Reimbursement Accounts allow you to pay health care and dependent care expenses with earnings on which you pay no federal, state or social security taxes. This benefit reduces your overall tax liability and saves you money. You select an amount to be deducted from your pay and deposited into a reimbursement account on a pre-tax basis. You pay for expenses as they occur, then submit a claim to recover these paid costs from your Reimbursement Account with tax-free dollars. You must re-enroll in this benefit annually during the open enrollment period each fall for the plan year of January 1 - December 31.
The plan is governed by IRC guidelines that limit the reimbursement of either health care expenses or dependent care expenses to legal dependents. Expenses for same-sex spousal equivalents are not eligible for reimbursement as spouses, unless married, but may be eligible if the same-sex spousal equivalent meets the definition of a qualifying relative as defined below or in Internal Revenue Code Section 152:
- Is any of the following: your child, grandchild, stepchild, foster child or adopted child; brother, half-brother or stepbrother; sister, half-sister or stepsister; nephew or niece; the child or grandchild of any of the relatives listed above; your father, grandfather or stepfather; mother, grandmother or stepmother; uncle or aunt; or son, daughter, father, mother, brother or sister in law. Or, any other person who will reside with you for the entire year (while not in violation of local law).
- Will not be claimed by any other person as a qualifying child for the calendar year
- Is a citizen, national or resident of the US; or a resident of Canada or Mexico (unless the person is an adopted child)
- And, you will provide more than 50% of this person's support for the calendar year
In addition to the above, for the dependent care account, a qualifying relative:
- Will reside with you for more than half the year
- Disregard temporary absences due to illness, education, business, vacation, or military service. You must maintain a home for the person during the temporary absence and the person must be expected to return after the absence.
- Will regularly spend at least eight hours a day in your home
- Will not file a joint tax return with his/her spouse for the calendar year (unless the qualifying relative is your spouse)
Health Care Reimbursement Account
This account can help reduce your costs for co-payments and deductibles associated with health care and dental insurance, and pay for non-covered expenses such as eye glasses or adult orthodontia. There is a $2,550 maximum contribution amount.
Dependent Care Reimbursement Account
This account may be used to pay dependent care expenses for children under the age of 13, aging parents or dependent adults. There is a $5,000 maximum contribution amount per family.