The University of Michigan offers faculty and staff the opportunity to pay for eligible health care and dependent care expenses with pre-tax dollars using a Flexible Spending Account (FSA) administered by PayFlex. An FSA allows you to have a set amount taken from your pay before taxes, which lowers your income tax. The money is put into an account you use to reimburse yourself for eligible expenses.
U-M offers two kinds of FSAs:
- The Health Care FSA is used to pay for most out-of-pocket medical, vision, and dental care expenses for you and your eligible dependents.
- The Dependent Care FSA is for eligible day care expenses for a dependent child age 12 and under, or elder care for a dependent adult, while you and your spouse work (or if your spouse is a full-time student or disabled).
You can enroll in one type of FSA or both. You contribute tax-free dollars to your FSA(s) through payroll deductions. You can claim amounts equal to your entire annual health care contribution from your Health Care Flexible Spending Account at any time during the year. To receive a reimbursement from your Dependent Care FSA, you must have enough funds in your account to cover the claim at the time you make the request for reimbursement.
PayFlex will mail a PayFlex/HealthHub debit card to new enrollees in a Health Care FSA to pay for eligible health care expenses. If you are only enrolled in a Dependent Care FSA, you will not receive a card. If you are enrolled in a Health Care FSA and did not receive a HealthHub card, call PayFlex at 877-343-1346. Learn more about using your PayFlex/HealthHub card.
The plan year ends on December 31. A grace period allows you to incur eligible expenses up to March 15 of the following year.
"Use it or Lose it" IRS Rule
Contribute to an FSA only the amount you are reasonably sure you will spend annually and file all claims for reimbursement by May 31. According to IRS regulations, any unclaimed funds in your FSA as of June 1 are forfeited and turned over to the university to help pay administrative fees.
Benefits of an FSA
Flexible Spending Accounts reduce your annual taxes. Here is an example of possible tax savings with an FSA.
|Annual Savings Example*||With an FSA||Without an FSA|
|If your annual taxable income is:||$28,000||$28,000|
|And you deposit this annual amount pretax into a Health Care Flexible Spending Account:||($1,500)||$0|
|Your taxable income is now:||$26,500||$28,000|
|Subtract federal and Social Security taxes:||($9,447)||($9,982)|
|Subtract after-tax dollars spent on medical expenses without an FSA:||$0||($1,500)|
|Your real spendable income is:||$17,053||$16,518|
|Your annual tax savings is:||$535||$0|
* Potential tax savings shown for demonstration only. Actual savings will vary based on your individual tax situation. Please consult a tax professional for more information.
For more information on the benefits of FSAs and how to use your accounts, visit the PayFlex/HealthHub website for U-M participants: umich.healthhub.com
Send claims to:
PayFlex Systems USA
P.O. Box 3039
Omaha, NE 68103-3039