By People & Culture
What is a Flexible Spending Account?
A flexible spending account (FSA) is a tax advantaged plan that allows you to set aside pre-tax dollars to pay for eligible medical and dependent care expenses. You can find a list of eligible medical expenses in IRS Publication 502. Once you make an FSA election, it is set for the year and cannot be changed without a qualifying event. Funds in your FSA account are use-it-or-lose-it.
A qualified transit expense account allows you to set aside pre-tax dollars for commuting and parking expenses. Your transit election can be changed at any time and the funds in the account are yours for as long as you are employed with MCI.
What’s New for 2023?
Flexible Spending Accounts will continue to be administered by Flores.
The IRS increased contribution limits for 2023 – the maximum amount for medical will be $3050. Transit FSA will increase to $300 per month for both commuter and parking benefits. The contribution limit for dependent care is unchanged at $5,000 for married filing jointly, single and head of household files, and $2500 for married filing separately.
Please note that up to $610 of unused funds in a medical FSA can be rolled forward into 2023. This is an increase of $40 in the allowable carryover amount. Keep any 2022 rollover balances in mind as you plan for your 2023 contributions as funds are use-it-or-lose-it on December 31, 2023, for unused funds greater than $610.
There is no rollover allowed for a dependent care FSA.
Healthcare FSA Versus HSA
While both accounts can help lower your taxes and pay for medical, dental, vision and other qualified medical expenses, there are significant differences between the two, and the IRS does not allow you to contribute to both a full medical FSA and an HSA at the same time.
If you moved from one of the PPO healthcare plans to the High Deductible Health Plan (HDHP) during our recent open enrollment period, you are eligible to open and contribute to an HSA account. If you had a medical FSA for 2022, it was converted to a limited purpose account on October 1 and funds in that account can only be used on dental and vision expenses after that date. Because FSA funds are fully available on January 1, you must continue to make your payroll deduction until you have contributed the full annual amount you elected.
Moving from the HDHP to one of the OAP plans is easier. Since you must be enrolled in a high deductible plan to contribute to an HSA, if you changed medical insurance on October 1, both employee and employer contributions to your HSA ended. However, any money in your HSA is still yours and you can continue to use those funds for any qualified medical expenses.
The FSA Open Enrollment period is from November 28 – December 9. This is a quick turnaround to allow time for Flores to receive enrollment data and generate debit cards prior to January 1, 2023. Please take a few minutes to complete the open enrollment process, even if you don’t wish to participate, so that we know that enrollment is complete.
As always, please reach out to any member of the People & Culture team if you have questions about the FSA or any of your benefits.
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