Flexible Spending Arrangement (FSA): Tax savings for medical costs

A flexible spending arrangement (FSA) allows you to set aside a portion of your salary and use the money to pay for medical costs such as deductibles, prescriptions, coinsurance, dentist visits, vision care, and other expenses not covered by health insurance. You can use the funds on yourself, your spouse, and your children. The primary benefit of having an FSA is that it can reduce your taxable salary.

You choose how much of your salary goes into your FSA, a minimum of $120, up to the annual maximum of $3,050 in 2024. Choose this amount carefully because FSAs are “use it or lose it” accounts, and you must spend your entire yearly allotment by December 31 or your unspent funds will be forfeit.

Enroll in a Spending Account: FSA

The FSA accounts for UW employees are managed by Navia Benefits Solutions, a local company that administers benefits for organizations.

Eligibility

You’re eligible to enroll in an FSA as long as you’re eligible for PEBB benefits. However, you can’t have a FSA if you’re enrolled in a consumer-directed health plan (CDHP) or if you are enrolled in a Limited Purpose FSA.

You can, though, combine a FSA with the Dependent Care Assistance Program (DCAP), which allows you to set aside pretax earnings for child care and eldercare. Please note that if your earnings are after-tax, such as a stipend, your FSA and DCAP deductions will also be made after-tax instead of pre-tax.

When you can enroll

You may enroll in a FSA at the following times:

During your first 31 days of becoming eligible for PEBB benefits
During annual open enrollment, from November 1 – 30
Within 60 days of a qualifying life event, such as a marriage or birth

If you enroll during the open enrollment period, FSA funds become available on January 1 and your FSA deductions begin on the first paycheck following January 1.

If you enroll due to a qualifying life event, FSA deductions start and funds become available on the first day of the next month.

How to enroll

View the FSA and/or DCAP – Enroll/Change Contribution Amount(s) User Guide and enroll through Workday. Contact UW Benefits if you have questions.

Re-enroll in FSA each year

FSAs don’t continue automatically. View the Open Enrollment User Guide and re-enroll through Workday each year during open enrollment, November 1 – 30.

How FSAs work

If you’ve never used an FSA before, you simply need to know that it’s a way to pay for health costs while, in most cases, reducing your federal tax obligation. The money deducted from your paycheck and put into the FSA isn’t taxed — you don’t pay Social Security, Medicare, or federal taxes on that money. The exception to this is when your earnings are from an after tax source, such as a stipend. In that case your FSA deductions will be made on an after tax basis, not a pre-tax basis.

This makes routine medical costs cheaper. Medical bills, prescriptions, eye glasses, orthodontia, physical therapy, and many other types of medical products and services not covered by health insurance are eligible FSA expenses.

But before enrolling in an FSA, you need to accurately estimate your medical costs for the calendar year. While you can’t predict all your health costs, many costs — routine dentist visits, for example — are simple to predict using past years as a guide.

Be conservative with your FSA amount if you’re not sure about your costs. You don’t want to have money left over because you’re required to forfeit any unspent funds. And once you enroll, you can’t change your deduction amount until next year (except due to a qualifying life event).

Once you know your FSA amount for the year, you’re ready to enroll. The max amount is $3,050 in 2024 and $120 is the minimum. The amount you elect will be deducted from your paycheck in equal increments throughout the calendar year.

Using your FSA account

Eligible medical expenses

FSA funds cover a wide variety of medical expenses. To learn what’s eligible and what’s not, see the list of eligible and ineligible FSA expenses.

FSA debit card

Traditionally with an FSA, you had to submit a claim then wait for your reimbursement. Now you can pay directly using an FSA debit card that works just like any other debit card — you just swipe it or pay online. Of course, you can use it only for qualified expenses and only at valid merchants. But it makes FSAs a lot more convenient: learn more about the Navia benefits card.

Submit a claim for reimbursement

If you incur a medical expense and can’t use the FSA debit card to pay for it, you have several options for submitting a reimbursement claim. Claims are processed by Navia, and you can submit a claim through your online profile, using the MyNavia mobile app, by sending an email, or by mailing a completed claim form.

If you have other questions about how claims work, see Navia frequently asked questions or contact Navia directly.

Deadline for spending FSA funds

You have from January 1 through December 31 to use your FSA funds.

If you have not spent all the funds in your FSA by December 31, and you are still employed and didn’t lose eligibility for the FSA, you may have certain unspent funds “carry over” into the following year without affecting annual maximums.

To be eligible for the automatic carryover:

You must enroll in either the Limited Purpose FSA or FSA for the following year, or
Have at least $120 left in your FSA balance.

Unused funds up to $610 will carryover to the next plan year. Any funds above $610 will be forfeited.

Qualifying life events for changes or special enrollment

During annual open enrollment, any eligible employee can enroll or re-enroll in an FSA and change their FSA amount for the forthcoming year. To make changes during other times of the year or to enroll during other times of the year, you must experience a qualifying life event.

Once the event occurs, you have 60 days to make a change or enroll. View the FSA and/or DCAP – Enroll/Change Contribution Amount(s) User Guide and make changes through Workday.

Events that qualify include:

Marriage or domestic partner registration
Divorce or dissolved partnership
Birth or adoption
Change in employment status
Change in a child’s eligibility
Loss of other health insurance coverage
Legal custody or guardianship of a child
Disability of a child
Court order that requires a child to be covered
Medicaid, Medicare, or CHIP coverage changes

If you’re unsure whether or not an event qualifies, contact Navia Benefit Solutions. Events that qualify are defined by the state in the Washington Administrative Code 182-08-199.