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Flexible Spending Accounts (FSA)

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What is a Flexible Spending Account (FSA)?

FSAs are accounts that let you pay out-of-pocket health care and dependent daycare expenses with tax-free money. You deposit a set amount of your paycheck into these accounts before any taxes are calculated. This saves you:

  • 15% - 20% on Federal taxes
  • 2% - 8% on State taxes
  • 7.65% on FICA (Social Security) taxes

For examples of savings and eligible expenses, view the information below and the brochure  (PDF Format, 175 KB)* published by TRI-AD, SDSURF's FSA Third Party Administrator.


Comparison of Savings:

  Without FSAs With FSAs
Annual Pay $36,000 $36,000
Contribution to FSAs Not applicable $2,000
Taxable Income (W-2 Earnings) $36,000 $34,000
Federal and State Income Taxes $5,200 $4,700
FICA (Social Security and Medicare) $2,750 $2,600
Total Taxes $7,950 $7,300
After Tax Expenses $2,000 Not applicable
Net Spendable Income $26,050 $26,700
Savings from Using FSA Not applicable $650

Estimate your potential FSA tax savings.

Eligible Dependent Expenses

The IRS defines an eligible dependent for the purposes of submitting expenses under Flexible Spending Accounts (FSA) differently for the Health Care FSA and the Dependent Care FSA. These definitions are also different from SDSURF's definition of eligible dependents for health and dental insurance. See table below for clarification:

Plan Health Care FSA Dependent Care FSA SDSURF Health & Dental Benefits
Eligible Dependents
  • You
  • Your spouse
  • Your children (through age 25)
  • Your domestic partner/domestic partner's children (if you claim them as dependents on your federal taxes)
  • Dependent who lives in your house at least 8 hours a day AND meets at least one of the following:
  • You
  • Your spouse
  • Your domestic partner
  • Your children
  • Your spouse's or domestic partner's children
Age of Children
  • Through age 25
  • Under age 13 and you claim as a dependent on your income tax return; if legally separated/divorced, for whom you are the custodial parent OR
  • Through age 25, no student certification required
Other Dependents
  • Person who resides in your house at least 6 months of the year, for whom you claim a dependency deduction on your federal income taxes.
  • A child, spouse, or other dependent who is physically or mentally incapable of self-care and for whom you claim a dependency deduction on your federal income taxes.
  • Not applicable
Other Information
  • For additional information on eligible dependents you can view this memo  (PDF Format, 34KB)*
  • AND the dependent care must allow you and your spouse to work or attend school full time
  • For additional information on eligible dependents you can view this memo  (PDF Format, 34KB)*
  • If a dependent falls under SDSURF benefits guidelines but outside the IRS's FSA guidelines, you are unable to submit expenses for reimbursement for these individuals

Contribution Limits and Eligible Expenses

You determine if you want to participate in each FSA plan and how much you will contribute to each plan every year, up to the maximums allowed by SDSURF.

  • Health Care FSA Limits
    You can contribute up to $2,000 ($3000 for 2012) of your pre-tax salary to a Health Care FSA. If your spouse has an FSA account at work, there are no limits to combined contributions on the Health Care FSA.
    • To view a list of Health Care eligible expenses that can be reimbursed by the FSA and to estimate how much you should contribute go to the FSA Toolkit, scroll down to FSA Tools Health Care Expenses and click on "See the list", and "How much should you contribute?"
    • View over-the-counter medications  (PDF Format, 54KB)* you can purchase with your FSA dollars.
    • View a list of Health FSA Frequently Asked Questions.
  • Dependent Care FSA Limits
    You can contribute up to $5,000 of your pre-tax salary to a Dependent Care FSA. This is a family maximum contribution so if your spouse has a Dependent Care FSA at work, the two of you can contribute a combined total of $5,000 per calendar year. If you are married and file your taxes separately, you can contribute up to $2,500. If you elect to participate in the Dependent Care FSA, you will not be eligible to claim the Federal Income Tax Credit. Consult your financial planner/tax advisor to see which is better for your situation. If you do not have a financial planner, SDSURF's EAP plan offers financial planning benefits.

View the Summary Plan Description (SPD)  (PDF Format, 598KB)*


* Note: Documents in Portable Document Format (PDF) require Adobe Acrobat Reader 5.0 or higher to view. Download Adobe Acrobat Reader.


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