Episode 25 – Save on healthcare costs with FSA and DCAP
Episode transcript:
[musical intro]
Jenny
Welcome back to Fund Your Future with DRS. And today we’re talking about tax advantage savings accounts to help you pay for qualified medical expenses. Today, we’re specifically focusing on FSA and DCAP, and then we’ll do another episode about Health Savings Accounts. But today we have Kelsie here from the Health Care Authority. Welcome, Kelsie.
Kelsie
Thank you.
Jenny
So, tell us a little bit about these. We have the Flexible Spending Account and DCAP, which is the Dependent Care Assistance Program.
Kelsie
Yeah. So, the Flexible Spending Account, we have two that are offered there and we can just say FSA as well. There’s two different types of FSAs that we offer to our PEBB and SEBB employees. So, there’s the medical FSA and the limited purpose FSA. And then also there is DCAP, which you mentioned, the Dependent Care Assistance Program. So how these work is, you set aside funds from your paycheck pretax to pay for out-of-pocket health care expenses.
Kelsie
And that’s kind of how employees can really save their money. So, the election amount they choose, the amount of money they want to be deducted from their paycheck is pretax throughout the plan year. So, you don’t have to pay for FICA or federal income tax. So those are really nice benefits that are used to pay for, you know, say you sprained your wrist and you need to go to the doctor and the bill comes your way, you will have the opportunity to pay for those pretax.
Jenny
Yeah. So it’s really this separate pot of money, like having a little savings account set aside for your medical expenses.
Kelsie
Right, exactly. And then for DCAP that is used for childcare expenses. So preschool, if you have kids under 13 that you need expenses for preschool or babysitting before and after school care, in-home care for a disabled dependent or such as taking care of an elderly parent. It’s not just for kids, but it’s for elderly adults as well. So, yeah, that’s the nice thing about DCAP as well.
Jenny
Yeah, that’s awesome. So you’re really saving a lot of money if you’re using these programs because like you said, it’s pre-taxed money, so you’re not having to pay those extra taxes on that money that would be coming out of your paycheck. And then you pay for the daycare or something like that, right?
Kelsie
Exactly. Yeah.
Jenny
Great. So how much can employees contribute from their paycheck each year?
Kelsie
So, for the Flexible Spending Arrangement, either the medical or the limited purpose FSA, you can contribute a minimum of $120. And this year it’s for 2023, it’s up to a maximum of $2,850. I will mention, though, it increases that amount that you can contribute from your paycheck increases to $3,050 effective January 1st, 2024.
So that’s for the FSA. And then for DCAP, it’s $5,000 you can contribute from your paycheck for the year for a single person or married couple filing joint income tax return or $2,500 for each married participant who files a separate tax return. I will mention as well that it does vary per IRS rules. The IRS announces the maximum late in the fall so employees can go to their employer to ask more questions about that when that time comes.
Jenny
Cool. So how do people spend the money or submit a claim? Do you have to submit a claim like you would normally would for like a car insurance?
Kelsie
Yeah. So, most use their Navia Benefits debit card and I should say that the vendor that administers these benefits for our PEBB and SEBB employees, is Navia Benefits Solution. So, if you enroll in an FSA or DCAP, you’re going to be working with Navia — Navia Benefits Solution — but you know, Navia for short, to enroll, create an account, to reimbursement claim forms, everything there.
So, most use their Navia Benefits debit card and you can check the box to enroll in that when you enroll online. And so, this is really nice. I use a Navia Benefits debit card to pay for my eligible health care expenses. The debit card is being redesigned right now. So gradually members will start to get this redesigned card.
You know, after your card expires in three years, you’ll get a new one. We really revamped this card to include the HCA icon and then also to have the words PEBB or SEBB program on it, so people can really start to realize and connect visually that the Navia Benefits debit card is part of your program, that you’re in, SEBB or PEBB, as an employee.
So that’s really, really nice. The debit card you can just swipe. So, say you go to the pharmacy, you pick up your prescription drugs or Tylenol and you check out at Rite Aid. You just use your debit card to pay for those expenses, right then and there instead of having to submit reimbursement claim form. Which is another way that you can spend the money and submit claims.
But it just takes a little bit longer. You have to submit the claim online or go through the Navia mobile app. You can email Navia or fax or snail mail. So the debit card I think is definitely the more popular choice for FSA. DCAP I’ve seen that people tend to do the reimbursement claim form for DCAP, but FSA definitely a debit card is more popular to use.
Jenny
Gotcha. So, they’re really trying to make it easy for people to be able to use this money for these qualified expenses, like you said, at Walgreens or wherever you pick up your prescriptions.
Kelsie
Yes, exactly. And I think I’ll also mention that, say you enroll during open enrollment time period in the fall — there’s different time periods for PEBB and SEBB — but that amount that you enroll in, in an FSA, it’s going to be available for you on January 1st of the next year. So this January 1st, 2024. So if you enroll for $1,000 in an FSA and you have a debit card or you choose to get a debit card, it’ll be mailed to you in January.
It’ll have that $1,000 on there for you at the first of the year, which is great because then you’re just you feel better that you have money to use.
Jenny
Yeah. Ready to go.
Kelsie
Yeah, exactly. Exactly.
Jenny
Yeah. And I know we really wanted to mention this as well, but you do have to enroll into the program every year.
Kelsie
Yes, that is definitely true. You have to enroll every year. If you don’t, then you’re not going to be enrolled for the next year. It’s not like your medical plan where if you’re enrolled in a plan that you like and you don’t do anything, you’re enrolled in it again. So, pay close attention to open enrollment time period. I know for PEBB, it’s November 1st through November 30th.
Jenny
Yeah, that’s coming up quick.
Kelsie
SEBB is a little bit different and I don’t know the dates off the top of my head, but you would go to Navia. Navia’s website, PEBB website or SEBB website to enroll. You don’t go to HCA’s website or anything like that. You go directly to Navia to enroll in an FSA or DCAP.
Jenny
And you had mentioned there’s a new sort of piece of this program this year that’s called carryover. Can you talk a little bit about that and the benefits of it?
Kelsie
Yeah. So, this is a new plan design. It really is beneficial to members. They basically get to keep more money in their pocket and it gets to carry over to the next year. But there are some caveats to that. So, to receive carryover, you must be enrolled in an FSA for the next plan year. So that’s why it’s important to re-enroll every year or just enroll every year and have at least $120 left in their account on December 31st.
So, any amount above $610, that is the maximum carryover limit or below $120 if you do not enroll, will just be forfeited to HCA as required by the IRS rules.
Jenny
So, it’s really important to kind of look at your balance and make sure that you still have that bit of wiggle room like 100, you said $120.
Kelsie
Right. So, log into your Navia account as it gets closer to that December 31st deadline. See if you have any money left or if you have less than $120 or wherever you are there, because you do have to pay close attention to it. And I can kind of give an example if that helps, you know, lay it down.
So, if somebody has between $120 and $610 remaining, say $150 left in their medical FSA on December 31st. If this person enrolls in a medical FSA, the $150 will carryover and be added to his medical FSA election for the next plan year. If he does not enroll in an FSA, the $150 will still carry over to establish a medical FSA for his use in the next plan year.
And so it’s there, but you just have to make sure you’re between those two markers.
Jenny
So, if someone does say they look in their account and they have $200 left in there, it’s like the beginning of December. Are there particular things that you recommend that people could maybe use that money for.
Kelsie
Yeah, and like, say you didn’t have a bill coming in? So you could go get, you know, Tylenol. There’s also an FSA store online where you can, you know, if you need sunscreen or anything like that. Prenatal vitamins I know is an eligible expense. You can go on the FSA store, and I’ve done that in the past and, you know, gotten things that I might need for the next year that you can use.
Jenny
So, specifically, if you look in your account, it’s like November or December. If you have more than $610, then you could go and you say, “okay, I could spend a $100 to kind of bring that total down so that actually it does roll over to the next year. And I’m not losing money.”
Kelsie
Exactly. Or just keep enrolling every year. And then you just know that it’s going to carryover.
Jenny
Great. So, is there a deadline to spend the funds that are in my account?
Kelsie
Yeah. So Okay. So, for an FSA, claims for reimbursement must be submitted to Navia Benefit Solutions by March 31st of the following year. So, you have to incur those expenses during the plan year, but you have two months and a half or three months to submit those to Navia, so you get some extra time to submit them.
Jenny
Gotcha. So, if I have a medical emergency come up at the end of December, then I still have some time to submit those claims…
Kelsie
…and get the reimbursement.
Jenny
It doesn’t have to be by December 31.
Kelsie
Exactly. I will say for DCAP, expenses must take place by December 31st each year as well, and then claims for reimbursement must be sent to Navia by March 31st. So, it’s the same for DCAP as well.
Jenny
Yeah, great. So, we talked a little bit about enrolling, circling back on all of those details, especially because we are in the fall now of open enrollment season.
Kelsie
I’m talking fall, and here we are. Usually people enroll during open enrollment for this benefit. Of course, you can enroll as a new, hire a new employee. Check with your benefits payroll office, but you have 31 days to enroll, if you’d like, as a new employee, and then 60 days after a special open enrollment event. So, a qualifying event would be if you had a birth or a marriage or something like that. Yeah. So, there’s different times to enroll, but the most popular is during open enrollment period.
Jenny
So, Kelsie, who is eligible to enroll in an FSA or DCAP?
Kelsie
Yeah. So, the FSA and DCAP benefits are generally offered to state employees, public college and university employees, and then those who are working in school districts, at least 630 hours per year. It is also available to former employees enrolled in continuation coverage. But I think no matter what, if you have more questions on eligibility, members should contact their benefits payroll office for sure.
Jenny
And then you had mentioned that you personally have used a Flexible Spending Account for yourself and your family. Can you tell us a little bit about that?
Kelsie
Yeah. Yeah. So I think I’ve been enrolled in the FSA for the last three years and I really use it….I was planning for birth expenses. I just gave birth this January to my second son.
Jenny
Oh, congratulations.
Kelsie
Thank you. And so, during last year’s open enrollment, you know, it was nice. I was already a member, a participant in the program. So I logged into Navia’s PEBB portal, and I just estimated the amount that I wanted to enroll in for this year. I kind of knew that birth expenses would be somewhat around $1000 to $1500 dollars, maybe even up to $2,000.
So, what I did is I enrolled for $1,500 in my FSA for 2024. And the nice thing also is a birth is a qualified special open enrollment event. And if I ever needed to add to my FSA, I could do that and enroll in more money due to the SOE event, which is a birth. But I didn’t need to, so I enrolled for $1,500.
And as those medical expenses came in, I just used my benefits debit card to pay for those right then and there. So, it was really it was really nice. It was nice to know that I had that money at the very beginning of the year to use for my birth and labor.
Jenny
Yeah, that’s awesome. So basically you were saying like if it had ended up being more expensive than what you had anticipated, you could have then put more money into your FSA account that tax free money from your paycheck?
Kelsie
Yeah. So a birth is a qualified special open enrollment event. So, you could go on the Navia website and use a certain form. So, you have 60 days from the qualifying event — the birth — to send in this form and enroll in a little bit more money if you wanted to. So that’s the nice thing about qualifying events too.
So generally you have to set your amount and that’s what you get for the year. Yeah, unless you have a qualifying special open enrollment event like I did as a birth.
Jenny
Yeah, that’s great. And have you also use the DCAP program?
Kelsie
Yes, I have, but I haven’t had to use any expenses yet. My little guy’s not yet enrolled in daycare. Okay, so it’s waiting for me to use and I will eventually, but I will definitely use it before December 31st. Yeah.
Jenny
Okay, great. Yeah. Well, we really appreciate your insight. Where can people go? Just general, more information about FSAs and Navia.
Kelsie
Yeah. Yeah. So any information about Flexible Spending Arrangements or the Dependent Care Assistance Program: One, you can go to your benefits payroll office at your employer, or you can contact Navia Benefits Solutions. That is our vendor that we use for these benefits, and they’re very knowledgeable and happy to answer questions. A phone number that PEBB and SEBB employees can use to contact Navia: 425-452-3500. Or you can just go online to PEBB. So, PEBB.naviabenefits.com or SEBB, SEBB.naviabenefits.com
Jenny
That’s great. Yeah. Thank you so much, Kelsie. We really appreciate it.
Kelsie
Yeah, absolutely. Thank you so much for having me.
Jenny
Yeah, thanks.
[music outro]
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