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Frequently Asked Questions

•  Will money in the Flex Spending Account (FSA) ever be subject to taxes, or is it free from taxes?
•  How much money will I save by enrolling in the HCSAccount or DCAAccount programs?
•  Does the State guarantee the tax benefits under the FSA?
•  What responsibilities do I have to ensure the intended tax benefits of the program are received?
•  Wouldn't I save more by taking a deduction on my income tax?
•  If I reside outside of New York State, how will my participation in the FSA be affected?
•  Do contributions to my FSA reduce my income for purposes of the Federal Earned Income Tax Credit?
•  How would I determine if participating in the FSA would affect my social security benefits?
•  Will my FSA deductions continue if, due to long-term illness, I begin drawing upon my Social Security benefit?
•  How much should I contribute?
•  What happens if I submit a claim for an amount greater than my HCSAccount or DCAAccount balance?
•  What if I don't use up all my money by the end of the year?
•  How long is my contribution in effect?
•  What if I change my mind?
•  If I underestimate or overestimate my elections, can I transfer money from my HCSAccount to my DCAAccount, or vice-versa?
•  How can I correct an error if I enroll in the DCAAccount when I intended to enroll in the HCSAccount (or vice-versa)?
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Q Will money in the Flex Spending Account (FSA) ever be subject to taxes, or is it free from taxes?
A Money used for qualified expenses from the DCAAccount and HCSAccount is free from taxes.
 
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Q How much money will I save by enrolling in the HCSAccount or DCAAccount programs?
A Your savings will be based upon your individual income and tax filings.
 
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Q Does the State guarantee the tax benefits under the FSA?
A No. The State cannot guarantee that a participant will receive the intended tax benefits. It is up to each participant to make sure that contributions are made for eligible expenses within the legal and Plan limits.
 
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Q What responsibilities do I have to ensure the intended tax benefits of the program are received?
A You should make sure that contributions to the FSA will only be made for eligible expenses; for qualifying individuals; up to the legal or plan maximum; and for services provided in the same plan year the contributions are made.
 
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Q Wouldn't I save more by taking a deduction on my income tax?
A You need to determine whether taking a tax deduction is more beneficial than using the HCSAccount and/or DCAAccount. According to the IRS, only health care expenses that exceed 10% of your adjusted gross income can be deducted from your income taxes. Most people do not have expenses high enough to qualify for this deduction. For work-related dependent care expenses, the tax credit amount is determined by applying a percentage to your total dependent care expenses. In addition, money set aside through your HCSAccount or DCAAccount is exempt from FICA taxes. This exemption is not available on your federal income tax return.
 
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Q If I reside outside of New York State, how will my participation in the FSA be affected?
A Most states follow the federal rules; however, some states may tax the Flex Spending Account contributions. You must comply with the laws of the state where you reside.
 
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Q Do contributions to my FSA reduce my income for purposes of the Federal Earned Income Tax Credit?
A No. Beginning January 1, 2013, contributions will no longer reduce your earned income for purposes of the Federal Income Tax Credit (EITC). This means that participation in either the DCAAccount, or HCSAccount, or both, may affect the amount of your EITC. Consult your tax advisor or the IRS for income eligibility and additional information.

The EITC is available to certain households whose total earned income is below the following threshold amount for individuals filing single or head of household: 1 child, $36,920; 2 children, $41,952; 3 or more children, $45,060. For married individuals filing jointly: 1 child, $42,130; 2 children, $47,162; 3 or more children, $50,270.
 
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Q How would I determine if participating in the FSA would affect my social security benefits?
A Participation in the Flex Spending Account may have a minimal effect on your social security benefits upon retirement. The Social Security Administration (SSA) uses the highest 35 years of salary earned before retirement to calculate your social security benefit. However, if you are concerned, you should call the SSA for further advice (1-800-772-1213) or visit www.ssa.gov.
 
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Q Will my FSA deductions continue if, due to long-term illness, I begin drawing upon my Social Security benefit?
A No. Flex Spending Account deductions can only be taken from checks issued through the Office of the State Comptroller. Additionally, if you are collecting disability payments through the Income Protection Plan (IPP) no deductions can be taken, since those funds come directly from the insurance company.
 
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Q How much should I contribute?
A The amount you contribute depends on your individual situation. Consider last year’s health-related and dependent care expenses, any medical or dental care costs you foresee that might not be covered under your medical or dental plans, and any changes in your family status that might have an impact on your medical and dental or dependent care expenses.
 
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Q What happens if I submit a claim for an amount greater than my HCSAccount or DCAAccount balance?
A When you submit an eligible claim to the HCSAccount, you will be reimbursed up to the full amount of your annual election, regardless of the amount of money that has been deposited into your account. Contributions will continue through payroll deductions throughout the year and claims will continue to be paid until your annual contribution maximum is met.

Dependent care claims are paid differently. If you submit a claim and your balance is less than the amount of the claim, you will only be reimbursed for the amount of money available in your account. The remainder will be reimbursed once the money is deposited into your DCAAccount. This enables you to submit a claim only once and receive reimbursement on an ongoing basis, rather than be denied payment or be forced to resubmit the claim until it can be paid in full.
 
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Q What if I don't use up all my money by the end of the year?
A You will forfeit the money that remains in your account. You will have until March 31, 2014 to send in claims for expenses you incurred during the 2013 plan year. This is the “use it or lose it” feature of the Plan, as required by the Internal Revenue Code. You should plan very carefully when estimating your expenses. The FSA administrator will notify you during the last quarter of the plan year if you are likely to have money left in your account. The State uses forfeitures to offset the costs of administering the program.
 
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Q How long is my contribution in effect?
A Your contribution is in effect until the end of the plan year. Each year you will have the opportunity to re-enroll and select a new annual contribution amount.
 
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Q What if I change my mind?
A You may not change your mind once the plan year begins, but you can decide not to join next year. There are certain situations, called "Changes in Status," and if they occur in your family during the Plan Year, you can make a change -- you can start, stop, restart, or change your deduction amounts. The change in status application process is paperless. You may file a change in status application online, or by calling the FSA administrator at 1-800-358-7202.
 
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Q If I underestimate or overestimate my elections, can I transfer money from my HCSAccount to my DCAAccount, or vice-versa?
A No, you can use monies only for the purpose for which the election was initially made. IRS regulations do not allow monies to be transferred or commingled between accounts. So, the money in your HCSAccount may be used only for health care expenses and your DCAAccount may pay only for dependent care expenses.
 
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Q How can I correct an error if I enroll in the DCAAccount when I intended to enroll in the HCSAccount (or vice-versa)?
A In early December, you will receive a confirmation notice of your elections and can make any necessary changes at that time. Changes to confirmation notices must be done in writing on the confirmation notice itself by the deadline. It is your responsibility to ensure that your address is correct and that your notice is received by the deadline. Once the confirmation notice deadline has passed, you cannot change your election unless you have a valid change in status event. No monies can be transferred between accounts under any circumstance.
 
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Andrew M. Cuomo, Governor