Employee Handbook

Section 7 — Employee Benefits

The City provides a Flexible Spending Account (FSA) that allows for unreimbursed medical and dependent care expenses to be deducted from regular full-time and three-quarter part-time employees’ pay before Federal income tax withholding and Social Security taxes are calculated and deducted. The result is that taxable income is reduced by the amount of such premium payments and other allowable expenses. These plans are allowed under Section 125 of the Internal Revenue Code.

Health-related insurance premiums, which may be deducted on a pre-tax basis include the City’s medical and dental insurance plans. voluntary life (on self or dependents), long-term disability and accidental death and dismemberment insurances do not qualify for pre-tax premium payment.

Employees who are eligible for the City’s medical and dental plans automatically have their premiums deducted on a pre-tax basis unless they notify Human Resources in writing that they do not want to have their share of premiums deducted on a pre-tax basis. This must be done upon becoming eligible for the plans or during annual enrollment.

Dependent Care Account

With a dependent care flexible spending account, employees set aside funds to pay for dependent care expenses. Single employees and married employees that file joint federal tax returns can deposit up to $5,000 on a pre-tax basis per plan year for dependent care expenses. 

If you are employed, your spouse must be one of  the following:

• employed

• enrolled as a full-time student at least five months of the year

• disabled and unable to provide care on his or her own

Employees can use the money in a flexible spending account to pay dependent care expenses for the following:

• children under 13

• disabled children or spouses

• disabled parents who are your legal dependents

The money must be used to pay for the following costs of care:

• approved day care centers for the elderly

• nursery schools

• kindergartens

• day care centers for children

• home care by an individual who is not one of your dependents

Medical Expense Account

Full-time employees can set aside up to IRS maximum on a pre-tax basis per year in a medical expense account. Medical expense accounts can be used to reimburse health care expenses that are not reimbursable under health insurance, including insurance co-payments, deductibles and out-of-pocket expenses for dental and vision care.  

Employees can also use the money they deposit in a medical expense FSA to pay for the following:

• Costs that are not covered by medical, dental, or vision insurance, including deductibles, co-payments, treatments not covered by insurance, and charges in excess of reasonable and customary charges.

• Orthodontic treatments.

• Hearing care, including hearing aids and special telephones or televisions for those who are hard-of-hearing.

• Prescription medicines and drugs.

• Certain over-the-counter (OTC) medications, when accompanied with a prescription, that are used to alleviate or treat personal injuries or sickness, such as, but not limited to antacids, allergy medication, pain relievers, and cold medicines. Dietary supplements and other items purchased for good health or toiletries, such as vitamins, toothpaste, or face creams are excluded.

• Psychoanalysis and psychiatric therapy, including inpatient treatment.

• Chiropractic treatment.

• Medical equipment.

• Treatment for drug or Alcohol addiction.

• Transportation to necessary medical care, including ambulance services and mileage to and from appointments plus parking fees.

Additionally, the City has set up a Limited Purpose Expense Account that can be utilized by those members who are currently contributing towards a Health Savings Account. A Limited Purpose Expense Account can only be used for dental and vision expenses, not medical expenses.

Enrollment Criteria

Full-time employees are eligible to enroll in a medical expense FSA, a dependent care FSA, or both. However, before enrolling, employees should carefully review how much money they expect to spend in the coming year for covered expenses. Money deposited in a flexible spending account must be used by the end of the plan year or it will be forfeited. Also, money cannot be transferred between accounts. It is better to underestimate the amount of money deposited in a FSA than it is to overestimate and lose some of the money.

Employees who are participating in a Health Savings Account may only sign up for a Limited Purpose FSA, a dependent care FSA, or both.

New employees are eligible to enroll in FSAs within 30 days of employment. After that, employees can enroll each June for the following plan year for the Medical Expense Accounts and each November for the following plan year for the Dependent Care Account. Because of the tax laws, after employees elect to contribute to a FSA, they must continue to make the same contribution throughout the plan year. Human Resources has information on the limited circumstances where changes will be permitted.

Submission for Payment

If you have any funds remaining after the end of the plan year in either the Medical FSA or the Limited Purpose FSA, the balance remaining (up to an IRS maximum) will automatically roll over into the next plan year.

Employees who terminate their FSA mid-year, have 60 days to submit claims incurred while they were actively employed.

All other Employees have 60 days after the first of the year to obtain reimbursement for expenses incurred in the prior year.

Medical Flex Spending

Dependent Care Flex Spending