Pre-Tax Expense Accounts: Participation

If you have a Pre-Tax Expense Account, remember that September 15, 2008 will be the final day on which you can incur eligible expenses for the 2007-2008 plan year, and you must submit claims for all expenses by September 30. More information about these deadlines is available here. For a list of eligible expenses, visit the Health Care and/or Dependent Care account pages. Instructions on filing a claim are available here.

If you decide to participate, you set up one or both accounts into which money will go before it becomes part of your taxable income. You choose the amount you want to set aside, within the limits allowed by the IRS and Penn. (These limits are described below.) Then, you draw against your accounts as reimbursement for eligible expenses.

The important point is that pre-tax expense account money is free from federal income and Social Security taxes—when it goes into your account, as well as when it is paid to you. Your contributions from your salary to your pre-tax expense account(s) lower your taxes each paycheck. And when you take the money out of your account(s), it is still free from federal income and Social Security taxes.

You decide how much money to contribute to a pre-tax expense account:

• For the health care pre-tax expense account the maximum amount you can contribute is: $4,000 for full-time employees and $1,000 for part-time employees with two years of continuous service. If your spouse is also employed by the University, he/she may participate separately and contribute up to his/her allowable maximum.
• For the dependent care pre-tax expense account, in general, your annual contribution cannot exceed $5,000* per family during both the calendar year (Jan 1 - Dec 31) and the fiscal year (July 1 - June 30). In addition, your contribution cannot exceed the lesser of your or your spouse's taxable income (special rules apply if your spouse is disabled or a full-time student). Also, note that if your child is enrolled at the Penn Children's Center, your maximum is reduced by the subsidy that the University provides for the Center. See the Dependent Care Account page for more information.
  
  * Note that if you are a highly compensated employee (salary of $100,000 or more), this limit is $1,800.

Your contributions are made in equal increments per pay period over the course of the plan year.

When setting up a contribution schedule, you should make sure that your monthly contribution still leaves you with sufficient take-home pay to meet your other living expenses. You will be able to make plan changes and contribution changes only if you have a qualifying change in family status and the changes desired are consistent with the change(s) in family status.

Health care pre-tax expense account participants may claim eligible expenses up to their annual election amount even if they have not contributed the full amount of the expense to the account yet. However, for the dependent care pre-tax expense account, the full amount of the expense must be in the account in order to receive reimbursement. For either account, after you have incurred an eligible expense, you must submit a request for reimbursement to the third party administrator, ADP, for any out-of-pocket expense for which you are responsible.

Once you have set up a pre-tax expense account, you can access your account details securely online through Penn’s online benefits enrollment site. Just login with your PennKey and password, continue until you reach the “Enrollment Options” page, and click the link titled “Access Your Pre-Tax Expense Accounts”.