Pre-Tax Expense Accounts

The "Use It or Lose It" Rule

Due to an IRS regulation known as "use it or lose it", if you don’t use the full balance in your Pre-Tax Expense Account each plan year, you lose that unused money.

Pre-Tax Expense Accounts allow you to pay for eligible health care and/or dependent care expenses that aren’t covered by other benefit plans. You determine how much money you’d like to contribute to your Pre-Tax Expense Account each month (up to maximum contribution limits), and that amount is automatically deducted from your paycheck on a pre-tax basis. That means you won’t be taxed on the money you contribute; it’s free from federal income and Social Security taxes. As you incur expenses, you can submit a claim to be reimbursed for them.

Eligibility

Full-time faculty and staff and members of collective bargaining units may begin participating in the Health Care Pre-Tax Expense Account immediately. Part-time faculty and staff may begin participating in the Health Care Pre-Tax Expense Account after two years of continuous service.

Note: If you participate in the Aetna High Deductible Health Plan, you’re not eligible to participate in the Health Care Pre-Tax Expense Account.

All eligible faculty and staff may begin participating in the Dependent Care Pre-Tax Expense Account after one year of continuous service and attaining age 21.

Enrolling and Making Changes

You can enroll in and/or make changes to your Pre-Tax Expense Account during the following times:

your new employee eligibility period
the annual Open Enrollment period
after certain employment status changes or qualifying life events (e.g., a change in marital status or the arrival of a new child)

Estimating Your Expenses

Use the Pre-Tax Expense Account worksheet to estimate the eligible expenses you expect to incur each plan year. It’s important to make careful estimates, especially because of the IRS regulation known as "use it or lose it". If you don’t use the full balance in your Pre-Tax Expense Account each plan year, you lose that unused money.

Accessing Your Account

Use Penn's secure online benefits enrollment site to access your account details (PennKey and password are required).

ADP Benefit Services (ADP) administers the Pre-Tax Expense Accounts. They’re also responsible for processing claims, issuing checks to plan participants and answering questions regarding the benefit.

Questions? Contact the Penn Benefits Center at 1-888-PENN-BEN (1-888-736-6236).