Flex Spending Accounts can save you money, but only if
you act quickly
By DEBORAH STAYMAN
If you are a PEF member in the state’s PS&T bargaining unit, you can cut your
income tax bill by using pre-tax income to pay for your out-of-pocket health
care and dependent care expenses in 2007. And the state will even help you pay
for your dependent-care expenses.
Consider carefully, but don’t put off the decision, because your chance to sign
up for either or both of these programs starts September 25 and ends November 10
of this year.
Even if you are already enrolled for 2006, you need to re-enroll for 2007 in
these flexible spending accounts — PS&T contract benefits PEF negotiated.
Enrolling in either benefit is voluntary. Savings will vary depending on your
annual income, the number of dependents you claim on your taxes, and the amount
of money you contribute through payroll deductions to your Health Care Spending
Account (HCSA) and/or Dependent Care Advantage Account (DCAA).
How does HCSA work?
If eligible, you may contribute any amount from $100 to $4,000 annually in
pre-tax dollars from your pay to a HCSAccount to pay for out-of-pocket medical,
dental or vision costs not reimbursed by health insurance. You can be reimbursed
from your HCSAccount for such things as co-pays for prescription drugs, dental
implants and orthodontia, fees paid to non-participating providers, deductibles,
laser eye surgery, contact lenses and even for certain over-the-counter drugs
Unfortunately, the debit-card program that was supposed to start January 1, has
hit a snag. The state assured PEF as recently as June 13 that this program,
which PEF negotiated with the state under the current PS&T contract, was on
track to begin January 1, 2007.
However, on July 26 the state informed PEF it is being postponed, citing very
recent changes in Internal Revenue Service guidelines affecting the kinds of
transactions that can be paid for with HCSA debit cards. Also, the state for the
first time announced it intends to charge employees a $20 annual fee to
participate in the debit card program.
While the state acknowledged its obligation to obtain PEF’s agreement before any
fee is charged, the operational confusion caused by the IRS rulemaking caused
the state to postpone the program. If these new issues can be resolved, the card
might be implemented mid-year. Check the Health Benefits section of www.pef.org
and The Communicator for updates.
What about DCAA?
If you pay a caregiver to care for your child, elderly parent, or disabled
spouse in order to work, you can set aside up to $5,000 in pre-tax salary
through payroll deduction into a DCAAccount to help pay for these expenses in
2007. Not only will you reduce your income tax bill, the state will contribute
money to your DCAAccount. The amount it contributes depends on your annual
salary. The smaller your salary, the bigger the contribution.
The 2007 employer contribution rates are:
• $700 for salaries less than $30,000;
• $600 for $30,001 to $40,000;
• $500 for $40,001 to $50,000;
• $400 for $50,001 to $60,000;
• $300 for $60,001 to $70,000; and
• $200 for more than $70,000.
Examples of expenses eligible for DCAAccount reimbursement include: child care
expenses (up to age 13) for workdays, summer day camp, and before/after school
programs; and adult day care, home aide, and housekeeper or cook if they provide
Easy to enroll
To enroll in either the HCSA or DCAAccount, estimate your annual out-of-pocket
costs, and decide how much money to have withheld from your paycheck. Be
conservative because you will lose any remaining funds at the end of 2007. Once
enrolled, you can mail or fax claims for reimbursement by check or direct
A streamlined enrollment process allows you to enroll on-line at
Or you can enroll by calling 1-800-358-7202 and a customer service
representative will take your application over the phone.