FSA Tax Advantages

2020 and 2021 Plan Year Information

Flexible Spending Account Tax Advantages and Limits

Nearly half of all U.S. benefits-eligible Morgan Stanley employees already take advantage of the tax benefits a Flexible Spending Account (FSA). With an FSA, you save money on things you already pay for – health care and dependent day care expenses – by paying with pre-tax dollars.

If you elect Options A or B or waive coverage, you can participate in:

  • Health Care FSA – 2020 and 2021 IRS limit of $2,750

If you elect Option C, you can participate in:

  • Limited Purpose FSA (for dental and vision expenses only) – 2020 and 2021 IRS limit of $2,750

If you elect Medical Plan coverage, or waive coverage, you can participate in:

  • Dependent Day Care FSA: IRS limit of $5,000, or $2,500 per adult if you file separately with your spouse or domestic partner (Lower limits may apply in certain circumstances)

Signing Up

You must elect to contribute to an FSA during Annual Enrollment , within 31 days of becoming benefits eligible, or within 31 days of experiencing a Qualified Life Event (QLE). FSA Elections do not automatically roll over from year to year.

Once you make your elections, your contribution will continue for the entire calendar year unless:

  • You terminate your employment with Morgan Stanley
  • You become ineligible to participate in the FSA
  • Your earnings are reduced to an amount less than your annual FSA election
  • Your contribution is reduced based on IRS nondiscrimination requirements, or
  • You change your election due to a QLE

Adding Funds to Your Flexible Spending Account

When you make your FSA election during enrollment, you choose your per paycheck contribution, up to the IRS limits. Your total election is prefunded in your account on January 1, and available for you to use. Your contribution payments, are deducted from your paychecks in installments throughout the year. You may not make changes to your FSA contribution election during the year except in limited special situations called Qualified Life Events (QLEs).

Using the Funds In Your Account

Health care FSA:

You use the money in your account to pay for eligible medical, dental, vision and prescription drug expenses, including deductibles, copays, coinsurance and certain equipment. For a full list of eligible expenses, see IRS Publication 502.

You can pay for health care expenses from your Health Care FSA in a few ways:

  • Elect to have your eligible out-of-pocket health care expenses (medical and dental) automatically reimbursed from your HCFSA. This means you will not need to submit claim forms. You can elect this automatic reimbursement feature on the Benefit Center website at the time you make your benefit elections. Certain benefits are not eligible for automatic reimbursement.  for details.
  • Submit claims by completing an FSA Claim Form (available on the Benefit Center website) and attaching an itemized bill or receipt, or the Explanation of Benefits from your plan administrator.

Make it easy: Choose to have your Health Care FSA reimbursement deposited directly into your U.S. checking or savings account by electing Direct Deposit on UHC’s website. This way, you will not have to wait for reimbursement of each claim in the mail.

Limited Purpose FSA:

For Option C Enrollees: Use the money in your account to pay for eligible dental and vision expenses, including deductibles, copays, coinsurance and certain equipment. For a full list of eligible dental and vision expenses, see IRS Publication 502.

Dependent Day Care FSA:

Use the money in your account to pay for eligible dependent care and elder care expenses that allow you and your spouse to work or attend school on a full-time basis. Eligible expenses include payments to a babysitter or companion in or outside your home. Eligible dependents for which expenses can be reimbursed under the Dependent Day Care FSA include qualifying children under age 13 and persons who are physically or mentally incapable of self-care, such as disabled children or elderly dependent parents. See Internal Revenue Code section 152(c) for more information about eligible dependents.

You must pay for expenses by submitting claims. Complete an FSA Claim Form (available on the Benefit Center website) and attach an itemized bill or receipt, including your receipts and the provider’s tax ID number.

Use It or Lose It

With FSAs, you must use all the funds in your account by the end of the year, or you forfeit any remaining funds. It’s important to plan carefully, so you don’t contribute more money than necessary to your account.

For 2019, eligible Health Care, Limited Purpose and Dependent Day Care FSA expenses must be incurred by December 31, 2019, and submitted for reimbursement by April 30, 2020. For 2020, eligible expenses must be incurred by December 31, 2020, and submitted for reimbursement by April 30, 2021.

FSA Advantages and Limitations

Advantages

  • Contributing to an FSA lowers your current taxable income
  • Use before-tax money to pay for eligible expenses
  • All the funds you elect to contribute are available for use immediately (if you are a new hire) or on January 1 (if you elect an FSA during Annual Enrollment)
  • Dependent Day FSA is open to any benefits-eligible employee, even if you waive coverage through the Firm

Limitations

  • Only eligible to participate in the Health Care FSA if you choose Options A or B
  • Only eligible to participate in the Limited Purpose FSA if you choose Option C
  • Use-it-or-lose-it feature puts you at risk of losing unused funds