TaxSaver Dictionary

This list of definitions is intended to help you understand your Flexible Spending Account.

1. FSA: This is a shortened term for a Flexible Spending Account. Flexible Spending Accounts allow you to use pre-tax dollars that you elect to set aside in an account to reimburse yourself for qualified out of pocket expenses. The FSA account may be funded solely with participant dollars or the Employer may contribute dollars to the FSA accounts or there may be a combination of both participant and Employer dollars. There are 3 types of FSA accounts and both accounts have a Use-It-Or-Lose it provision.

2. Health Care Reimbursement Account: This is a FSA for eligible out of pocket health, dental, vision, prescription and over the counter expenses defined as “eligible” under your Employer’s Plan. This is often referred to as a Health FSA or a General Purpose Health FSA.

3. Limited Purpose FSA: This is a FSA that is offered along with a HSA. A Limited Purpose FSA is eligible for dental and vision expenses. Some Limited Purpose FSAs also include post-deductible expenses. A post-deductible expense is eligible under a Limited Purpose FSA when you and/or family members have met your deductible under the HDHP qualified insurance plan offered by your employer.

4. Dependent Care Reimbursement Account: This is a FSA for eligible day care expenses paid so that you and your spouse can provide care for your eligible tax dependents (Qualified Dependents) while you are at work.

5. Health Reimbursement Arrangement (HRA): A HRA should not be confused with a FSA. A HRA is strictly funded with Employer dollars and it is offered in conjunction with a HDHP – High Deductible Health Plan. There may also be a carryover provision under a HRA.

6. Health Savings Account (HSA): A HSA is different from a HRA in that the account can be funded with employee dollars or employer dollars or a combination of both. A HSA is operated by a trust and there is no requirement to substantiate the expense when a withdrawal is made. Dollars may be carried over from year to year, and unlike a HRA, the account is portable, so you may take it with you if you were to leave your Employer. These accounts are also offered in conjunction with a HDHP and if you are a participant in a HSA, your eligibility for other benefits, like a FSA or HRA, will be limited.

7. Qualified Dependent: A Qualified Dependent is an individual who satisfies the requirements defined by the IRS in Code Section 152 as a qualified child or qualified relative of the participant in the Plan. If your dependent does not qualify as a qualified child or a qualified dependent, their expenses will not be reimbursable under the FSA Plan.

8. Plan Year: A Plan Year is designated by your Employer. The Plan Year determines when expenses may be incurred for reimbursement. A Plan Year is never more than 12 months long, but it can be less if your Employer offers a Short Plan Year.

9. Incur: This term is used to determine when expenses are eligible for reimbursement. The incur date is the service rendered date, not the date that the bill is paid or the date that the provider charges you for the service. The service rendered date must fall within the Plan Year (some exceptions may apply – see item 26).

10. Eligible Expense: An eligible expense is an expense that has been defined as reimbursable by the IRS under the Plan. A list of eligible expenses can be found on the TaxSaver Plan website. Please do not refer to Publication 502 as a guide, as many expenses that can be deducted on your tax return do not qualify for the FSA Plan. In general, eligible expenses consist of services and items that are used to prevent or alleviate a disease, condition or malfunction of the body.

11. Open Enrollment: Open Enrollment is the period of time that is designated by your Employer as the time to elect your benefits for the following Plan Year. This is the only time of year when you may elect to make a change to any of your pre-tax benefits without experiencing a qualified Change in Status.

12. Change in Status: A Change in Status is a qualified event, as defined by the IRS that would allow a participant to make a change to their pre-tax elections once the Plan Year has begun. For all intents and purposes, once you have made your election and the Plan Year has started, you are locked into that election for the length of the Plan Year. A qualified Change in Status, if recognized by your Employer’s Plan, may allow you some flexibility in changing your current election mid Plan Year. This may involve revoking, increasing or decreasing the election. A Change in Status will result in an election change only when the change directly affects the eligibility of the current coverage and when the change is consistent with the Change in Status.

13. Claim Form: A Claim Form is a signed form that should accompany your receipts for reimbursement. Without a signed Claim Form, TaxSaver Plan cannot accept the claim for processing. Claim Forms are available on our website. If you are submitting a receipt to substantiate a FSA debit card expense, you are not required to complete a claim form, but you should always include something that identifies you and your Employer. Please do not submit a receipt by itself.

14. Receipt: Receipts are required to substantiate the FSA expenses. A receipt is defined as a statement from a third party provider that includes the date the service is rendered, the type of service rendered or the items purchased and the amount owed to the provider. Receipts should also include the provider information. For dependent care receipts from an individual provider, the signature of the day care provider should always be included.

15. FSA Debit Card: A FSA Debit Card is provided to participants by the Employer. Not all Employers offer this card. A FSA Debit Card is a credit card – Mastercard – that is accepted at eligible providers as determined by the Plan. Mastercard assigns the provider a merchant code that determines whether the card is accepted or denied at the point of sale.

16. Merchant Code: A merchant code is a 4 digit number that is assigned by Mastercard to any vendor that accepts Mastercard. For a listing of merchant codes that are allowed under a FSA Plan, please refer to the Debit Card page on TaxSaver Plan’s website.

17. Receipt Notification: A receipt notification is a notice sent by TaxSaver Plan after a FSA debit card has been used at an eligible provider. The IRS requires that FSA debit card swipes be substantiated when the swipe does not match the co-pay for that service under the Employer’s health plan. A receipt notification is sent via email or mail, depending on your Employer. You are given a 35 day window of time to submit your receipts.

18. Recurring Charge: A recurring charge is defined as a charge seen on the FSA Debit Card from the same vendor in the same amount. A recurring charge can only be determined to be recurring after the charge has been paid for with the FSA Debit Card two (2) times.

19. An Approved FSA Debit Card Transaction: If you view your account on the TaxSaver Plan website, the FSA Debit Card transactions are listed at the bottom of the screen. If the transaction shows to be approved, this means that TaxSaver Plan is not in need of a receipt for that expense or you have submitted the requested receipt at that time.

20. A Pending FSA Debit Card Transaction: If you view your account on the TaxSaver Plan website, the FSA Debit Card transactions are listed at the bottom of the screen. If the transaction shows to be pending, this means that TaxSaver Plan is in need of a receipt for that expense. If you have submitted the requested receipt, please contact TaxSaver Plan to verify that the receipt was received and that we were able to process it.

21. Account Balance: An account balance available in your account is the dollars remaining in the Health FSA. This amount is derived by taking the total annual election and subtracting the total dollars distributed from the Plan for eligible expenses submitted for reimbursement, and any expenses applied to the flex debit card.

22. Cash Balance: The cash balance available in your account is the cash remaining in the FSA account. This amount is derived by taking the dollars that you have contributed to the Plan and subtracting the total dollars distributed from the Plan for eligible expenses submitted for reimbursement. Please note that it is possible to show a negative cash balance in the Health FSA at anytime during the Plan Year. It is not possible to show a negative cash balance in the Dependent Care FSA.

23. Claims Run Out Period: A run out period is the amount of time after the Plan Year has ended that your Employer allows participants to submit expenses that were incurred during the previous Plan Year.

24. Use-It-Or-Lose-It: This is a term used to explain the forfeiture procedure at year end. After the Run Out Period ends, any unclaimed dollars will be forfeited back to the Employer, unless your plan offers a rollover of funds up to $500.00 (see ‘Rollover’ below)

25. Cash In/Cash Out: This term is used to describe how Dependent Care claims are paid. A participant in the Dependent Care Account will never be reimbursed more than they have contributed to the Plan at any given time during the Plan Year. Much like a bank account, claims remain pending against the account until more dollars are contributed to the account.

26. 2 1⁄2 Month Extension: This is a provision of the Plan that may or may not be offered by your Employer. Should your Employer offer this provision, you will be allowed an additional 2 1⁄2 months after the Plan Year ends to incur expenses. When you incur an eligible expense during the first 2 1⁄2 months of the new Plan Year and if you submit that expense during those first 2 1⁄2 months, the claim will be reimbursed first from the previous Plan Year balance, if you have a remaining balance. If you do not have any dollars remaining in the previous Plan Year, the claim incurred and submitted during the 2 1⁄2 month extension period will be reimbursed from the current Plan Year dollars.

27. Terminated Participant: A Terminated Participant is a person that is no longer eligible to participate in the Plan based on the Employer’s eligibility requirements. A person may become a Terminated Participant due to a layoff, a change in hours, a change in classification or a resignation.

28. COBRA: COBRA is a continuation of existing coverage. COBRA is offered to Health FSA participants who have not been reimbursed the total amount contributed to the Plan during the Plan Year. A COBRA election allows the Terminated Participant to remain an active participant in the Plan. The Terminated Participant who elects COBRA will be able to continue to submit expenses incurred after the date of termination, assuming that the Terminated Participant makes the scheduled payments as outlined in the COBRA agreement. The COBRA offering for Health FSA participants is not in conjunction with any other COBRA offerings. COBRA contributions for Health FSA Plans are generally made on an after-tax basis. The COBRA election ends on the last day of the Plan Year, assuming that you continue making your after-tax payments through the end of the Plan Year, as scheduled.

29. HDHP: A HDHP is a High Deductible Health Plan which is a health insurance plan offered by your employer. In order for an employee to participate in a HSA, a HDHP must be offered and meet certain government requirements. A HDHP does not always include a HSA offering.

30. Qualified Beneficiary: A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee’s spouse, or an employee’s dependent child. In certain cases, a retired employee, the retired employee’s spouse, and the retired employee’s dependent children may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

31. Qualified Event under COBRA: Qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

Qualifying Events for Employees:

  • Voluntary or involuntary termination of employment for reasons other than gross misconduct
  • Reduction in the number of hours of employment

Qualifying Events for Spouses:

  • Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
  • Reduction in the hours worked by the covered employee
  • Covered employee’s becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee

Qualifying Events for Dependent Children:

  • Loss of dependent child status under the plan rules
  • Voluntary or involuntary termination of the covered employee’s employment for any reason other than gross misconduct
  • Reduction in the hours worked by the covered employee
  • Covered employee’s becoming entitled to Medicare
  • Divorce or legal separation of the covered employee
  • Death of the covered employee

32. Health Care Reform: The Patient Protection and Affordable Care Act (PPACA), commonly called Obamacare or the Affordable Care Act (ACA), is a United States federal statute signed into law by President Barack Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act, it represents the most significant government expansion and regulatory overhaul of the country’s healthcare system since the passage of Medicare and Medicaid in 1965.

The ACA aims to increase the quality, affordability, and rate of health insurance coverage for Americans, and reduce the costs of health care for individuals and the government. It provides a number of mechanisms—including mandates, subsidies, and insurance exchanges—to increase coverage and affordability. The law also requires insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or sex. Additional reforms aim to reduce costs and improve healthcare outcomes by shifting the system towards quality over quantity through increased competition, regulation, and incentives to streamline the delivery of health care. The Congressional Budget Office projected that the ACA will lower both future deficits and Medicare spending.

On June 28, 2012, the United States Supreme Court upheld the constitutionality of most of the ACA in the case National Federation of Independent Business v. Sebelius. However, the Court held that states cannot be forced to participate in the ACA’s Medicaid expansion under penalty of losing their current Medicaid funding.

33. True Up: A technology developed by TaxSaver Plan to facilitate FSA and HRA Debit Cards. When offered by the Employer*, participants enrolled in the Employer’s health plan will not be asked for receipts when they use their FSA or HRA Debit Card during the plan year and ensuing 2 1/2 Month Extension period. During the year, TaxSaver Plan accumulates electronic FSA and HRA claims data from insurance carriers. If the claims data does not match the exact dollar amount the card was used for, the data will apply to any unverified debit card transactions to off-set the amount, as allowed by IRS regulations. After the Claims Run Out period ends, a final True Up is performed on each participants account. If there are not enough claims reported by the insurance carriers to off-set the debit card transactions, TaxSaver Plan will contact the participant to True Up any dollar amounts outstanding after the Claims Run Out period has ended.

*In order for an Employer to offer True Up, the insurance carrier must be willing to send electronic claims data to TaxSaver Plan on a pre-agreed upon timeline.

34. Over the Counter Items: Once upon a time in the FSA world, a list of eligible over-the-counter items existed that allowed participants to use their General Purpose Health FSA dollars for just about any over- the-counter item that was not considered to be a supplement or vitamin. January 1, 2010, the list of eligible over-the-counter was greatly reduced by law and the items once purchased to treat the common cold or headache were no longer considered to be eligible items without being accompanied by a prescription from a licensed physician. Thousands of items are still eligible for reimbursement without a prescription. Here are just the top 10!

  1. Contact Lens Solution
  2. Band-Aid Bandages or Flexible Fabric Adhesive Bandages
  3. SPF-15 and above Sunscreen
  4. Vaporizers
  5. Breast Pumps
  6. Digital Thermometers
  7. First Aid Kits
  8. Instant Hot & Cold Compresses
  9. Ankle, arm, knee Braces
  10. Reading Glasses

35. Commuter Benefit Plan: A commuter benefit plan is often offered by Employers to allow their employees to pay for work related parking, transit and even bicycle expenses on a pre-tax basis. This benefit is not a part of the Cafeteria (FSA) Plan. Monthly limits are established each year by the IRS in regards to this benefit plan. Eligible pre-tax expenses include: public transportation, vanpools, commuter highway vehicles, and parking at or near the employee’s workplace. In addition, parking at a location from which an employee commutes to work, (via public transit, vanpool or carpool), is also a qualified expense as well as certain expenses that apply to the bicycle an employee uses to commute to work each day. These plans do not operate under Use It Or Lose It as long as maintain in the employment of your employer and eligible for the benefit.

36. Explanation of Benefits (EOB): An EOB is a document provided to you by your insurance carrier after an claim for services has been filed by your provider and processed by the insurance carrier. Often, the EOB can be obtained online when you log into your insurance carriers website. The EOB is an excellent form of documentation for a FSA reimbursement request and usually required for a HRA reimbursement request. These documents can also substantiate debit card transactions, in most cases.

37. Automatic Adjudication: This term applies to debit card transactions. If a debit card transaction is automatically adjudicated, it means that TaxSaver Plan will not request additional information to verify that the card was properly used for eligible expenses, as defined under the Plan.

38. Off Set: This term applies to debit card transactions. If a debit card transaction is off Set, it means that documentation has been provided by the participant or directly from the insurance carrier to satisfy the pending debit card transaction with an eligible FSA or HRA expense from another eligible source. Off Sets are allowed by the IRS to verify and approve debit card transactions.

39. Claim Return: A Claim Return occurs when the documentation submitted by the participant is not enough to meet the requirements of the IRS. The documentation is missing something that the IRS states is necessary to process and pay out the claim submitted.

40. Rollover: If you have a remaining balance in your Health FSA once the current plan year ends, the ‘rollover’ feature (optional on plans without an extension) will allow TaxSaver Plan to access those funds for reimbursement purposes during the next plan year, up to $500.00.

41. Stockpiling: This usually refers to large quantities of over-the-counter items being purchased at once and submitted for reimbursement. Buying any more than five of the same item could be considered “stockpiling.”   A product you’re purchasing should be for you, your spouse or a qualified dependent that could be used/consumed properly during the plan year. TaxSaver Plan will allow up to 5 duplicate items per receipt to be submitted once per month. Additional quantity submissions will be denied.