Health Care Spending Account
Gives you a tax break on medical, dental and vision expenses not covered under another health care plan.

• Eligible expenses
• Your annual contribution amount
• Making your contributions
• Receiving reimbursement
  

Dependent Care Spending Account

Gives you a tax break if you pay someone to take care of your dependents while you work.

• Eligible dependents

• Eligible expenses

• Eligible providers

• Your annual contribution amount

• Making your contributions

• Receiving reimbursement

• Your Individual Health Plan Account

• IRS Rules for Spending Accounts

• A Note About Social Security Benefits

• For More Information
  

THE SPENDING ACCOUNT ADVANTAGE

No matter what benefits coverage you may have, you're likely to have some out-of-pocket expenses that aren't paid by your plans. This includes, for example, expenses you incur for medical or dental deductibles or copayments. Similarly, the cost of dependent care can be a significant, but necessary expense for working parents.

The Health Care and Dependent Care Spending Accounts can help reduce the impact of these out-of-pocket expenses on your budget. Here's how:

When you participate in one or both of the spending accounts, you use before-tax payroll deductions to pay many of your health care and/or dependent care expenses. You save money because your federal income, Social Security and Montana state taxes are figured after spending account deductions are taken. This means you can have a lower taxable income so less taxes will be taken out of your paycheck.

How much can you save?

As shown in the following chart, a rough rule of thumb is that your savings through either one of the spending accounts will equal your tax rate times your costs.

In addition, reduced Montana state taxes on eligible expenses can add between 6% to 9% to your tax savings.

For example.....
Carla is a single mother of one child, earns $27,000, and is in the 15% federal income tax bracket. She expects out-of-pocket health care costs of $480 and day care costs of $2,600 -- a total of $3,080 in eligible spending account expenses.

By using the Health Care and Dependent Care Spending Accounts to pay these expenses, Carla decreased her federal taxes and increased her spendable income
by ... $3,080 x 22.65% = $697.62

Carla will also save between 6% and 9% in Montana state taxes on her expenses -- or an additional $184.80 to $277.20.

YOUR SPENDING ACCOUNT OPTIONS

At each annual enrollment, you may choose to enroll in the Health Care Spending Account, the Dependent Care Spending Account or both. A yearly election is required. The following sections provide highlights of each spending account option.

Your Health Care Spending Account
It probably comes as no surprise to you that health care is becoming more expensive every day. To help you manage health care costs that aren't covered by another plan, Montana University System offers the Health Care Spending Account. Here's a brief summary showing how the Health Care Spending Account works:

Eligible expenses . . .
Includes amounts you pay toward annual deductibles, copayments, amounts remaining after the plan has paid benefits, orthodontia expenses, hearing aids and exams, or travel to and from your doctor's office, and any other medical expenses (except health care premiums) that could be deducted on your Federal income tax return.

Treasury and IRS Announce over-the-counter Drugs
to be covered by Health Care Flexible Spending Accounts

Your annual contribution amount . . .
at the beginning of each year, you decide how much you want to contribute to your account. You may contribute from $10 to $500 a month ($6,000 per year) per household. In certain cases this maximum may be subject to further limitations.

Making your contributions . . .
automatic payroll deductions in equal amounts from each paycheck throughout the year are deposited directly into your individual plan account. Contributions are deducted from your paycheck before federal and state income or Social Security taxes are withheld.

Receiving reimbursements . . .
first, submit covered medical, vision or dental expenses to the appropriate insurance company. If ...

• the expense is fully paid by the plan, no further action is necessary.

• the expense is not paid or is partially paid by the insurance company, you'll receive an Explanation of Benefits (EOB). You should then submit a completed Reimbursement form to Employee Benefit Resources, LLP for the unpaid portion, using the EOB as evidence of your expense.

You may request reimbursement from the Health Care Spending Account at any time during the year for up to the full amount you contribute, even if that amount hasn't yet been credited to your account. Your request for reimbursement must, however, be for amounts of $10 or more during the year.

Your claim may be for a single expense or you may save up smaller expenses until they total $10 or more. Claims for any amount may be submitted at the end of the year.

Reimbursement checks are issued daily.  Submit claims to:

Employee Benefit Resources, LLP
P.O. Box 1193
Helena, MT  59624

Your Dependent Care Spending Account
If you pay someone to take care of your children or a dependent disabled adult while you work, then you may be interested in the Dependent Care Spending Account. It's a convenient way to budget for dependent care expenses and get a tax break at the same time.

Here's how your Dependent Care Spending Account works:

Eligible dependents . . .
are our children under age 13 and older dependents, if they are mentally or physically incapable of taking care of themselves.

Eligible expenses . . .
include most non-educational, non-medical day-care expenses for your eligible dependents. The purpose of the expenses must be to allow you -- and, if you're married, your spouse -- to work.

Eligible providers . . .
these include licensed day-care centers and babysitters' services inside or outside your home. To get the tax-break, you must supply your day-care provider's tax I.D. number (or Social Security number) on your tax return. Tax ID numbers are not required for tax-exempt providers, such as church groups.

Your annual contribution amount . . .
at the beginning of each year, you decide how much you want to contribute to your account. You may contribute from $10 to $500 a month per household. In certain cases this maximum may be subject to further limitations.

Making your contributions . . .
automatic payroll deductions in equal amounts from each paycheck throughout the year are deposited directly into your individual plan account. Remember, contributions are deducted from your paycheck before federal and state income or Social Security taxes are withheld.

Receiving reimbursement . . . 

first, you pay your provider. You may submit a Claim for Reimbursement any time after the services have been rendered, as long as you have at least $10 in expenses. Claims for any amount may be submitted at the end of the year.

Reimbursement checks are issued daily. Unlike the Health Care Spending Account, however, your Dependent Care Spending Account may reimburse you only up to your account balance at the time your claim is submitted. The remaining portion of any partially paid claims will be paid to you when you have made additional contributions.

Your Individual Health Plan Account
If any of your family members are covered by an individual health plan, or if a family member is paying COBRA payments, you may be able to pay these premiums with pre-tax income. Plan members who are interested in this opportunity should contact Employee Benefit Resources, LLP for more information.

IRS Rules for Spending Accounts
In exchange for the tax advantages available when you use the Health Care and/or Dependent Care Spending Accounts, the IRS has some special rules. As you make your spending account decision, keep in mind that . . .

• Money you contribute to these accounts each plan year may be spent only on expenses you incur that plan year.
• Reimbursements from a spending account may be used only for expenses allowed for that account. For example, you may not be reimbursed for health care expenses from amounts you have deposited into the Dependent Care Spending Account.

• Expenses you have reimbursed from a spending account may not be deducted on your federal income tax return.

• You may begin, stop or change the amount of your spending account contributions only at annual open enrollment unless you have an appropriate life event change. To make a mid-year election change, the increase or decrease in your annual election amount must be consistent with the qualifying event. Qualifying events include:
  • marriage
  • divorce
  • birth of your child
  • adoption of your child
  • death of your spouse or child
  • change in your employment status
  • change in your spouse's coverage or job
  • unpaid leave of absence

Finally, if your eligible expenses for the year are less than the amount you contribute to your account that year, the remaining money will be forfeited. Our plan allows a 90-day grace period after the end of a plan year, during which claims may be submitted for the prior plan year.

You may refer to IRS Publication 502 for more information
about reimbursable health care expenses and IRS Publication 503 for more information on reimbursable dependent care expenses. These publications are available at many public libraries or may be obtained by calling the IRS directly at 1-800-829-3676.

A Note About Social Security Benefits

By participating in the Health Care and/or Dependent Care Spending Accounts, you reduce your Social Security taxes. This could possibly affect your future Social Security benefits. Most experts say, however, that the tax advantage you get now will probably offset any potential reductions in future benefits.

For More Information

If you want to know more about how one or both of these spending accounts can work to your advantage, please refer to your summary plan description or contact Employee Benefit Resources, LLP. You may also contact your Campus Payroll/Personnel Office for questions about enrolling in these accounts.