How FSAs Work
When you set up an FSA, you decide how much money you want to contribute to each account for the year. This means that you are telling Metro to place part of your income into a special account to pay for dependent care or medical expenses. Because FSA money is limited to those uses, you will not have to pay taxes on that income. However, there's a catch: Once money goes into an FSA, it can only be used to reimburse eligible expenses.
If you enroll in a Health Care FSA and you have funds left over at the end of the year, you have a grace period of an additional 2½ months (through March 15) in which you can incur eligible expenses and until June 15 in which to file those claims. For example, if you elected to contribute $1,000 and only incurred $900 in eligible health care expenses for the year, the remaining $100 may be used between January 1 and March 15 of the next calendar year.
NOTE: Any money remaining in an FSA at the end of the grace period will be forfeited. In other words, you can't roll it over to the following year. Therefore, before you decide how much to contribute to an FSA, be sure to estimate your expenses for the coming year carefully.
Your contributions will be withheld from your paycheck — before taxes are taken out — in equal amounts and deposited in the appropriate FSA account.
When you incur an eligible expense, you pay it, and then file a reimbursement claim with Metro's FSA administrator. You will be reimbursed with pre-tax money from your own account. (For FSA purposes, an eligible expense is "incurred" when the health care or dependent care service is received, not when the bill is received or paid.) Because the FSA pays these expenses with tax-free dollars, you are actually lowering your taxable income, and that means you pay less tax.
How quickly will I be reimbursed? Your reimbursement will be processed within five business days from the time the carrier receives your properly completed and signed FSA Reimbursement Request Form. You may enroll in direct deposit rather than waiting on a mailed check.
Effect on Social Security benefits — Participation in a Flexible Spending Account usually has little to no effect on your social security benefits upon retirement. The Social Security Administration (SSA) uses the highest 35 years of salary earned before retirement to calculate your social security benefit. However, if you are concerned, you should call the SSA for further information at (800) 772-1213.