Pre-Tax Programs
Flex NM Spending Accounts

The Flex New Mexico Spending Accounts offer you a convenient way to pay for medical and dependent care expenses while you save on your taxes.

There are two types of accounts:
The Medical Reimbursement FSA, and
The Dependent Care FSA

You may elect to contribute a portion of your BEFORE-TAX income each pay period to either or both of the accounts.  This money – free of taxes – is used to reimburse you for eligible unreimbursed expenses incurred by you and your eligible family members during the year.

What Do You Mean BEFORE TAX?

FSAs enable you to set aside money from your paycheck BEFORE you have paid federal and state income taxes and social security taxes.  The amount you set aside reduces your reported W-2 income, so you are never taxed on these savings.

How Does It Work?

Medical Reimbursement FSA

The Medical Reimbursement FSA is for medical, dental and vision expenses that are not reimbursed by any coverage you and your eligible family members may have.  You may set aside up to $5,000 per year to pay for your unreimbursed medical expenses.

For Medical Reimbursement FSA purposes, your eligible family members are your spouse, your children or any individual who you claim on your tax return as a dependent.

Eligible Medical Expenses

As a general rule, any medical expense that would qualify as a deduction on your federal income tax return qualifies as an eligible expense under the Medical Reimbursement FSA.  Examples of eligible medical expenses include:

  •      Charges for medically necessary services not reimbursed by medical, dental and vision plans such as:

  • Deductibles, copayments, and coinsurance

  • Out-of-pocket expenses

  • Charges exceeding reasonable and customary amount, and

  • Other non-covered charges

  •      All medically necessary prescription drugs (including contraceptives)

  •       Travel to and from medical service providers at $0.14 per mile.

To be sure that an expense is eligible, check the current Internal Revenue guidelines, IRS Publication 502.

Dependent Care FSA

You may use the Dependent Care FSA to pay for qualified dependent care expenses that enable you (or your spouse if you are married) to work or actively look for work.  You may also qualify if your spouse is disabled or a full-time student.  Your may set aside up to $5,000 per year for dependent care expenses.  The IRS imposes special limits on contributions to dependent care accounts; see your group agency representative for more details.

Eligible Dependent Care Expenses

Examples of eligible dependent care expenses include:

  • Care for children under 13 years old that you may claim as dependents on your federal tax return.

Your spouse or any person of any age who is physically or mentally incapable of self-care tat you are entitled to claim as a dependent on your federal tax return.

If the care is provided outside your home, your dependent must spend at least eight hours a day at your home.

To be sure that an expense is eligible, check the current Internal Revenue guidelines, IRS Publication 503.

Dependent Care FSA Versus
Federal Tax Credit

If you are responsible for the care of a dependent child or adult, you need to determine whether the federal tax credit for dependent care expenses or the Dependent Care FSA is better for you.  (You may not use the Dependent Care FSA and the federal tax credit simultaneously.)

Your tax bracket and the amount of expenses you incur during the year will determine which tax-savings approach is best for you.  You may wish to consult your personal tax advisor for further information.

Who is Eligible?

To participate, you must be an active employee and be eligible for State group insurance benefits.  You must also re-enroll during the fall enrollment period each year to continue participation.

How Do I Join?

You can enroll in the Flex New Mexico Spending Accounts during the announced annual enrollment period, usually mid-October through mid-November.  Simply complete a Flex New Mexico Spending Accounts Enrollment Form, indicating how much you and your family want to set aside to pay for medical and dependent care expenses you expect to incur in the next year.  Your savings will begin January 1 of the next year.  Your savings will begin January 1 of the next year.  Remember to monitor these expenses during the year to make sure you are filing all of your claims for reimbursement.

How Do I Get Reimbursed?

When you incur an eligible medical or dependent care service, you submit a completed claim form and proof of the expense and the FSA reimburses you for that expense.

“Proof of the expense” may include:

For medical expenses–

  • a bill or receipt from the provider, or

  • an Explanation of Benefits (EOB) from your health/vision plan, showing any balance you have to pay.

For dependent care expenses–

  • a copy of the receipt from the provider (day care, nursery adult day care, etc.), or

  • the provider may supply this information directly on the claim form.

You will be reimbursed for your eligible medical expenses up to the total annual amount you elect to contribute to the Medical Reimbursement FSA.  For dependent care expenses, you will be reimbursed for the eligible service only up to the amount actually in your account at the time the claim form is received.

How Soon Will I Be Reimbursed?

You have a choice of receiving a check in the mail, or electing to have your reimbursement automatically deposited into your checking account.  Reimbursement checks are processed weekly and are mailed to your home.  By choosing direct deposit, you eliminate mailing time.

When Must Claims Be Filed?

You have until March 31 of the year following the Plan Year to request FSA reimbursement, as long as the claim is for eligible services you received during the Plan Year.  The Plan Year runs from January 1 through December 31.

What Are The Rules for FSAs?

Because of the tax advantages of Flexible Spending Accounts, the IRS has established strict guidelines for their use.  There are four main rules:

1.     You must sign up in advance for the period to be covered.  The State holds an open enrollment each year from mid-October through mid-November for the Plan Year starting the following January 1.  Remember, participation does not continue automatically from year to year; you must re-enroll each annual open enrollment period.

2.     Changes during the Plan Year are limited to changes in family status, and must be consistent with that change in status.  Only increases are allowed.  An example would be the birth of a child.  In this event, you may wish to increase the amount set aside for medical expenses, as well as the amount for dependent care.  You have 31 days from the date of the change to make allowable changes in your FSA participation.

3.     You will forfeit any account balance that is not used to pay for eligible expenses incurred during the Plan Year.  For example, if you contribute $600 to your Medical Reimbursement FSA and you incur eligible claims totaling only $500 by December 31, you will forfeit $100.  Under IRS rules, you cannot receive a refund of any unused balance or carry funds over from one year to the next.  It is important to estimate expenses carefully before you decide how much to contribute to FSA.

4.     The Medical Reimbursement FSA and Dependent Care FSA are separate accounts; money cannot be transferred between them.

What Are The Tax Laws for FSAs?

The tax advantages of the Medical Reimbursement and Dependent Care FSAs are based on the law as it stands today.  In the future, this law may change.  If any significant change in the law takes place, you will be notified.

Contributing before-tax dollars to Flexible Spending Accounts may reduce your future Social Security benefits since you contributions are not subject to FICA withholding.  There is no reduction in Social Security benefits for employees who pay less than the Social Security maximum; there may be a nominal reduction in Social Security benefits.

Plan Administration

Flex New Mexico is administered by ASI.  It is a flexible benefits program made available through Section 125 of the Internal Revenue Service (IRS) code.  The program rules are governed by the IRS.

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