Spending Accounts
Spending accounts are a great way to set aside tax-free dollars through payroll deductions while putting away money for health care, dependent care or transportation expenses.
Health Care FSA
The health care FSA allows you to contribute up to $3,050 on a pre-tax basis to pay for health care expenses for yourself and covered dependents not paid by insurance or by another cafeteria plan. Unused funds will be forfeited at the end of the plan year period.
You may not participate in the health care FSA if participating in the HSA. Any unused health care FSA funds will be forfeited on December 31 if you are transitioning to the HSA on January 1 and want to receive the HSA company contribution for the year.
The following example illustrates how the health care FSA can reduce the cost for medical expenses:
Bill is a single man who anticipates spending $500 a year in medical expenses, including his deductible, which will not be paid by his group insurance.
| Without a Health Care FSA | |
|---|---|
| Bill’s annual earnings | $30,000 |
| Bill pays his taxes | – $6,795* |
| What is left after taxes | $23,205 |
| Bill pays his medical expenses | – $500 |
| Spendable income | $22,705 |
Here’s the same situation, but this time Bill uses his health care FSA to set aside money to pay for his medical expenses before he pays his taxes.
| With a Health Care FSA | |
|---|---|
| Bill’s annual earnings | $30,000 |
| Spending account contribution | $500 |
| Bill’s adjusted income | $29,500 |
| Bill pays his taxes | $6,682* |
| Spendable income | $22,818 |
*Tax rate equals 22.65% (15% federal and 7.65% Social Security)
Bill contributes $20.83 to his health care FSA each pay period. By the end of the year, he will have contributed $500. During the year, he will use his FSA benefits card or submit claims for his unreimbursed expenses totaling $500. When Bill uses his health care FSA in this way, he pays $113 less in taxes and will have an additional $113 of spendable income for the year.
Did you know?
You cannot transfer funds from one type of spending account to another, so think about which spending account meets you and your dependents’ needs. If you have questions regarding your spending account, contact Health Advocate at 866-799-2728.
Important FSA Reminders
- Estimate your qualified expenses carefully because you will forfeit any unused funds at the end of the plan year.
- As you incur eligible expenses, use your provided spending account benefits card or file a claim for reimbursement if you pay for them out of your own pocket.
- You have until April 30, 2025, to request reimbursement for expenses incurred in the 2024 plan year for the health care FSA and dependent care FSA.
- If you have funds remaining in your 2023 health care FSA and/or dependent care FSA and you incur an eligible expense between January 1, 2024, and March 15, 2024, those funds will be paid from your 2023 funds.
Dependent Care FSA
The dependent care FSA allows you to contribute up to $5,000 on a pre-tax basis to pay for qualified dependent care expenses (daycare centers, elderly care facilities, etc.). This account cannot be used for health care expenses. Unused funds will be forfeited at the end of the plan year period.
The following example illustrates how the dependent care FSA can reduce the cost for dependent care expenses:
Laura is married with two children. Each month, Laura pays $400 in day care expenses.
| Without a Dependent Care FSA | |
|---|---|
| Laura’s annual family earnings | $40,000 |
| Family pays its taxes | $14,260* |
| What is left after taxes | $25,740 |
| Laura pays dependent care expenses | $4,800 |
| Spendable income | $20,940 |
| Year-end tax credit** | $960 |
| Total | $21,900 |
Here’s the same situation with Laura using a dependent care FSA to reduce her day care expenses.
| With a Dependent Care FSA | |
|---|---|
| Laura’s annual family earnings | $40,000 |
| Spending account contribution | $4,800 |
| Adjusted family income | $35,200 |
| Family pays its taxes | $12,549* |
| Spendable income | $22,651 |
| Year-end tax credit | $0 |
| Total | $22,651 |
*Tax rate equals 22.65% (15% federal and 7.65% Social Security)
**Any reimbursements received through participation in the dependent care FSA are not eligible for the IRS Dependent Care Tax Credit and reduce the amount of eligible expenses that can be claimed under the tax credit. Each associate will need to determine which option is best for their situation.
Laura deposits $400 each month into her dependent care FSA before she pays her taxes. After she pays her day care expenses, she submits a claim and is reimbursed with pre-tax dollars from her account. When she uses her spending account this way, Laura pays approximately $63 less in taxes each month, giving her family $751 in extra spendable income for the year.
Note: To prevent the company’s dependent care FSA from being characterized by the IRS as discriminatory—and therefore no longer eligible for favorable tax treatment—the plan administrator may reject or reduce contributions or benefits during the plan year to satisfy nondiscrimination requirements. For more information, review the cafeteria plan document.
Transportation Spending Account
The TSA allows you to have pre-tax dollars deducted from your paycheck to assist with the cost of parking, mass transit and vanpooling, such as bus, train and streetcar passes. You can contribute up to $300 per month for parking and $300 per month for mass transit and vanpooling through separate elections in My Workday. Expenses must be submitted within 120 days of the date incurred for reimbursement.
Note: Associates parking at HW-owned garages at Hancock Whitney Plaza & Hancock Whitney Center (old Whitney Bank garage) with current payroll deductions do not need to enroll in the parking TSA. Those pre-tax parking deductions will continue outside of the parking TSA.