Everything you didn't know about TexFlex

Are you part of the 80%? Statistics show the vast majority of state employees are not taking full advantage of their TexFlex benefits, essentially leaving money on the table every month.

In this episode, we sit down with James Handy, TexFlex account executive, to demystify these powerful budgeting tools. We dive into the different types of spending accounts and uncover the surprising list of everyday items you are likely already buying that are 100% eligible for reimbursement. From routine essentials at TexFlex.com to "insider" tips for managing major expenses like orthodontia, we cover the budgeting insights you need to stop overpaying. Whether you are looking for better ways to save or just want to uncover the surprise savings you have been missing, this conversation is your guide to making your money work harder for you.

In this episode, we talk about the following resources:

Sign up for TexFlex and save money on taxes

TexFlex program resources: Get fact sheets, "How to" guides and more.

View all eligible expenses

Check out the FSA Store

Transcript

Angelica Rivera: Welcome to this month's episode of Money Talks, a podcast by the Employees Retirement System of Texas seeking to provide in-depth benefits information to state and higher education employees. My name is Angelica Rivera and I am joined by two of my colleagues: Crystal Olvera and Erika Perez. 

Today, we've got a really special guest with us to talk about one of my favorite ERS-sponsored programs and that's the TexFlex Flexible Spending accounts (FSA). James Handy is an account executive with Inspira Financial, the third-party administrator of the TexFlex program, and he's been helping us with the TexFlex program for at least as long as I've been with the agency. I'm showing my age, but that's like over 14 years now. And I think, James, you were on the account when I started working on the TexFlex program and so we're so glad to have you here with us to talk about it. 

James Handy: Thank you so much. Glad to be here and talk about the TexFlex program. 

Crystal Olvera: So James, for those folks who don't know, maybe you can talk a little bit about what a flexible spending account is. When I started at ERS, I had no idea. I got braces and I could have used this to help me because it was a $100 charge every month that I really could have just used the Texflex debit card to pay for. So, can you kind of give us an overview of what TexFlex is — what an FSA is? 

James: Absolutely. You know, simply put, flexible spending accounts are IRS-regulated plans that allow employees to set aside pre-tax dollars — so that's your main benefit pre-tax — to budget for your healthcare and your daycare needs, ultimately lowering your taxable income. 

Erika Perez: It sounds like a really helpful benefit but I did just read a stat that only about 16% of our total eligible employees are enrolled. I'm one of the few. So why do you think that is? 

James: Well, the number one is that 4-letter word: fear. You know, fear, uh, from flexible spending accounts. Oh, ultimately, they get a bad rap because of the “use-it-or-lose-it” rule that people are accustomed to. And many may be thinking, you know, pre-carryover and not even understanding that it's not truly a use-it-or-lose-it because there are many, many forms of carryover that IRS has adopted to lessen the likelihood of losing funds. But in reality, they can be a super powerful budgeting tool and tax savings tool if people know how to use them. 

Crystal: It sounds like it's not the type of benefit that you can just set and forget, kind of like your 401(k) contribution or like the health insurance plans. So how would one use them effectively? 

James: Well, you said it exactly right, Crystal. Flexible spending accounts are designed in a way that requires employees to really be proactive in their healthcare journey and in the types of accounts they choose — not only from the healthcare side, but then what subsequently, what flexible spending account associated with that. And there's a level of that planning that is required by looking at what your out-of-pocket expenses are each year. There ultimately is three types of accounts that we administer for ERS and the TexFlex program. 

We have your traditional healthcare FSA that the majority of the population are involved in. Then we have a limited-purpose FSA that goes along with someone who has enrolled in the Consumer Directed HealthSelectSM high deductible health plan, which comes with an HSA. You can have a limited-purpose FSA that will pay for dental, vision and orthodontia only. It's a great resource to have not only pre-tax, but those accounts are pre-funded by ERS. So the money is available to you immediately on 9/1. So you have the money and you can spend it all if you need it. And then we have daycare or dependent care, which is daycare expenses for children under the age of 13 — not to be confused with your dependent that you file taxes with. So those are the three types of benefits that we offer. 

Erika: What would you say to me as someone who is on the fence about enrolling? Summer Enrollment is coming up in June and let's say I'm not 100% convinced.

James: I'd start with Erika, you know, start with the safe zone. When I go to Summer Enrollments for the state every year, that question comes up to me. And so what I say is you start with a safe zone. What do I mean by safe zone? Well, the carryover provision that, you know, many may not be aware of, but there is a $660 carryover currently before this plan year of monies that will carry over to next year. So, you know, first year people coming into it getting their feet wet, you you can't lose anything at $660 because everything will automatically roll over on 9/1 of the subsequent plan year. Let's just say hypothetically you're at $660 and you didn't spend a dime come next Summer Enrollment. Then you need to make the decision. You can drop that down to zero. All $660 is going to move over to the next year and then you will spend it down and it will keep carrying over as long as you're an employee of ERS. So there's no risk there. But when I tell people that and they jump into it, what you will most likely find, is that is gone and gone in a hurry. 

Crystal: So, James, I wanted to see if you could maybe talk me through kind of a real world situation — maybe an example of how it works. So I like to use myself because I started in 2020 here at ERS. I didn't know anything about TexFlex and during Covid, I got braces. I signed a contract with my orthodontist and I had a monthly bill of about $166, let's say. What I did was just pay it, you know, every month. I mean, that's kind of what I did, but what could have saved me, like if I knew I was going to get the braces, that's how much it was going to be, you know, what's my next step with Texflex? 

James: Yeah, that’s a great example. And what would have saved you money is you started paying that $166  post-tax. So you got your paychecks, that money was already taxed. So you would be saving the tax money on that. 

So let's just say that the total expense was $4,000 and you entered into a contract with the orthodontist, which most people do just because of the expense. They'll say, you can pay for it upfront and we'll give you a 2%, 3% discount. But not everybody can just pay that. And so they enter into these orthodontia agreements where they're paying a monthly fee. So you're able to take that one $166, take it times 12, you know, that's going to be year one — for at minimum year one. Then the uniqueness about orthodontia that the IRS allows is they — with no other expense type is this allowable — will allow the subsequent plan year to pay for an expense that happened in the year prior. So you had the orthodontia put on. Now, in two years, you could still be using new TexFlex monies to pay for that expense because you entered into that orthodontic contract. 

Crystal: So what if the contract is for 12 months, right? Let's say it's a 12-month contract. So I would take that $166 multiply it by 12. Correct. And so that's about $2,000 for the whole year. So let's say I make $50,000 a year. So that $2,000 is taken out from my paycheck, right. How is it done? It's, I guess monthly, right?

James: It is going to be done monthly based on your payroll schedule. So they're going to divide whatever your annual election is by your number of payroll. So if you're paid once a month, they're going to divide it by 12. That's what's going to come out pre-tax. But all $2,000, if that's your election, is available to you immediately on Sept. 1, right?

Crystal:  So I could just pay it off if I wanted to. 

James: You could. Absolutely. You could pay it off if it was $2,000 was going to be roughly your bill and you elected $2,000 on Sept. 1, you could pay the orthodontist. If they're going to give you a little bit of a discount to pay that, you can pay it all at once.

Angelica: You mentioned the debit card, James. I do want to talk a little bit about the debit card because I think it's a super convenient way for people to pay for a lot of these expenses. Orthodontia , orthodontia is a big expense, right? And we talked about, you know, how it can cost thousands of dollars and the maximum, I think this year, remind me, the maximum that you can contribute 

James: $3,300 is the maximum 

Angelica: And I think for next Summer Enrollment that'll increase it. Typically, the IRS typically increases it. 

James: That's been the case so far. So we anticipate it to continue both carryover increasing and the annual election amount increasing. 

Angelica: One of the most convenient ways, I think, to use the healthcare flexible spending account is via the debit card. Right. So you're issued a debit card when you enroll. And I think that there's some maybe misconceptions with using the debit card and how to use it effectively and appropriately, right? Because nobody wants to get a ton of requests for receipts. So kind of enlighten us about the debit card process and how we can use that effectively. 

James: Yeah, absolutely. The debit card, to your point, is it's just one means to access the funds, but it is the most convenient. You go to the doctor, you swipe the copay; you go to pick up prescriptions, you swipe the debit card. The convenience of it is enormous, but it does come with some responsibility from the member. 

Not every card swipe is going to be auto substantiated. What do I mean by auto substantiated? If you swipe it at a pharmacy, you're never going to hear from us; if you swipe it for a copay amount at a doctor's office, you're never going to hear from us. If you swipe it at a doctor's office for $131.13, you're probably going to hear from us. Why? Why do we contact you on $131.13? Well, number one, we know that the date of service was not the date you swiped the card, right? Because otherwise it would have been a copay amount, right? Or we know that the system knows that the plan design knows that. 

We know the date of service happens somewhere prior to the date that you swiped it, but we don't know the exact date when that swipe happens. Did it happen the date of service happened last year, and now it's 9/1 and we're using new money to pay for an old service, which you can't do under IRS regulations. We, as the administrator, have to protect the plan here as a whole. And so we'll have to ask you for certain card swipes, right? The main one being dental. And it's primarily because of how dental providers bill you or require payment. 

Many of them will ask you for payment before you walk out the door, right? And they base that on an estimate or expected insurance, right? But the unfortunate side of that is many times after the dental insurance carrier gets the claim, they make adjustments based on plan, design, etc. and all of a sudden now you get the explanation of benefits (EOB) from the dental carrier and you owe less than what you already paid the dentist, right? So you paid the dentist $130. The explanation of benefits come in and says you only owe the doctor $120, so you overpaid him by $10. And that's what happens when they do estimates are expected. They're not going to typically call you and say, "Hey, we got $10 dollars. Where do you want it sent to?" They're going to hang on to that money until you go in for your next service.

The problem with it, when it comes to pre-tax dollars, is that we have to be able to track all of those dollars, so that $10 is sitting in a dentist bank account that I have no visibility to, and we have to be able to track that and identify that it's spent correctly within the plan year, that it's designed to be spent, etc. So we got to get that $10 back into your account with us so that we can track that you spend it correctly and or carry it over to the next year, whatever the case may be. 

If possible, don't swipe it at dentists that make you prepay. If it's a final bill after insurance has been paid and everything else, it's perfectly fine. But when they have you prepay, if you can do it in other means, great! If not, just know that most likely we're going to ask you for some substantiation for it. We're not thinking you're doing anything wrong. We just have to make sure we protect ERS as a whole — that plan — to make sure that they can offer this to all of your members for that tax benefit. So do's and don'ts: try not to at a dental, but everywhere else you're going to be you're going to see the convenience of it is just enormous. And you end up going through money before you know it. 

Crystal: That's so interesting. I had no idea that dental is really the one that requires the most substantiation. And when we're talking about substantiation, I just want to clarify, you mean receipts, right? Like, yeah. Okay. Great. 

James: Yeah. Receipts. So itemized receipts from the provider most of the time work when we're looking at, you know, the highest echelon of documentation, the explanation of benefits (EOB), no matter what it is, is going to be the top of the heap. So if you can provide us with the explanation of benefits, if we've asked for it, then that is going to be your bulletproof type of documentation. 

Angelica: Yes. So the EOB is the gold standard, it sounds like, and folks can find that in their providers portal usually. So like your Delta Dental today it's Delta Dental portal or your Blue Cross Blue Shield portal. 

So I wanted to talk a little bit about the ease of filing claims and getting reimbursed outside of the debit card. We have a claims file feed from our health plan provider, which is Blue Cross and Blue Shield of Texas. That goes to Inspira, our TexFlex administrator, and those show up in our TexFlex participant portals. And I think it's so convenient to be able to go in there, see those claims and act accordingly. So can you give us a little overview of that piece, James. 

James: Yeah, absolutely. So to your point, we do get a claims file in from Blue Cross Blue Shield of Texas. We get that claims file in and it automatically will populate to an individual's account online. So you go see Dr. Jones and Dr. Jones files it with Blue Cross and Blue Shield. Blue Cross Blue Shield processes the claim. They send us a claims file that says you owe $120 to Dr. Jones and that will automatically populate in your account. You're going to get an alert that says we, you know, you have new activity. You log into your account either via the website or our mobile application. And you're able to simply click on that claim and then make a determination of what you want to do with it, right? And then you have some options. 

Let's say that you want to pay Dr. Jones with your American Airlines credit card because you want to, you know, gain some points or whatever and you just want reimburse yourself, right? I'm going to pay Dr. Jones another means I want reimbursed. You click on it, you know, literally just a couple of clicks, you determine that I want to pay myself, hit submit. And hopefully we're sending you an ACH to your bank account as long as you have set up some bank account. Otherwise, we're going to send you a check. 

So let's say that you don't want to hassle. You don't even want to go into Dr. Jones again. You don't want to send anything to him. You just want us to pay him. So we have the functionality on our portal where you're able to click on and you say, pay provider. We're going to have all that information already populated in there that we get from Blue Cross Blue Shield. You're going to confirm it, and we are automatically going to send Dr. Jones $120 on your behalf from your account. 

Let's say that you have a spouse that is not covered under your medical plan for whatever reason, and they have their own, and you're able to use flexible spending accounts for any of your household tax dependents. It doesn't matter if they're covered under your insurance or not. In that case, we're not going to get a claims file for your spouse that's went to Dr. Jones. But you want to you want to get reimbursed for that and you're able to do so. You're able to file a claim with us. We just need again, either an itemized statement or the gold star standard that Angelica said is the explanation of benefits. And once we get that, we'll again pay you however, whatever means you have determined whether that's a bank account, direct deposit or a check to you. 

Erika: So if I'm still worried about the use it or lose it piece, is there anything else that can really convince me to commit. 

James: You know, the carryover is the main part of that where we're able to carry over monies to the next year so that's safe zone. But let's say that you added up all your things and you're like, "I'm going to go a little bit out of my safe zone and I'm going to just do a $1,000." And so TexFlex is going to divide that out by by 12. We're going to take out 12 monthly installments for that throughout the year. And we're getting towards the end of the year. And we know $660 is moving over, but I've only spent $100. What do I do? I don't want to lose that, other $300 and some dollars well over the counter items is a huge way for people to utilize their funds. 

FSAStore.com a huge proponent of FSAStore.com you can go on there and you will be mind blown at all of the things that are eligible to use these tax-free dollars for.  I was at one of your colleges here this last summer and a couple of security personnel came up to me and they said, you know, "Are first aid kits eligible?" And I'm like, "Yeah, absolutely. First aid kits." And they're like, "Well, what about tactical first aid kits?" Right? So I'm like, "I know that's a great question." I love it when, when I'm sitting down with people and I get these great questions. Well, I jumped on the FSA store. I'm like, have you ever been here? Nope. So I, had my computer, I, we popped it up together. You know, I look up tactical first aid kits, absolutely one hundred percent covered. And they have, you know, it's wound care and tourniquets and coagulative stuff for, you know, in case of serious emergency, but it's something that they wanted to have with them, and they wanted to see if the FSA dollars would pay for it. And absolutely it would. So for somebody that, you know, you're fearful about losing, there's so many avenues to be able to spend it down to prevent you from losing any even if you over contribute a little, taking into consideration even the $660 carryover. So great question. 

Angelica: Yeah, there's a lot of cool stuff at the FSA store. I think they have those Oura Rings that everyone talks about. Yeah, there's there's some cool stuff on there. So, you know, to James's point, if you're getting low on your or it's getting down crunch time, August 31, is coming around the corner. Check out the FSAstore.com and everything either ships for free or your FSA card covers the shipping.  

Erika: So it's National Women's Month and I couldn't help but look around the room and see a lot of women in the studio and I was curious. Are feminine hygiene products eligible? 

James: Absolutely. Menstrual supplies is one hundred percent a covered FSA eligible item. 

Crystal: Another thing I wanted to mention is something that I was surprised was also eligible. A friend of mine actually who works here at ERS who has TexFlex, says she's been using her debit card to buy her daughters those acne pimple patches that you put on overnight. I thought that was really cool. I had no idea that that was an eligible item. 

Angelica: Yeah, my it's like a fashion statement for girls these days. I and I've been paying for them out of pocket. And now I know I can file a receipt for those. 

Crystal: Yeah, I thought that was really fun. So James, what what other items would you be surprised to find are eligible? 

James: Sunscreen SPF 15 Chapstick — as long as it has SPF 15 or above — Chapstick is a covered item. You know so many, you know your typical stuff:  pain meds, Tylenol, Advil, cough medicines, Prilosec — I use on the daily, you know, that's something that people use over the counter. They might have prescription, but it's something that's covered under FSA. So there is a ton of things. And like I said, Angelica confirmed, if you just type in FSAStore.com, go on it and just browse for five minutes, you will find 10 things that you would never have expected. 

You know, a little plug for our, mobile application: we do have a barcode scanner. So if you're in a Walgreens or CVS or some store that you're not for sure you can barcode scan, it'll tell you if it's FSA-eligible and or not, or if it possibly is eligible, but only with a letter of medical necessity. But it'll tell you that on the on our barcode scanner as well. So a lot of cool things. 

Angelica: Well, thanks for joining us, James. I want to reiterate that, you know, this is a wonderful tool for people to have as part of their benefits package. Um, it's shocking to me that 80% of our eligible employees are not using this benefit. And I hope that we were able to educate and provide some information that might encourage folks to enroll, because I do think it is a valuable tool towards financial wellness. So thank you for being here. Thank you to our listeners for listening, and I hope you're interested in learning more about flexible spending accounts. If you are, you can learn more about them and enroll during Summer Enrollment. That's coming up here in June. 

Crystal: And you'll probably be able to find James at some of the Summer Enrollment fairs throughout the summer. He also does the TexFlex webinars where he can answer your questions. So we encourage you to sign up for those when they become available, when the schedule becomes available. And thanks for listening. Please do drop us a line if you have a comment or want to suggest a topic at storyideas@ers.texas.gov because we'd love to hear your thoughts on Money Talks!