Flexible Spending Accounts - My Lowe's Life

How Spending Accounts WorkYou may enroll in both the Health FSA and the DCSA. Yourelections will be in effect during the entire calendar year. Theamount you choose to contribute to your spending account(s)will be deducted from your regular pay in equal amountsthroughout the year.All eligible Health FSA and DCSA must be incurred during theyear for which you make your account deposits. An expense isconsidered incurred when the service is provided, not when youare billed or when you pay for it.Unused Account BalanceIt’s important that you carefully estimate your expenses beforeyou enroll in either the Health FSA or DCSA because theInternal Revenue Service (IRS) requires that you forfeit anyaccount balance not used to pay eligible expenses incurredduring the year. In addition, you cannot:• Receive a refund of any unused balances;• Transfer your funds from one account to the other;• Carry funds over from one year to the next; or• Stop making deposits until the following January 1 unlessan eligible family status change occurs.Changing Your ElectionsIn exchange for the tax advantages provided by the Health FSAand DCSA, the IRS limits your ability to make changes duringthe year. As a result, you can only change your Health FSA andDCSA elections during the course of the year if you have aneligible change in status. The type of change you can makemust be consistent with your change in status. See “Change inStatus Events” of the Plan Overview section for more detailsabout changing your election.Health FSAThe Health FSA lets you pay for eligible health care expenseswith before-tax dollars, thereby reducing your taxable income.How Much Can You Deposit?You may deposit a minimum of $104 and up to $5,000 a yearin your Health FSA. The amount will be deducted on a pre-taxbasis in equal amounts from each paycheck you receive duringthe year.Eligible DependentsFor the Health FSA, you may claim eligible health careexpenses for anyone you claim as a dependent on your federalincome tax return (e.g., dependent children or elderly parents).These dependents do not have to be covered by the Lowe’sCompanies, Inc. group medical or dental plans. See the “PlanOverview” section for more information on eligibledependents.How the Health FlexibleSpending Account WorksYou can use your Health FSA spending account to pay on apre-tax basis for healthcare expenses incurred by you and youreligible dependents if the expenses are not reimbursable orcovered by any medical or dental insurance option. The IRSspecifies the kinds of expenses that may be paid through ahealthcare spending account. You cannot take a deduction onyour federal income tax return for any healthcare expenses forwhich you have been reimbursed through your Health FSAspending account.Spending Account Tax AdvantagesYou don’t pay federal or Social Security (FICA) taxes, and, inmost locations, state or local income taxes, on the portion ofyour pay that is credited to your spending accounts.If you’re a highly compensated employee (as defined by theIRS), the maximum amount you can contribute to the DCSAmay be limited. You’ll be notified if these limits apply to you.2

The following eligible—and ineligible healthcare expenses arebased, in part, on Internal Revenue Service information.Call theIRS toll-free at 1-800-829-3676, or visit the IRS website atwww.irs.gov. for more information.To be eligible for reimbursement, eligible expenses must beincurred during a coverage period (see “When Coverage Starts”Section in the Plan Overview Section and “End of YearClaims” Section in this Section for more information. Paymenttiming rules and IRS guidelines are not the same for whenexpenses are incurred for purposes of a Healthcare FSA.Eligible Healthcare ExpensesYou may receive reimbursement from your Health FSAspending account for healthcare expenses that have not beenreimbursed from other sources. Here are some examples ofeligible healthcare expenses:• Your deductibles and co-payments (including those fromother employers’ plans);• Fees for doctors, dentists, and hospital services not coveredby a medical or dental option (e.g., routine eye exams);• Charges that exceed usual and customary amounts. SeeDefinitions for an explanation of the terms usual andcustomary, usual, customary and reasonable, and allowedamount;• Medical equipment and supplies (must be prescribed andnot available over the counter);• Reconstructive cosmetic surgery (surgery that is medicallynecessary to correct a deformity from a hereditaryabnormality, a personal injury resulting from an accidentor trauma, or a disfiguring disease);• Birth control pills or other birth control items prescribed byyour doctor (if not covered by your health plan option);• Infertility treatment(s);• Capital expenses to install special equipment or makehome improvements if the main purpose is medical care(such as installing entrance and exit ramps);• Equipment and materials required for using contact lenses,such as saline solution and enzyme cleaners; and• Over-the-counter (OTC) drugs that are taken for medicalcare. An OTC drug is for medical care if it is taken to treata medical condition or to affect a function or structure ofthe body.Flexible Spending AccountIneligible Healthcare ExpensesYou may not receive reimbursement from your Health FSAspending account for expenses that are not considereddeductible for income tax purposes. Following are someexamples of ineligible expenses:• Payroll deduction amounts and/or premiums for your oryour spouse’s coverage;• Athletic club expenses to keep physically fit (even ifsuggested by a doctor);• Cosmetic surgery of a nonreconstructive nature (i.e., notnecessary to correct a deformity arising from, or directlyrelated to, a hereditary abnormality, a personal injuryresulting from an accident or trauma, or a disfiguringdisease);• Work-related transportation costs of a disabled person;• Medical/dental expenses of a former spouse and formerdependent; and• OTC drugs taken only for the person’s general health (e.g.,multivitamins and toiletry items (toothpaste, shampoo,etc.)• Any medicine or drug that is not legally procured or thatviolates the federal Food, Drug and Cosmetic Act.Child (Dependent) CareSpending AccountThe DCSA lets you deduct money from your pay before taxesto cover your eligible dependent care expenses.How Much Can You Deposit?Generally, you may contribute a minimum of $104 and up to$5,000 a year to your DCSA. The amount will be taken in equalamounts from each paycheck you receive during the year.If you’re married and you and your spouse file separate taxreturns, the maximum you can set aside for DCSAreimbursement is $2,500. If you file a joint tax return, theamount you can contribute to your DCSA cannot exceed thelesser of your earned income or your spouse’s earned income.Earned income means your annual gross earnings (less certainpretax deductions) less your annual deposit to the DCSA. Your3

earned income and your spouse’s earned income must each begreater than the DCSA contribution.If your spouse doesn’t work, you cannot use the DCSA unlessyour spouse is disabled; is a full-time student for at least fivemonths of the year; or is looking for work. In these cases, thelaw assumes that your spouse has a monthly income of $250 ifyou have one dependent, or $500 if you have two or moredependents. If your spouse works part-time, you can bereimbursed for dependent care expenses, but only for workrelatedtime, such as the time he/she spends at work andcommuting to and from work.How the Dependent CareSpending Account WorksYou can use the DCSA to pay for eligible dependent careexpenses necessary for you—and your spouse, if married, towork. DCSA expenses are often regular, budgeted expenses,such as the cost of daycare while you and your spouse work. Bybeing reimbursed for these expenses through the DCSA, youcan increase your take-home pay.Eligible Dependent CareExpensesThe following information is based on Internal RevenueService Publication 503, Child and Dependent Care Expenses.Expenses eligible for payment through your DCSA includeexpenses for:• Wages or salary paid to a care provider (whether inside oroutside your home) who is not a dependent and who isage 19 or older;• Household services, such as preparing meals, related to thecare of an eligible dependent;• FICA and other taxes you pay on behalf of the care-serviceprovider; and• Nursery schools, prekindergartens, day camps, and daycarecenters that meet state or local regulations, provide care formore than six nonresident people and receive fees forservices provided.Ineligible Dependent CareExpensesServices that do not qualify for reimbursement through yourDCSA include:• Dependent care provided by a spouse, by a dependentunder age 19, or by anyone you list as a dependent on yourfederal income tax return;• Dependent care for nonwork-related reasons;• Dependent care provided if your spouse does not work orworks different hours than you, unless your spouse isdisabled or a full-time student;• Any expense you plan to take as a credit on your incometax return;• Transportation to and from a dependent care location ifcare is provided in a full-time residential institution;• Overnight care expenses, unless the parents work nights;• Late payment fees;• Expenses for a provider’s food, clothing, andentertainment;• Expenses that are primarily educational, such askindergarten; and• Expenses for family members other than your childrenunder age 13, when that family member has a gross incomeover $3,100 (as indexed) per year.To receive reimbursements from the DCSA, you must providewritten receipts showing the caregiver’s name and taxpayeridentification number or Social Security number. However, ifthe provider is a charitable organization, such as the YMCA, achurch or similar organization, it is not necessary to provide theorganization’s taxpayer identification number.Tax Credit vs. Dependent CareSpending AccountYour participation in the Spending Accounts can affect the wayyou calculate your federal income tax return at the end of theyear. For every dollar of reimbursement you receive throughthe DCSA, your dependent care tax credit is reduced by adollar. So if you elect to participate in the DCSA, you aremaking a decision NOT to take the federal dependent care taxcredit for those expenses.4

Flexible Spending AccountIn many cases, the DCSA will offer you the greater taxsavings—especially if you only have one dependent. However,it is important to note that in some cases, your tax savings maybe greater if you use the dependent care tax credit rather thanthe spending account for part or all of your dependent careexpenses.The following table compares the DCSA and the federalincome tax credit. You may want to consult your personal taxadvisor to see which method makes the most sense for you.Using the DCSAMinimum annualcontribution of $250Maximum annualcontribution is $5,000($2,500 if married, filingseparately)Contribution excludedfrom taxable incomeContributions free fromSocial Security taxesYour must decidecontribution amountbefore expenses areincurred and you forfeitany unused amountUsing the FederalIncome Tax CreditNo minimum annualexpensesMaximum annualexpense applicabletoward credit is $3,000 forone child and $6,000 fortwo or more childrenA percentage ofexpenses is applied as acredit against taxes owedTax credit doesn’t affectSocial Security taxesYou determine tax creditat the end of the yearafter all expenses areincurred, so there’s norisk of forfeiture.Impact on Other BenefitsYour spending account participation has no effect on yourLowe’s-sponsored benefit amounts. Although spending accountcontributions lower your pay for tax purposes, your othercompany benefits under the Plan, such as disability insurance,are based on your earnings before spending account depositshave been withheld.Please keep in mind that if you pay less Social Security (FICA)tax because of your participation election, then your SocialSecurity benefits at retirement, death, or disability may also belower. You will pay less FICA tax if your pay is at or below thewage base for Social Security taxes. However, whether yourSocial Security benefits will actually be lower depends on anumber of factors, such as your current age, your earningsbefore participation in the accounts, and future pay levels.Account StatementsTo help you keep track of spending account balances, you’llreceive a statement every month. The statements will showdeposits, payments made, and account balances as of the end ofthe quarter. In addition, you can find information regardingyour spending account claims and account balance through theHR employee portal at www.myloweslife.com and accessingthe WageWorks web site or by calling 1-877-924-3967.Filing ClaimsThe easiest and fastest way to receive reimbursement of yourhealthcare FSA expenses is to use your WageWorks debit card.You should retain a copy of the receipts you receive at the timeof purchase in the event WageWorks requires you to provideadditional documentation.The card is not available for use for dependent care FSAexpense reimbursement.You can also file a paper claim or authorize a “pay myprovider” payment.Claim forms for the Health FSA and DCSA are availablethrough the HR employee portal at www.myloweslife.com andaccessing the WageWorks web site. You can also obtain aclaim form by contacting the WageWorks Customer ServiceCenter at 1-877-924-3967 or logging on to your account atwww.wageworks.com. Claims for both plans are administeredby WageWorks. Complete and return the form together withwritten proof of payment of the expenses to:WageWorksClaims AdministratorP.O. Box 14053Lexington, KY 40511Or, fax your claim to 1-877-353-9236.Health FSAUse your WageWorks debit card to pay for your eligibleunreimbursed health care expenses. Or go online atwww.wageworks.com to set-up a Pay My Provider transactionor send a completed Health FSA claim form and proof of5

payment, including an Explanation of Benefits (EOB) form oritemized receipt for nonreimbursed expenses, to WageWorks.Reimbursements from the Health FSA will equal the lesser of:• The actual amount of your claim*, or• The total amount you’ve elected to put in the account forthe year, less any reimbursement you’ve already received.* If you submit claims by mail for less than $25, WageWorks will hold them untilthey total $25 before making a payment, except at the end of the year when youcan submit smaller claims in order to clear the funds in your account.Health FSA reimbursement checks are processed daily,provided that there are sufficient deposits in the account. Ifthere are not sufficient deposits, the payment will be pendeduntil notification of deposit.DCSAGo online at www.wageworks.com to set up a Pay My Providertransaction or send a completed DCSA FSA claim form andproof of payment to WageWorks. Reimbursement from theDCSA will equal the lesser of:you received during the prior calendar year. You will have tofile a Form 2441 and attach it to your 1040 federal income taxreturn if you participate in the DCSA.Termination of Employment andSpending Account BenefitsWhen you terminate employment from the company, you willhave until May 31 st of the following year for Health FSAexpenses and March 31 st of the following year for DCSAexpenses to submit expenses that were incurred prior to thetermination date. You may elect, through COBRA, to continueyour Health FSA participation on an after-tax basis through theend of that calendar year. If you do so, you will have untilMay 31 st of the following year to submit claims for expensesincurred prior to their COBRA termination date.Reimbursement checks that are not cashed within 120 daysfrom the date that the check was printed will be voided.• The actual amount of your claim*, or• The amount of your account balance at the time thereimbursement is made.* If you submit claims for less than $25, WageWorks will hold them until theytotal $25 before making a payment, except at the end of the year, when you cansubmit smaller claims in order to clear the funds in your account.DCSA reimbursement checks are processed daily, provided thatthere are sufficient deposits in the account. If there are notsufficient deposits, the payment will be pended untilnotification of deposit.End of Year ClaimsYou’ll have until May 31 of the following year to file a claimfor Health FSA claims, including Health FSA expenses youincur during the period January 1 to March 15 of the followingcalendar year and March 31 st of the following year to file aclaim for DCSA expenses incurred during the prior year. Afterthat date, any amount left in your account will be forfeited. Thismoney will be used to offset future costs of administering theaccounts, and then according to applicable rules andregulations.By January 31 st of each year, after you participate in the DCSA,you’ll receive a statement showing the amount of assistance6