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Benefits Orientation - Video 5 - Flexible Spending and Health Savings Accounts (FY23) - YouTube
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Welcome to the next video in the new employee聽
benefit orientation series. In this video,聽聽
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we will cover the flexible spending accounts聽
and health savings accounts offered through CMS.
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Flexible spending accounts are a type of IRS聽
tax-favored programs that allow employees to set聽聽
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aside pre-tax, payroll deducted money for eligible聽
expenses. Eligible State employees may enroll for聽聽
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contributions each year to MCAP and or DCAP for聽
the plan year from July 1st through June 30th.聽聽
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You are not required to participate聽
in one of our health insurance plans聽聽
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in order to be eligible for the flexible spending聽
accounts. Employees who participate in the Health聽聽
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Savings Account may not participate in MCAP.聽
However, they do remain eligible for DCAP accounts
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The Medical Care Assistance plan or MCAP account,聽
pays for eligible medically necessary expenses聽聽
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incurred by the employee and聽
their eligible dependents.聽聽
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Dependents must qualify under the Internal Revenue聽
Code in order to have their expenses be eligible.聽聽
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With MCAP, you can save on eligible health dental聽
and vision expenses by setting aside pre-tax,聽聽
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contributions per pay period, for you and your聽
dependents. Expenses include things such as聽聽
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doctor visits, dentist visits, glasses聽
and contacts, prescription drug co-pays,聽聽
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coinsurance, deductibles, and other聽
eligible out-of-pocket expenses.
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MCAP contributions are limited by the IRS to an聽
annual and monthly maximum. The monthly limit is聽聽
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modified for university employees paid over less聽
than 12 months. The maximum amount is a per person聽聽
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limit. Meaning a couple who are both eligible聽
under the State Employee Group Insurance Program,聽聽
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may each contribute up to the limit. The聽
minimum amount for which an employee may聽聽
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enroll is $240 per year or $20 per month.聽
Per IRS regulations, the full amount you聽聽
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intend to contribute to MCAP for the plan year聽
is funded in your account on your effective date.聽聽
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The current year contribution maximum is shown聽
on the screen and is also found in the Benefit聽聽
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Choice book on the Benefit Orientation site聽
included in your Benefit Orientation Email.聽聽
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A portion of unused MCAP funds聽
with the amount defined by the IRS聽聽
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can roll over to the next plan year after聽
the September 30th runout period ends.聽聽
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Any amount remaining above the聽
IRS limit will be forfeited.聽聽
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Employees must re-enroll in MCAP for the new plan聽
year in order to qualify for the rollover benefit.聽聽
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Participants who do not re-enroll for the new plan聽
year will forfeit any monies remaining after the聽聽
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September 30th run out period. There are two聽
ways to use your MCAP funds to pay for health聽聽
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care expenses. You will receive a pre-loaded debit聽
card which can be swiped for eligible expenses and聽聽
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paid directly out of your account. Certain聽
expenses will still require an explanation聽聽
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of benefits or receipt to be submitted聽
to the flexible spending administrator.聽聽
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You may also pay out of pocket and聽
request reimbursement from your account.聽聽
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Using the administrator's website聽
or app, you can create a claim,聽聽
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upload or send in documentation, and receive聽
reimbursement via direct deposit or a check.
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The dependent care assistance plan or DCAP聽
account, reimburses eligible child or adult聽聽
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day care expenses during the plan year. Dependents聽
must qualify under the internal revenue code in聽聽
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order to be eligible. DCAP is a program that聽
allows an employee to set aside money, before聽聽
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taxes, from their paycheck to pay for childcare聽
expenses of dependent children ages 12 and聽聽
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younger. In addition to childcare, DCAP may also聽
be used to pay for the dependent care expenses聽聽
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for any individual living with the participant聽
who is physically or mentally unable to care for聽聽
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themselves and is eligible to be claimed聽
as a dependent on the employee's taxes.
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DCAP contributions are limited by the IRS to an聽
annual and monthly maximum. The monthly limit is聽聽
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modified for university employees paid over less聽
than 12 months. The maximum amount is a household聽聽
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limit. The minimum amount for which an employee聽
may enroll is $240 per year or $20 per month.聽聽
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There is no rollover with DCAP, so any funds聽
remaining at the end of the year are forfeited.聽聽
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The current year contribution maximum is shown聽
on the screen and is also found in the Benefit聽聽
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Choice book on the Benefit Orientation site聽
included in your Benefit Orientation email.聽聽
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The full value of your intended contributions聽
is not funded to your account upfront like an聽聽
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MCAP account. A DCAP account is funded each聽
time a payroll deduction occurs. DCAP is an聽聽
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alternative to the Dependent Care Tax Credit.聽
Please note that if an employee claims the聽聽
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dependent care tax credit, the credit will be聽
reduced, dollar for dollar, by the amount the聽聽
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employee contributes to DCAP. Please discuss聽
which option is best with your tax advisor.
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DCAP participants must pay for qualifying聽
dependent care expenses using personal funds聽聽
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and then request reimbursement from their DCAP聽
account by submitting a completed DCAP Claim Form聽聽
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or by submitting a receipt with聽
certain required information.
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A health savings account or HSA is a聽
tax-favored interest-bearing account聽聽
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that an active State employee can use聽
to pay for qualified medical expenses,聽聽
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now, or in the future. Active state employees聽
who qualify can save or invest the account聽聽
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funds. The State will contribute a third of the聽
deductible to an active state employee's HSA.聽聽
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You may also contribute additional聽
amounts, up to the IRS maximum, to your HSA聽聽
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through pre-tax payroll deductions or post-tax聽
direct payment. Current year employer and聽聽
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employee contribution maximums are shown on聽
the screen and are also found in the Benefit聽聽
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Choice book on the Benefit Orientation site聽
included in your Benefit Orientation email.
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To be an eligible individual and qualify聽
for an HSA you must be enrolled in the聽聽
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Consumer-Driven Health plan through the state聽
of Illinois, have no other health coverage聽聽
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except what is permitted under the聽
IRS Other Health Coverage rule,聽聽
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not be enrolled in Medicare (including part聽
A), and cannot be claimed as a dependent on聽聽
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someone else's tax return (please note this does聽
not preclude married couples who file jointly).聽聽
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Employees who do not meet HSA eligibility may聽
be interested in MCAP flexible spending instead.
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There are many advantages to a health savings聽
account. An HSA offers triple tax savings:聽聽
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pre-tax or tax deductible contributions,聽
tax-free interest or investment earnings,聽聽
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and tax-free distributions when used for qualified聽
medical expenses. Active state employees can make聽聽
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tax-free withdrawals to pay for qualified medical聽
expenses for you and your eligible dependents.聽聽
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HSAs are portable, meaning the account remains聽
yours even if you change jobs, and they have聽聽
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no "use it or lose it" rule. Unused contributions聽
remain in the account each year, earning tax-free聽聽
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interest. If the employee invests HSA funds,聽
those funds remain in the investment account.聽聽
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HSAs offer the potential for long-term, tax-free聽
savings that can be used for future health care聽聽
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expenses including; out-of-pocket expenses after聽
retirement, Medicare and long-term care premiums聽聽
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up to IRS limits, and other certain long-term聽
care expenses. There are no income limitations.
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This completes the flexible spending聽
accounts and health savings account video聽聽
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in the New Employee Benefit Orientation series.聽聽
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Please continue to the next video to learn聽
more about the benefits available to you.
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