Health care Flexible Spending Account (FSA)

Made possible by Section 125 of the Internal Revenue Code and subject to IRS regulations, and offered at USC through WageWorks, health care FSAs can protect up to $2700 a year per employee from any federal, state, or Social Security tax.

  • If you’re looking for information on dependent care FSAs, visit that webpage
  • If you’re a Verdugo Hills employee, your Flexible Spending Account is administered by a different third party provider – visit that webpage

How health care FSAs work

  • You choose an amount – up to $2700 a year, minimum $100 – for health care expenses you think you will incur (details on what expenses qualify below).
  • Calculate expenses carefully – you can only carry over $500 from your health care account to the next year (and those funds are not available until April 15 of the next year). Any unused amount above $500 in your health care account will be forfeited.
  • The amount you select is then deducted from your paycheck in equal increments over the full 12-month calendar year (except for faculty who opt to receive their base pay over a shorter cycle).
  • Enrollment is via Workday; enroll for your FSA within 30 days of hire date, and every year thereafter during open enrollment (you must re-enroll each year), or when you have a life event status change.
  • If you begin an account mid-year due to enrollment as a new hire or a status change, eligible claims must be for services rendered after the effective enrollment date.
  • Because the amount you set aside in your FSA is not taxed for Social Security purposes, your future benefit from Social Security may be reduced slightly.

Eligible expenses

Health care accounts are for expenses incurred by you or your eligible dependents (as defined by the IRS) and include:

  • Medical and dental plan deductibles
  • Copayments
  • Prescriptions
  • Some over-the-counter medicines if prescribed
  • Other health care expenses not covered by your insurance (most expenses that the IRS considers tax deductible are eligible, but not all)

Expenses that are NOT eligible

  • Medical and dental insurance premiums
  • Expenses associated with cosmetic surgery
  • Expenses incurred for ineligible dependents or others not in your family

When you can use the money

The full amount you have selected is available for qualifying expenses from January 1-December 31 of the year in question (but you have until March 31 of the following year to submit the previous year’s claims). Up to $500 of your health care FSA can be carried over to the following year – but it’s important to note that you cannot access that carryover amount until April 15 of the following year. An example to explain this – let’s say you:

  • Opted for the full $2650 health care FSA in 2018
  • Also had $500 carried over from 2017

In that situation, on January 1, 2018, you could access the $2650 in 2018 funds, but not the additional $500, which would become available on April 15, 2018. If at that time you had not yet incurred any 2018 expenses, your funds available would now be $3150 instead of $2650.

Although you can access all of the present year’s funds at the beginning of the year (and the carryover balance on April 15), note that if you leave USC employment during the year, any services provided after your termination date will not qualify, even if you have funds remaining in your FSA (unless you elect COBRA continuation coverage on an after-tax basis – for more information see Leaving USC).

Options to access the money

  • Use WageWorks’ online “Pay My Provider” system
  • Use the WageWorks debit card; be sure to keep your receipts
  • Use WageWorks’ online “Pay Me Back” system
  • Pay with personal funds and provide receipts for traditional claims reimbursement
  • Purchase eligible products and services through the FSA Store
  • Submit a claim by fax/mail, online or via the mobile app

See the Wageworks website for more information.

FSA health care claim
FSA orthodontia guidelines

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