Flexible Spending Accounts

The flexible spending account (FSA) program provides a way for you to use tax-free money to pay for some of your expenses. Purdue offers both a health care FSA and a dependent care FSA. When you choose to participate, you elect to have salary deducted from your paycheck, before it is taxed, and directed to your flexible spending account(s). This untaxed money is then available to reimburse you for eligible health care or dependent day care services you receive during the calendar year.

If you choose to enroll in both the health care and dependent care accounts, the funds in the two accounts must be kept separate from each other. So, you may not use your health care account to reimburse for dependent day care expenses and vice versa. You may contribute up to $6,000 per calendar year to the health care FSA and up to $5,000 per calendar year to the dependent day care account. (IRS regulations place additional conditions on how much you can contribute to a dependent day care FSA. Please see the Special Considerations information under Dependent Care FSA Details.)

The annual amount you choose to contribute is taken in equal installments from your regularly-scheduled pays. If you are paid on an academic year (AY) schedule, your FSA deductions will be taken only from your September through April pays.  You will not have an FSA deduction taken from any summer earning you may have.

If you terminate your Purdue employment, you may continue your health care FSA contributions through COBRA on an after-tax basis. If you don’t continue through COBRA, expenses incurred after your employment termination date are not eligible. For the dependent day care account, you may not make further contributions, but you may continue to file claims after your termination date to exhaust the funds remaining in your account.

IRS limitations on flexible spending accounts

• Expenses reimbursed from an FSA cannot be claimed as a medical expense on your tax return or claimed for a dependent care tax credit.
• Only expenses actually incurred during the calendar year and through March 15 of the following year are eligible for reimbursement. Expenses incurred before or after the eligibility period are not eligible, regardless of when you paid for the expenses. FSAs may not reimburse for future or projected expenses.
• If you do not use all the pre-tax dollars in your flexible spending account, you forfeit the amount left over. That’s an Internal Revenue Service requirement. However, if you carefully estimate expenses, the chance of forfeiture should be slim.
• You will have until April 30, 2008, to turn in claims against your 2007 FSA.
• You will have until April 30, 2009, to turn in claims against your 2008 FSA.

Health care FSA details

You may use the health care FSA for health care expenses that are not covered by any insurance. This includes your out-of-pocket expenses related to your health plan’s deductible, coinsurance, or copayment arrangements.

You may request reimbursement for your own eligible expenses as well as your spouse’s, if you file a joint tax return. Expenses for a dependent are eligible for reimbursement if the dependent lives with you and you provide more than half of the dependent’s support. You do not need to be covered by a Purdue medical plan to participate in a health care FSA.

Eligible expenses

Fiserv Health, the administrator for Purdue’s flexible spending account program, provides an extensive list of eligible and ineligible expenses on its Web site. 

Dependent care FSA details

The dependent care account reimburses dependent day care expenses necessary while you (and your spouse, if you’re married) are attending school on a full-time basis or working. Typically, these would be day care expenses for children, but you can also use this account to reimburse day care for other dependents, such as spouses, parents, or grandparents, who cannot care for themselves. Your dependent must live in your home at least eight hours a day.

Allowable expenses include those for care provided in your home, a sitter’s home, or a day care facility. Expenses for certified all-day kindergarten programs are not eligible.

Special considerations

By IRS rules, married individuals who file separate tax returns are limited to a $2,500 contribution annually. You may contribute up to $5,000 if you are married and file a joint tax return, provided both you and your spouse each earn more than $5,000 annually. If one of you earns less than $5,000 during the year, you are limited to a maximum spending account contribution equal to the salary of the lowest-earning spouse.

Time spent by a student spouse in educational endeavors is considered working for the purposes of opening an FSA. Volunteer work does not qualify.

If both you and your spouse work at Purdue, you must coordinate your dependent day care enrollments so that the two of you together stay within the $5,000 annual maximum.

You may only claim dependent care expenses on children age 12 and younger, unless the dependent is disabled.

Tax credit versus spending account

Is it more advantageous for you to take the tax credit for dependent care expenses OR to pay for these expenses through a dependent care FSA? You cannot claim the same expenses both ways.

Tax Credit: As income increases, the tax credit becomes less valuable. You may claim up to $2,400 in dependent day care expenses for one dependent or $4,800 for two or more dependents. Your actual tax savings, however, depends upon your income. For example, a family with taxable income of $10,000 is eligible for a 30 percent credit, giving them a $750 savings on $2,500 of expense. Meanwhile, a family with taxable income of $28,000 would receive only 20 percent credit for the same expense, giving them a $500 savings on $2,500 of expense. Remember, taxable income is your income after you have subtracted exemptions and deductions.

Dependent Care FSA: Reimbursement of dependent care expenses through an FSA becomes more valuable as family income increases. The crossover income level at which the advantages of both methods are about equal (in terms of federal income and Social Security taxes) occurs at $24,000 of adjusted gross income. Use this general rule as a guideline only!

Eligible expenses

For guidance about what is and is not eligible for reimbursement from a dependent care FSA, visit the Fiserv Health Web site.

How to file an FSA claim

Fiserv Health processes all FSA claims for Purdue University. Your claims will be processed through one of the following methods:

Automatic Reimbursement: If you are covered by a Purdue medical plan, an FSA claim for your out-of-pocket medical expense, such a your deductible, coinsurance, or copayment, will be automatically processed for you when your medical plan claim is processed. You have no claim forms to complete or submit.  If you do not want to have your out-of-pocket medical expenses automatically processed, contact Fiserv Health at 1 (800) 826-9781, ext. 2189 to cancel automatic processing.

Fax Submission: For claims that are not automatically processed for you, you may file your claim by faxing a copy of the completed FSA claim form and supporting documentation to Fiserv Health at the company’s toll-free fax number, 1 (877) 390-4782. This is Fiserv Health’s preferred way of receiving your FSA claims.

Paper Submission: If you prefer, you may submit your claims by completing a paper claim form and providing the necessary documentation to Fiserv Health via standard mail at P.O. Box 8022, Wausau, WI 54402-8022. Pre-addressed envelopes are available, but you will need to attach your own postage.

Direct deposit
Direct deposit of your FSA reimbursements is available. If you wish to take advantage of this option, contact Fiserv Health at 1 (800) 826-9781, ext. 2189.

Go to Fiserv Health FSA forms.