DEPENDENT CARE AND HEALTH CARE SPENDING ACCOUNTS
 AT AUGUSTA STATE UNIVERSITY

The Treasury Department and the IRS announced that some over-the-counter drugs can be paid for with pre-tax dollars through health care flexible spending accounts, effective September 3, 2003.  Additional information on the IRS over-the-counter drug ruling can be found at www.irs.gov/pub/irs-drop/rr-03-102.pdf.

Also, there are new reimbursement forms for the flexible spending accounts.  These forms can be found at www.aug.edu/personnel/forms or you can pick one up from the Business Office or Personnel Services.

SUMMARY OF PLAN PROVISIONS

The health and welfare of you and your family is important to Augusta State University and we recognize that safeguarding both is frequently a difficult and expensive task.  Single parents and families in which both spouses work outside the home often have significant dependent care expenses, and in spite of your health and dental insurance benefits, many of you may still incur a variety of health care expenses which are not covered by your insurance plan.  To assist you with these kinds of expenses, we are offering you the opportunity to participate in the Augusta State University Flexible Spending Account Plans for Dependent Care and Health Care.  These spending account plans allow you to pay for those dependent and/or health care expenses with before-tax dollars.

Under a spending account arrangement, you make contributions to the account from your salary each pay period - before payroll taxes are computed - and are then reimbursed for eligible expenses from your Flexible Spending Account (s) as you present your claim for payment.

This booklet is written with as few technical terms as possible, so that you will be aware of your rights and benefits.  Every effort has been made to make the booklet as complete and accurate as possible.  However, if any conflict should arise between this booklet and the Plans, the terms of the Plans will govern.

The Augusta State University Personnel Office will be happy to supply you with any available additional information so that you will have a more complete understanding of the benefits to which you are entitled.

Before deciding to participate in a Flexible Spending Account Plan, you may wish to consult a tax advisor.
 
 

 EFFECTIVE DATE, ELIGIBILITY AND CHANGE IN ELECTIONS

Effective Date

The plan year will cover  January 1st  thru December 31st of each year.  All subsequent plan years will also be on a 12-month period beginning on the January 1st  plan anniversary.
 

Eligibility and Elections

All regular, benefit eligible employees can participate in the Medical and Dependent Care Reimbursement Plans.

To open your spending account, you must make an election by completing an election form and returning it to the Augusta State University Personnel Office.  If you do not complete the election form on a timely basis, you will be deemed to have elected not to make any salary reduction contributions to pay for eligible dependent and/or health care expenses you may incur during the plan year.
 

Change in Elections

Your election of the flexible spending account from a previous year will not automatically continue into a new plan year; therefore, you must re-enroll in the flexible spending account each plan year.  You may only change your elections once a year, prior to the plan anniversary date, unless there is a change in your family status (I.E., MARRIAGE, DIVORCE OR LEGAL SEPARATION; DEATH OR DISABILITY OF DEPENDENT; BIRTH OR ADOPTION OF CHILD; CHANGE IN THE CONTRIBUTION REQUIRED FOR BENEFITS PROVIDED BY SPOUSE’S EMPLOYER; CHANGE IN EMPLOYMENT STATUS OF SPOUSE; CHANGE FROM FULL-TIME TO PART-TIME EMPLOYMENT OR VICE VERSA BY YOU OR YOUR SPOUSE; UNPAID LEAVE OF ABSENCE BY YOU OR YOUR SPOUSE.)  If you experience such a change, you will be permitted to change your benefit to accommodate that change.  The change must, however, be consistent with one or more of the changes listed above.  Change in elections must be submitted to the Personnel Office.
 

 

 GENERAL RULES FOR SPENDING ACCOUNTS

When you are first eligible to participate in the Augusta State University Flexible Spending Account Plans, and prior to each plan year, you may elect to contribute a portion of your salary to your individual spending account(s) to pay for eligible dependent care and/or health care costs you will incur during the plan year.  Your contribution is made on a salary reduction (i.e., before-tax) basis.

Your contributions for a plan year to the Spending Account can only be used to reimburse (repay) eligible health care or dependent care expenses which you incur for yourself and/or eligible members of your family during the plan year.

Expenses that you incur in excess of your account balance at the end of the plan year cannot be reimbursed nor carried forward for reimbursement in a subsequent plan year.

Use-It-Or-Lose-It Rule For Spending Accounts
 

The IRS has imposed several rules regarding the use of spending accounts.  The most significant rule is the USE-IT-OR-LOSE-IT Rule.  Unused funds at the end of the year must be forfeited and cannot be returned in any manner.  Because of this rule, it is very important that employees estimate their eligible expenses very carefully and conservatively.  If employment should terminate during the plan year, all contributions to the spending account will cease, effective the date of termination.  However, employees will be entitled to submit claims for eligible expenses through the end of that plan year or until the account has been depleted, whichever comes first.
 
 

 HEALTH CARE SPENDING ACCOUNT

Contributions

The amount of salary which can be contributed to the Spending Account is limited to $3,600.00 per plan year.  The annual amount you decide to contribute will be deducted as a fixed amount from each paycheck and is not subject to Federal, State or FICA (Social Security) tax.

Eligible Expenses

In general, Health Care expenses for you and your dependents are eligible for reimbursement (See IRS Publication 502, www.irs.gov,  for more details) from your Flexible Spending Account if they:
 

? Would qualify as a medical expense for Federal income tax purposes under Section 213 of the Tax Code; however, contributions made by your spouse to a group health plan provided by his or her employer can not be considered an eligible expense for reimbursement.

? Have not been and will not be reimbursed by the Augusta State University medical insurance plan or by another employer’s group health insurance plan, and

? Have not been and will not be deducted on your income tax return.
 

Eligible reimbursable expenses (See IRS Publication 502, www.irg.gov ,for more details) under this plan to include-but are not limited to:
 

? Otherwise unreimbursed medical expenses (including deductibles, and co-payments) for hospital, physician, prescription drug, dental and vision care;

? Uncovered health services such as prescription glasses, hearing aids and orthodontia;

? Routine checkups and physicals;

? Physical fitness programs, smoking cessation clinics and weight loss institutions when prescribed by a health practitioner for a specific health condition;

? Some Cosmetic surgery (See IRS Publication 502); and
 

? Long term rehabilitation services (alcoholism and drug abuse).

See IRS Publication 502, www.irs.gov,  for further information on the types of health care expenses eligible for reimbursement or contact the Augusta State University Personnel Office.
 
 

 DEPENDENT CARE SPENDING ACCOUNT

Contributions

If you are married and file a joint tax return, file as head of household, or single, you may elect to contribute up to $5,000.00 per plan year to your dependent care spending account.  The limit is $2,500 if you are married and file a separate tax return.  These limits are imposed by the Tax Reform Act of 1986.

Your contribution is deducted in equal amounts from each of your paychecks.  This means that the maximum amount that you can contribute to the Dependent Care Spending Account Plan per plan period is:

? $416.66 per month for employees on a 12 month contract,
? $500.00 per month for faculty on a 10 month academic, or
? $192.30 for each of 26 pay periods for hourly employees paid bi-weekly.

Additional Employment and Earnings Limitations

If you are married, generally both you and your spouse must be employed in order to use this plan to reimburse your eligible dependent care expenses.

However, during any month in which your spouse is a full-time student at an educational institution or is physically or mentally unable to take care of himself or herself, your spouse will be deemed to have a monthly salary of $200 if there is one dependent, or $400 if there are at least two dependents who qualify for assistance under the Dependent Care Flexible Spending Account Plan.
 

The amount by which you may reduce your salary to make pretax contributions for dependent care expenses is limited to the lesser of your earned income or the earned income of your spouse.
 

Eligible Expenses

Eligible Dependent Care Expenses are work-related expenses (See IRS Publication 503, www.irs.gov) incurred for qualifying individuals (see next subsection).  These expenses include housekeeper (when babysitting services are included), babysitter, licensed day care center costs and schooling costs for children not yet in the first grade.  Costs which are not eligible include transportation and overnight camping costs and schooling costs for children in the first grade or above.

You may be reimbursed by this plan for payments you make to a relative who provides dependent care services except for payments you make to your child or other dependents.  You must provide Augusta State University with the name, address and taxpayer identification number of the individual or organization providing care, unless that individual or organization is tax exempt.  In addition, you must provide a receipt from the service provider which identifies the service received, name of the child or children to whom service was provided and dates of service.

Qualifying Individuals

Individuals who qualify as dependents for the purpose of this plan are your dependent children age 13 or under and any other individuals who reside with you, and who rely on you for more than half of their support, or are physically or mentally unable to care for themselves.

If you are divorced or legally separated, you can generally have your child’s Dependent Care Expenses reimbursed if you are the custodial parent; i.e., if you have custody of the child for a longer period of time during the plan year than the other parent.

The following exceptions would override the custodial parent rule and permit you, as a non-custodial parent, to have your child’s dependent care expenses eligible for the Flexible Spending Account:

? The custodial parent formally released claim to the Federal income tax dependent exemption for the tax year;

? You provide over half of the support of the child under a multiple agreement; or

? You are entitled to the dependent exemption for Federal income tax as a result of an agreement executed prior to 1985.
 

Alternative Source of Dependent Care Assistance

Section 129 of the Internal Revenue Code also allows a Dependent Care Income Tax Credit which may apply to your dependent care costs.  You cannot use the same dependent care expenses for both the Spending Account Plan and the Tax Credit.  Also, the dollar limit available under the Tax Credit is reduced dollar for dollar by the amount used under the Spending Account.  You will want to consider carefully which option will give you the greater tax savings.

Reporting Requirements

Effective in 1989, as a condition to the Dependent Care credit or exclusion, a taxpayer must provide the name, address, and taxpayer identification number of the dependent care provider.
 

 EFFECT OF THE PLAN ON OTHER BENEFITS

The salary dollars you contribute to a Spending Account are not subject to Federal, most State taxes or FICA taxes, and will not be included in the income reported on your W-2 forms.

Some of the benefits provided by Augusta State University (i.e., Teachers Retirement, group life insurance benefits, long term disability) are determined on the basis of your earnings.  For the purpose of determining these benefits, the Spending Account Plan will provide that your earnings will be your earnings before any salary reduction contributions to the spending account plan are taken into account.

However, under present law, your earnings for the purpose of determining your maximum contribution to a tax-sheltered deferred annuity plan and your Social Security benefits do not include salary reduction contributions made under the Augusta State University Flexible Spending Account Plans.  In almost all cases, the value of the FICA, Federal, and State income tax savings to you should substantially exceed the reduction in your eventual Social Security benefits.

 CLAIMS INFORMATION

In order to receive reimbursement for an eligible claim for health care or dependent care expenses, you must complete a claim form which is available on the Personnel Office website (www.aug.edu/Personnel). Please read each claim form carefully to be sure you have included all required information before you submit a claim to the Business Office.

Claims should total at least $25.00 when submitted for processing.  Flex-spending reimbursements are made by direct deposits once a week.  In order to meet the processing requirements, completed claim forms turned in by noon on Friday, should be in your bank account by the end of the day on Friday of the following week.  This schedule is subject to change for bank and school holidays, accounting month end, or year end closing requirements.

All requests for reimbursement must include complete and appropriate documentation.  Should you submit a claim for more than the current balance of your Dependent Care Spending Account, your claim will be returned and you will need to re-submit the claim when sufficient funds are available.  However, at the end of a plan year if the total funds remaining in your account are not sufficient to cover an entire claim, you will be entitled only to reimbursement of the remaining balance of your account.  Should you submit a claim for more than the current balance of your Health Care Spending Account, you may receive full reimbursement up to the annual salary reduction contribution elected.

To enable you to use your spending account for expenses incurred up to the end of the plan year, you may continue to submit claims for three months following the close of the plan year.  In order to be processed by month end, be sure all claims are turned in by the 20th of March.  Those claims must be for expenses incurred during the actual plan year.
 
 












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