimbursement from your accounts. You choose how you want to receive reimbursement for your eligible expenses. You may use your FSA debit card, have a check sent to your home or you can sign up for direct deposit to your bank account. To find out how much you can save with a Flexible Spending Account, you can use this Savings Calculator to help estimate the amount of money you can save. It is important that you save your receipts as Discovery Benefits may need a copy for verification. Per IRS guidelines, all receipts should be itemized to reflect what product or service was purchased; credit card receipts are not sufficient.
- Open Enrollment for the Flexible Spending Accounts is held in October for a January 1 effective date. The plan year runs from January 31 — December 31. You must re-enroll in the FSA every year as your current election does not automatically roll over from year to year.
- With a Health Care Spending Account, your annual election amount is available on the first day of the plan year.
- With a Dependent Care Assistance Plan, funds are only available as the money is deducted from your paycheck.
Health Care Spending Account
This plan is used to pay for expenses not covered under your health plans, such as deductibles, coinsurance, copays and expenses that exceed plan limits.
Dependent Care Assistance Plan
This plan is used to pay for eligible expenses you incur for child care, or for the care of a disabled dependent, while you work. Your total Dependent Assistance Plan election amount is deducted from your paycheck in equal amounts throughout the year.
Please note you can only seek reimbursement from your Dependent Care Assistance plans from the funds in your account at the time you submit your claim.
Download the Discovery Benefits app on the Apple App Store or Google Play to access your Flexible Spending Account(s) 24/7 from your mobile device. The secure Discovery Benefits app allows you to check account balances, upload photos of receipts, file claims, view account activity and contact customer service
Use It or Lose It Rule
FSAs offer sizable tax advantages. The trade-off is that these accounts are subject to strict IRS regulations, including the use-it-or-lose-it rule. According to this rule, you must forfeit any money left in your account(s) after your expenses for the year have been reimbursed. The IRS does not allow the return of unused account balances at the end of the plan year, and remaining balances cannot be carried forward to a future plan year. If you are unable to estimate your health care and dependent care expenses accurately, it is better to be conservative and underestimate rather than overestimate your expenses. If your debit card is used and it later determined that the claim was not a qualified expense, the amount paid by the debit card must be repaid to the plan. If it is not repaid, the amount in question becomes taxable income after year-end reconciliation has been made.