How The Plan Works

There are basically four steps to maximizing the advantages made possible through the Reimbursement Accounts...

As a new hire—and then each year during Open Enrollment—you decide if you want to participate in either or both Reimbursement Accounts during the coming year. Your election does not roll over automatically; you must actively enroll for each year in which you want to participate.

Before indicating your contribution amount, you should estimate how much you think your health care, and day care or elder care expenses will be for the coming year. (Each Open Enrollment, A&B provides "expense estimators" you can use to help you make this estimation.)

Then, decide how much you want to put into the applicable pre-tax Reimbursement Accounts for the Plan Year. Note that contribution amounts are subject to the Account limits as described under "Contribution Limits" of the Health Care and Dependent Care sections, respectively. If you enroll...

• As a new hire, the amount you contribute may be used for expenses you incur after your date of hire through December 31.

• During Open Enrollment, your contribution amount may be used for expenses you incur starting the following January 1 through December 31.

Once you enroll, your contributions will be deducted from your pay in equal installments during the Plan Year, before Federal, state and Social Security taxes are withheld. These pre-tax dollars are deposited into your Account(s) where they are available for reimbursement of your eligible expenses.

After incurring an eligible expense, you may submit a claim for reimbursement from the appropriate Account. Alternative methods for reimbursement will be described in your enrollment packet.

How The Accounts Can Help You

Reimbursement Accounts are like two benefits in one: First, they provide a convenient way for you to set money aside to pay for predictable expenses. Second, they can reduce the income taxes you pay.

• The HCRA lets you use the FlexSolutions credits and/or pre-tax dollars you contribute to pay for eligible medical, dental, and vision care expenses you or your eligible dependents incur, and which are not covered (or fully covered) by your health care plan.

• The DCRA lets you use the FlexSolutions credits and/or pre-tax dollars you contribute to pay for the day care or elder care of your legal dependents if the care is needed in order for you and your spouse (or you only if you are single) to work or look for work.

The table below illustrates potential tax savings for a married individual earning $50,000 annually who contributes 5% of earnings to the health care reimbursement account (HCRA). Tax savings will vary depending on your salary, health care expense amount, and tax filing status.

Note, the above example is an estimate based on 2008 tax tables and is shown for illustrative purposes only. The example assumes a married individual filing jointly, using the standard deduction and no other income. It does not include estimated state taxes or additional savings from pre-tax payroll deductions for health care premiums. Of course, the IRS also offers alternative tax credits and deductions for dependent care and health care expenses. These alternatives are discussed under The Health Care Account or Federal Tax Deduction? and The Dependent Care Account Or Federal Tax Credit?, respectively.

Other Important Facts To Consider

• Just as with your other FlexSolutions elections, the contribution amount you elect remains in effect the entire Plan Year. The only time you may change your Dependent Care contribution amount is if you have a qualifying change in status and you notify your local Human Resources representative within 31 days to adjust your contribution amount(s) accordingly. (For more details on status changes, see Changing Your FlexSolutions Elections During the Year.)

• The Reimbursement Accounts are "use it or lose it" benefits. You have until March 31 of the next year to file claims for expenses incurred through December 31 of the current year. Any money left in a Reimbursement Account after the close of this period must be forfeited according to IRS rules. Therefore, it is important to estimate your expenses carefully, and to track your usage of your Account(s)—you will receive periodic statements indicating your Accounts' activity and balance. (For additional information, see Reimbursement Account Rules.)