Flexible Spending Accounts

The City offers Flexible Spending Accounts (FSAs), which are Internal Revenue Code (IRC) approved accounts that allow you to pay out-of-pocket health expenses and dependent care expenses without paying taxes, saving you tax dollars. Be careful not to over budget because if you do not use all the funds in these accounts, the IRC forces you to forfeit the unused monies after the grace period, which expires March 15, 2017 for the plan year 2016.

If you have predictable medical expenses for yourself or your family, such as deductibles and copays, or any work-related day care expenses, FSAs may be right for you. FSAs allow you to set aside money for reimbursement of health care and day care expenses you regularly pay. The amount you set aside is not taxed and is automatically deducted from your paycheck and deposited into the FSA. During the year, you have access to this account for reimbursement of some expenses that are not covered by insurance. An FSA not only results in a substantial tax savings, it also increases your spending power. There are two types of FSAs: 

Health Care Reimbursement Account

Dependent Care Reimbursement Account

This account allows you to set aside up to an annual maximum of $2,550. This money will not be taxable income to you and can be used to offset the cost of a wide variety of eligible health expenses that generate out-of-pocket costs for you or your qualified dependents.

Employees can also receive reimbursement for expenses related to dental and vision care (that are not classified as cosmetic).

Examples of common expenses that qualify for reimbursement are listed below.

 *NOTE: The entire Health Care FSA election is available to you on the first day coverage is effective.


This account allows you to set aside up to an annual maximum of $5,000 if you are single or married and file a joint tax return ($2,500 if you are married and file a separate tax return) for work-related day care expenses.

Qualified expenses include adult and child day care centers, preschool, and before/after school care for eligible children and adults.

Please note that if your family’s annual income is over $20,000, this reimbursement option will most likely save you more money than the dependent care tax credit you take on your tax return.

To qualify, your dependent must be:

  • A child under the age of 13, or
  • A child, spouse or other dependent that is physically or mentally incapable of self-care and spends at least 8 hours a day in your household.                                                                                         

 *NOTE: Unlike the Health Care FSA, you will only be reimbursed up to the amount that has been deducted from your paycheck for Dependent Care expenses.