Tax-favored accounts are voluntary benefits designed to provide employees with tax advantages to offset healthcare and/or dependent care costs. These account are intended to pay for qualified medical expenses and dependent care expenses only. The University offers three kinds of tax-favored accounts: Healthcare Flexible Spending Accounts (HCFSAs) and Dependent Care Flexible Spending Accounts (DCFSAs), and Health Savings Accounts (HSAs). Each program has different rules about who’s eligible, who can contribute funds, how much they can contribute, and how the funds can be used as non-taxable. IRS rules define how tax-favored accounts operate.
When enrolling, employees must decide how much money to contribute to each account. The money will be withheld pre-tax from your pay, providing more value for the dollar. The result is that you’ll save federal income tax, state income tax and Social Security tax on the amount you contribute to the account. The more you contribute – the more you can save! All HCFSA and HSA participants will receive a debit MasterCard® to access funds to pay for eligible medical and/or childcare expenses.
InfoNew Branding for FSA HSA Administrator
Beginning January 2024, PayFlex’s new name will be Inspira Financial. Inspira Financial will continue to serve as third-party administrator for all HCFSAs, DCFSAs, and HSAs. The website and communications will look different. Don’t worry! There’s nothing for employees to do during this brand transition.
All PayFlex-branded debit cards will continue to work through the expiration date identified on the card. Employees may receive an Inspira-branded card if a new card is requested before the expiration date, such as for a lost or stolen card. For questions, login to the website on the back of the debit card then go to “Help & Support”. From there, employees can access FAQs, chat with Inspira Financial, or send an email. Employees can also call the number on the back of a debit card for additional assistance.
Access Online Account: Click here to login or create a new profile. Employees with established PayFlex login credentials will continue to use the same username and password. For new FSA participants, click here to create a new profile. Inspira Financial will require your MasterCard debit card account number OR Social Security number to register a new online account.
- Review the Inspira Reimbursement Account Quick Reference Guide for additional instructions
How to Verify an FSA Card Purchase: Inspira Financial requires substantiation documentation for most Healthcare FSA debit card transactions.
Questions? 1-844-729-3539 (TTY: 711), Monday-Friday 7:00 a.m. – 7:00 p.m. CT, and Saturday 9:00 a.m. – 2 p.m. CT.
Flexible Spending Accounts
Healthcare Flexible Spending Account
A Healthcare Flexible Spending Account (HCFSA) is a voluntary tax-favored benefit available to employees enrolled in the University’s Preferred Provider Organization (PPO) health plan, or other low deductible medical insurance plans.
Annual Contribution Limit: The maximum annual pre-tax amount allowed for this plan is $3,050 for Plan Year 2024. HCFSAs are individual accounts, so if you and your spouse both work at UA and are eligible to participate in the HCFSA, then you may each contribute up to the annual maximum for your individual HCFSA (e.g., $3,050 + $3,050 for a total of $6,100 in 2024).
Healthcare FSA FAQs
Who should enroll in a Healthcare FSA?
The Healthcare Flexible Spending Account can be beneficial for anyone who has eligible out-of-pocket healthcare expenses beyond what their insurance plans cover (i.e., cannot be paid by or reimbursed through any benefit plan). They can save by paying for these expenses with tax-free dollars. You must enroll and indicate how much to contribute within the first 30 days of hire, within 30 days after a qualifying event or during the annual open enrollment period. The amount you elect will be deducted from your pay in equal amounts depending on your pay schedule. After you enroll, you will receive a welcome letter from Inspira Financial with information about your account. You may be reimbursed your full HCFSA annual election amount prior to having the full amount of payroll contributions deducted and deposited in your account. You do not have to enroll in a medical plan to participate in the HCFSA.
What are examples of qualified healthcare expenses?
Many people find Healthcare FSAs a cost-effective way to pay for health plan deductibles/coinsurance/copayments, eyeglasses, contact lenses, prescriptions, orthodontia, and other health-related expenses that are not covered by insurance. Even if you do not itemize deductions on your tax returns, you can take advantage of this tax break by using the HCFSA. IRS Publication 502 provides an extensive list of eligible medical and dental expenses.
How do you get reimbursed for healthcare expenses?
The Inspira Financial debit MasterCard® is the easiest and best way to access the money set aside in your HCFSA account. However, any charges paid for with a method other than the debit card, or if you are filing for eligible over-the-counter expenses, you must send a Request for Reimbursement form with appropriate documentation to Inspira.
What is the "use-it-or-lose-it" rule?
It’s important to remember that all Flexible Spending Accounts have a “use-it-or-lose-it” rule. Unlike HSAs, FSA funds do not rollover from year-to-year. Employees enrolled in the Healthcare FSA have a three-month run-out period from Jan. 1 to March 31 of the following year to submit any previous year’s claims for reimbursement. Claims must be incurred during the previous plan year (i.e., claims incurred from Jan. 1 – Dec. 31, 2023 can be reimbursed until March 31, 2024). Any unused funds remaining in an FSA at the end of the run-out period will revert back to UA to help offset administrative costs.
Is substantiation required for all healthcare expenses?
Yes. The IRS requires Inspira Financial to verify that all FSA debit card transactions are for eligible medical or childcare expenses, a process also known as substantiation. When using your debit card to access funds from your FSA, Inspira has established certain systems and rules to automatically verify the funds were used for an eligible expense. However, sometimes Inspira can’t prove that the funds were used for eligible expenses. When this occurs, you will receive a “Request for Documentation” notice on the Inspira member website or letter by email or mail based on your account settings.
The best type of documentation to provide for substantiation is the Explanation of Benefits (EOB) from an insurance company showing the “final” amount owed. Inspira will also accept an itemized receipt including the following information:
- Provider or merchant name,
- Patient name,
- Date of service,
- Type of service or item description, and
- “Final” amount you owe
It’s strongly recommended to keep all receipts, invoices, EOBs, etc. Inspira Mobile allows members to simply take a picture of a document and upload it through the app. Inspira Mobile also features an Eligible Expense Scanner for barcodes and a list of common eligible items. If your transaction is identified as not eligible for reimbursement then your FSA may be subject to correction procedures, including suspending the use of your debit card until the required documentation is received by Inspira OR the exact amount is paid back to your account.
Dependent Care Flexible Spending Account
The Dependent Care Flexible Spending Account (DCFSA) provides a way to save significant amounts of money on dependent care expenses. You can contribute to the account on a pre-tax basis and use the money to pay for eligible dependent care expenses during the year. The result is that you’ll save federal income tax, state income tax and Social Security tax on the amount you contribute to the account. The more you contribute – the more you can save! DCFSA will not receive a debit card, but may instead request claims reimbursement from Inspira.
Annual Contribution Limit: DCFSAs are household accounts, so if you and your spouse both work at UA and are eligible to participate in the DCFSA, the maximum contribution amount allowed is $5,000 if a joint tax return is filed, or up to $2,500 each if you file separate tax returns.
Dependent Care FSA FAQs
Who should enroll in a Dependent Care FSA?
The Dependent Care Flexible Spending Account is generally beneficial to anyone who has a qualified dependent and pays for eligible dependent care expenses. They can save by paying for these expenses with tax-free dollars. Determine if your Dependent Care expenses qualify for FSA reimbursement. You must enroll and indicate how much to contribute within the first 30 days of hire, within 30 days after a qualifying event or during the annual open enrollment period. The amount you elect will be deducted from your pay in equal amounts depending on your pay schedule. After you enroll, you will receive a welcome letter from Inspira Financial with information about your account. You do not have to enroll in a medical plan to participate in the DCFSA.
What are examples of qualified dependent care expenses?
Dependent care FSAs can be used to reimburse you for eligible expenses associated with the care of your qualified IRS dependents, as long as the expenses are incurred:
- so you and your spouse can work or attend school full-time
- for services relating to the care of a dependent child under the age of 13 or your dependent or spouse who is physically or mentally incapable of self-care and who lives with you for more than one-half of the year
- for dependent care services provided during the plan year while employed with the University.
Reimbursements from the DCFSA cannot exceed the amount deposited in your account at the time your reimbursement is processed. Eligible expenses include:
- licensed nursery school and daycare facilities for children, or
- childcare in or outside your home, or
- daycare for an elderly disabled dependent
IRS Publication 503 provides an extensive list of eligible and ineligible dependent care expenses.
How do you get reimbursed for dependent care expenses?
Dependent Care FSA participants will not receive a MasterCard ® from Inspira Financial. You will need to send a Request for Reimbursement FSA form with the appropriate documentation to Inspira Financial in order to be reimbursed.
What is the "use-it-or-lose-it" rule?
It’s important to remember that all Flexible Spending Accounts have a “use-it-or-lose-it” rule. Unlike HSAs, FSA funds do not rollover from year-to-year. Employees enrolled in the Healthcare FSA have a three-month run-out period from Jan. 1 to March 31 of the following year to submit any previous year’s claims for reimbursement. Claims must be incurred during the previous plan year (i.e., claims incurred from Jan. 1 – Dec. 31, 2023 can be reimbursed until March 31, 2024). Any unused funds remaining in an FSA at the end of the run-out period will revert back to UA to help offset administrative costs.
Is substantiation required for all healthcare expenses?
Yes. The IRS requires Inspira Financial to verify that all FSA transactions are for eligible childcare expenses, a process also known as substantiation. If Inspira cannot automatically verify that funds were used for eligible expenses, then you will receive a “Request for Documentation” notice on the Inspira member website or letter by email or mail based on your account settings.
Inspira prefers accept an itemized receipt including the following information:
- Provider or merchant name,
- Patient name,
- Date of service,
- Type of service or item description, and
- “Final” amount you owe
It’s strongly recommended to keep all receipts, invoices, EOBs, etc. Inspira Mobile allows members to simply take a picture of a document and upload it through the app. Inspira Mobile also features an Eligible Expense Scanner for barcodes and a list of common eligible items. If your transaction is identified as not eligible for reimbursement then your FSA may be subject to correction procedures, including suspending the use of your account until the required documentation is received by Inspira OR the exact amount is paid back to your account.
Connected Claims Solution
Inspira Financial (previously PayFlex) utilizes a Connected Claims Solution to help manage your FSA debit card expenses. If you are covered by UA’s BlueCross and BlueShield of Alabama medical and/or dental plans, then Connected Claims allows you to view your medical and dental claims data all in one place in the Inspira Financial online dashboard. Vision claims from United Healthcare are not included in this solution.
How does it work? BlueCross sends a weekly secure file feed to Inspira Financial. It shares a copy of the data from your Explanation of Benefits (EOB) which is the preferred form of documentation to substantiation your FSA expenses. As a result of Inspira Financial’s enhanced verification, you should not have to upload additional documentation once the medical or dental claim is processed and sent by BlueCross.
exclamationLimitations to Connected Claims
The Connected Claims feature will work only if the subscriber on UA’s BlueCross medical and/or dental contract is the same person as the primary FSA account holder with Inspira Financial. The secure file feed is connected by the subscriber’s Social Security Number.
For example with dually employed spouses at UA, if one spouse is the subscriber for medical insurance and the other spouse is the FSA account holder then Connected Claims will not be able to assist with substantiation. The same limitation applies if an employee is covered under their spouse’s medical and/or dental plan (not UA insurance), and only enroll in the standalone Healthcare FSA. In these cases, you will still be required to provide documentation to substantiate FSA debit card expenses.
Additional Information about FSAs
For questions concerning claims incurred on or after January 2024, please contact:
Inspira Financial Customer Service (previously PayFlex): 1-844-729-3539, www.inspirafinancial.com
- Inspira Financial Flyer – Connected Claims Solution with the Inspira Card
- Inspira Financial Flyer – Substantiate Expenses to Keep Inspira Card Active
- IRS Publication 502 (Medical and Dental Expenses)
- IRS Publication 503 (Child and Dependent Care Expenses)
Health Savings Accounts
A Health Savings Account (HSA) is a voluntary tax-favored benefit available only to employees enrolled in the University’s qualified High Deductible Health Plan (HDHP). If you are claimed as a dependent on someone else’s taxes or are covered by any other health insurance policy that is not an HDHP, including Medicare, you are not eligible for an HSA. If you participate in a healthcare FSA or HRA through your employer or spouse’s employer, you are not eligible for an HSA. This account can be used by you and your eligible IRS tax dependents to pay for qualified medical, dental or vision expenses.
HSAs offer Triple Tax Savings:
- Tax free payroll contributions from the employee and The University of Alabama.
- Tax free earnings will accumulate, if the HSA funds are invested.
- Tax free distributions, when and if HSA funds are used to pay for qualified medical expenses.
HSA Employer Contributions
The University of Alabama provides “seed money” once per year to help pre-fund your HSA. You must enroll in the High Deductible Health Plan (HDHP) and open your HSA account to receive this money! If you enroll in the HDHP, enrollment in the HSA is not automatic, you must also elect the HSA benefit in order to open an HSA account. When enrolling, you should determine how much money you want to contribute to your health savings account. The money is then withheld from your pay before taxes are calculated, thus providing you with more value for your dollar. HSA participants will be able to use a special debit MasterCard® to pay their eligible HSA expenses incurred by the eligible individual and any eligible IRS tax dependents. You will also be able to manually file for reimbursement from your account or make withdrawals up to your current account balance.
2024 Annual Employer Contributions:
| HDHP Medical Plan Tier | |
|---|---|
| Employee Only | $500 per year |
| Family without a Spouse | $1,000 per year |
| Family with a Spouse | $1,000 per year |
HSA Employee Contributions
Employee HSA contributions are tax-free via payroll deduction. The amount you can contribute to your HSA depends on: 1) the type of HDHP coverage you have (single or family); 2) your age (under or over age 55); 3) the date you become an eligible individual; and 4) the date you cease to be an eligible individual. See IRS Publication 969 for additional details.
Employees have two main contribution methods:
- Payroll Deduction based on BenefitFocus elections during Open Enrollment or each month.
- Direct Deposit through the Inspira online portal. If you deposit funds on a post-tax basis through Inspira, you can recoup the tax savings at the end of the year with an above-the-line deduction.
The IRS has established annual pre-tax contribution limits for tax year 2024:
| Employee Only: | Family: | |
|---|---|---|
| HSA Contribution Limit (< 55 years old) | $4,150 per year | $8,300 per year |
| HSA Contribution Limit (55 years or older; $1,000 catch-up) | $5,150 per year | $9,300 per year |
The annual contribution limits set by the IRS are a combination of both employee and employer contributions. See the following examples for tax year 2024:
| Employee Only: | Family: | |
|---|---|---|
| UA Employer Contribution (Seed Money) | $500 | $1,000 |
| + Employee Contribution | + $3,650 | + $7,300 |
| = Annual Contribution Limit | = $4,150 | = $8,300 |
HSA Reimbursements
The Inspira Financial debit MasterCard® is the easiest and best way to access the money set aside in your HSA account at the point of sale, therefore, eliminating the need to complete and submit paper claim forms. When you use your card for qualified medical expenses, please save your receipts in the event you are audited by the IRS and must verify the eligibility of your purchases. However, for any charges paid for with a method other than the debit card, you must send a Request for Reimbursement form with appropriate documentation to Inspira. Your annual HSA election amounts will be loaded automatically onto the card per pay period. If your card expires during the year, Inspira will mail new card to you.
How to Enroll in an HSA
In order to enroll and “activate” an HSA account with Inspira Financial, employees must:
- Enroll in the HDHP and Health Savings Account in Benefitfocus, either during annual Open Enrollment or within 30 days of date of hire or another qualifying life event.
- Inspira will complete the identity verification process required by The Patriot Act. If an employee does not pass The Patriot Act’s Identity Verification process, Inspira will contact the employee via mail to request backup documentation. Documentation may include a copy of a Social Security card, recent utility bill, or driver’s license. The employee will receive three, separate mailed letters over a 90-day period to supply this documentation, or their HSA will be permanently closed.
- Receive a “Welcome!” packet from Inspira with instructions to register for an online account. The online portal is available at: https://www.inspirafinancial.com. Additional information can be found in the HSA Participant Reference Guide.
- Accept all Terms and Conditions Agreements, including:
- HSA Custodial Agreement and Disclosure Statement,
- Designated Representative Agreement,
- Electronic Disclosure, and
- Patriot Act Requirements (only if applicable, and you will receive an email with questions to verify your identify)
After registration and acceptance of all Terms and Conditions, then you will be able to access the funds in your HSA account. If you do not accept the Terms and Conditions, your account will continue to accrue a balance but you will be unable to use the funds.