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UT FLEX Can Increase Your Spendable Income

Authorized by the IRS, the UT FLEX Flexible Spending Account plans let you set aside money from your pay before taxes are withheld. You can use money from these accounts to pay for certain out-of-pocket medical and dependent day care expenses while receiving a tax advantage. As you incur medical expenses and/or dependent day care expenses throughout the plan year, you submit a claim via Express Claims (Web), fax or mail, and you will be reimbursed with tax-free dollars from your UT FLEX flexible spending account. This reduces the amount you pay in taxes and increases your spendable income.

Tax Savings Examples
**Based on 2010 tax year, 15% tax bracket & 7.65% FICA

Robert, Single, 1 child
Annual Salary =$34,000
Health Care Election =$1,500
Dependent Day Care Election =$3,000 
Tax Savings =$1,020

Robert, Single, 1 child

UT FLEX Participant
Without UT FLEX
Annual Salary

$34,000

$34,000

Health Care Election Amount

($1,500)

($0)

Dependent Day Care Election Amount

($3,000)

($0)

Taxable Income After Election Amount

$29,500

$34,000

Estimated Taxes Withheld (22.65%)

$6,681

$7,701

Post-Tax Income

$22,819

$26,299

Money Spent After-Tax on Health Care & Dependent Care Expenses

($0)

($4,500)

Take-Home Pay

$22,819

$21,799

Savings

$1,020

$0

Randy, Single, no children
Annual Salary =$20,000
Health Care Election =$1,500
Dependent Day Care Election =$0
Tax Savings =$340

Randy, Single, no children

UT FLEX Participant
Without UT FLEX
Annual Salary

$20,000

$20,000

Health Care Election Amount

($1,500)

($0)

Dependent Day Care Election Amount

($0)

($0)

Taxable Income After Election Amount

$18,500

$20,000

Estimated Taxes Withheld (22.65%)

($4,190)

($4,530)

Post-Tax Income

$14,310

$15,470

Money Spent After-Tax on Health Care & Dependent Care Expenses

($0)

($1,500)

Take-Home Pay

$14,310

$13,970

Savings

$340

$0

Olivia, Married, 2 children
Annual Salary = $60,000
Health Care Election = $3,000
Dependent Care Election = $5,000
Tax Savings = $1,812

Olivia, Married, 2 children

UT FLEX Participant
Without UT FLEX
Annual Salary

$60,000

$60,000

Health Care Election Amount

($3,000)

($0)

Dependent Day Care Election Amount

($5,000)

($0)

Taxable Income After Election Amount

$52,000

$60,000

Estimated Taxes Withheld (22.65%)

($11,778)

($13,590)

Post-Tax Income

$40,222

$46,410

Money Spent After-Tax on Health Care & Dependent Care Expenses

($0)

($8,000)

Take-Home Pay

$40,222

$38,410

Savings

$1,812

$0

Valerie, Married, 2 children
Annual Salary =$40,202
Health Care Election = $1,750
Dependent Care Election =$4,500
Tax Savings = $1,415

Valerie, Married, 2 children

UT FLEX Participant
Without UT FLEX
Annual Salary

$40,202

$40,202

Health Care Election Amount

($1,750)

($0)

Dependent Day Care Election Amount

($4,500)

($0)

Taxable Income After Election Amount

$33,952

$40,202

Estimated Taxes Withheld (22.65%)

($7,690)

(9,105)

Post-Tax Income

$26,262

$31,097

Money Spent After-Tax on Health Care & Dependent Care Expenses

($0)

($6,250)

Take-Home Pay

$26,262

$24,847

Savings

$1,415

$0

 

UT FLEX: Making Your Annual Enrollment Election, Annual Administrative Fee, New OTC Regulations

Don’t forget, you must make your UT FLEX elections for both Medical and Dependent Day Care for Plan Year 2010-2011 during July 2010 Annual Enrollment, even if you are currently enrolled in one of the UT FLEX plans. Your election(s) in this current plan year will not automatically carry forward to the next plan year.

Before making your UT FLEX Medical election, please read “New UT FLEX Over-The-Counter Regulations: January 1, 2011”  and the “UT FLEX Annual Administrative Fee article below.

*Important: Please be sure to verify your election(s) and the amount(s) to ensure they are correct. In compliance with the IRS guidelines, corrections will not be allowed after 31 days following receipt of your first paycheck that reflects this withholding. Annual Enrollment elections will become effective September 1, 2010. If you receive your paycheck monthly, then the first UT FLEX withholding for plan year 2010–2011 will be reflected on your October 1, 2010 paycheck. If you make an election error (e.g., you intended to elect the Dependent Day Care Reimbursement Account but mistakenly elected the Medical Expense Reimbursement Account) and fail to report the error to your Benefits Office by the end of October 2010, UT System will not approve the change.

 

UT FLEX Annual Administrative Fee

Since the inception of the UT FLEX Flexible Spending Account plans, forfeiture dollars from prior years’ elections have been sufficient to cover the administrative costs paid to the UT FLEX plan third party administrator (TPA). With the decrease in election forfeitures, a new Flexible Spending Account administrative fee is being introduced.

The decrease in election forfeitures is due to many factors including:

The new annual fee is $12 per UT FLEX account (pro-rated for mid-year flex elections). The election amount for each account will be reduced by the $12 annual fee prior to the payment of claims for Plan Year 2010-2011.

Even with the introduction of the $12 administrative fee, UT FLEX participants save significant tax dollars and increase their take home pay, as illustrated in the tax savings examples in this newsletter.

 

New FSA Over-The-Counter Regulations: January 1, 2011

Effective January 1, 2011, in compliance with the new federal healthcare reform law (Patient Protection and Affordable Care Act), eligibility rules for Over-The-Counter (OTC) items will be changing. OTC drugs and medicines (except OTC insulin) will be considered ineligible expenses unless you have a prescription* from your physician.

Effective January 1, 2011, the list of items that will require a prescription includes, but is not limited to: allergy medicine, cough, cold and flu medicine, eye drops, indigestion medicine, laxatives, nasal sprays, and pain relievers.**

Items that will remain eligible without a prescription include, but are not limited to: band aids, birth control, braces and supports, contact lens solutions and supplies, first aid supplies, and reading glasses.**

You should consider this change as you estimate your UT FLEX Medical election amount for this upcoming plan year.

Debit Card

The PayFlex Debit Card works in conjunction with your UT FLEX Medical election and is pre-loaded with your annual election amount. Every time you use the debit card for health care expenses, it reduces the available account balance on the card.

The PayFlex Debit Card can be obtained at an annual cost of $9. If you currently have the PayFlex Debit Card this plan year and you make a UT FLEX Medical Account election for 2010-2011, your debit card election will continue for the 2010-2011 plan year (unless you specifically cancel your selection during this Annual Enrollment).

If your PayFlex Debit Card has an expiration date of 08/10 (August 2010), you will receive a new card prior to September 1, 2010. If your Debit Card has an expiration date of 08/11 or later, you will continue to use this card during the 2010-2011 plan year.

Please see guidelines on utilizing the PayFlex Debit Card for Over-The-Counter purchases below.***

*The documentation required for a prescribed OTC drug or medicine is still being clarified by the IRS. More information will be provided as it becomes available.
**The complete list of eligible/ineligible healthcare expenses can be viewed at www.payflex.com.
***Important:  Effective January 1, 2011, the PayFlex Debit Card cannot be used to purchase OTC drugs and medicines not included on the list of approved items. If a debit card is presented to purchase an OTC item after January 1, 2011, the transaction will be denied at the point-of-sale. The purchase will need to be made out-of-pocket and a claim should be submitted to PayFlex accompanied by a prescription in order to receive reimbursement.

For more information about the UT FLEX accounts, visit www.utflex.com.

Contact Us

If you would like a specific topic discussed or have a question you would like answered in a future issue of this newsletter, please send your suggestions to benefits@utsystem.edu.

UT System Employee Benefits Web site: www.utsystem.edu/benefits/
UT System Retirement Programs Web site: www.utretirement.utsystem.edu
Your Local Benefits Office: www.utsystem.edu/benefits/contacts/#1