OT - Flexible Spending & Health Savings Accounts?

[DaddyChoc]

Do you use either of them? What are the pros and cons of them? Is it "pay now or a pay later" situation? Does it come down to being a tax-free deduction?

 

[HuskyNan]

Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) allow you to put a certain amount of money, deducted from your pay before taxes, into an account to be used to pay for approved medical expenses such as:

• Paying the deductible on insurance claims
• Eyeglasses
• Co-pays on prescriptions
• Some over the counter drug store items (first aid, medicines)

There may be other allowed expenses, depending on the plan and the insurance company. The amount you can deposit to an FSA is capped at $2700 for 2019 and an HSA is capped at $3500 for an individual, $7000 for a family.

It's a good deal because you could conceivably pay for $2700 worth of expenses with money that would otherwise have cost you $2700 + state and federal taxes. That could really help if you have some kind of health issue or need some kind of expensive medicine or treatments. I used to get allergy shots regularly and got reimbursed from the FSA - nice.

The difference between an FSA and an HSA is that the money you pay into an FSA from Jan-Dec must be spent by a certain date (I've seen March 15 of the following year most commonly) or you forfeit whatever is left in your account. My husband I have scrambled to get eyeglasses or late doctor's appointments just to spend whatever was left in our accounts because of this. In an HSA, the funds can roll over to the next year, however I'm not sure if they can stay in there forever.

Keep in mind that you can't draw cash from these accounts and they don't earn interest, at least, I'm not familiar with any accounts that accrue interest to the employee. It's also a reimbursement deal, so you can't put in claims to the FSA and have them pay your doctors.

 

[meyers7]

Nan explained them well. We use FSA for co-pays, glasses, prescriptions, etc. But yea, sometimes you have to scramble at the end to spend it. I'd start with a lower amount, if you run out, you're just paying with post tax dollars. If you spend it all say by October, you can bump it up the next year.

And it can be different every year depending on what's going on in your life. Last couple of years we've run through it by December. This year, we've got about $800 to spend by the end of the year.

 

[HuskyNan]

Nan explained them well. We use FSA for co-pays, glasses, prescriptions, etc. But yea, sometimes you have to scramble at the end to spend it. I'd start with a lower amount, if you run out, you're just paying with post tax dollars. If you spend it all say by October, you can bump it up the next year.

And it can be different every year depending on what's going on in your life. Last couple of years we've run through it by December. This year, we've got about $800 to spend by the end of the year.

Yeah, we had about $800 left at the end of 2016 so I went and bought prescription sunglasses. They were designer frames from a lah di dah optician in New Haven and I cringed paying $800 for a pair of glasses. I guess I could have gone to Sears or Costco and gotten 2 pairs of glasses but the lah di dah optician was across the street from where I worked and more convenient. Still, we discontinued the FSA since my sons are on their own and we're all reasonably healthy (knock on wood). We always scrambled to spend the money at the end.

 

[Centerstream]

I am not sure if this is true for all accounts but the FSA and HSA accounts where my wife is employed are different in that with the FSA you can use the money before it has been deducted from her pay, HSA money has to be in the account. So with an HSA, if you have multiple needs for it early in the year you may not be able to use it right away.

 

[Bama fan]

Nan explained them well. We use FSA for co-pays, glasses, prescriptions, etc. But yea, sometimes you have to scramble at the end to spend it. I'd start with a lower amount, if you run out, you're just paying with post tax dollars. If you spend it all say by October, you can bump it up the next year.

And it can be different every year depending on what's going on in your life. Last couple of years we've run through it by December. This year, we've got about $800 to spend by the end of the year.

Good year for you then, relatively!

 

[mhshuskies]

You can go to irs.gov and download Publocation 969 for information regarding HSA. Anyone with high deductible health insurance can open their own HSA, it does not need to be done through your payroll or work. Plenty of banks have HSA available. Once money is put in the HSA it is yours to use without a time constraint. Contributions to an HSA (up to the IRS limit) are a direct reduction of Gross Adjusted Income. Funds in an HSA can be used for any qualified medical expense, INCLUDING long term care insurance premiums. I have had one for more than ten years and think it should be a part of everyone’s investment strategy. All my kids have them and none of them are older than 30 or married.

 

[mhshuskies]

To clarify, contributions to an HSA individually (not pretax) would be a reduction of Adjusted Gross Income.

 

[oldude]

My wife an I have an HSA. Unlike an FSA, there is no time limit on the use of an HSA. Essentially, an HSA is pretax savings account that you can use on qualified medical expenses for the rest of your life. You receive a debit card, typically affiliated with a credit card company. Ours is Visa. Whenever I pick up a prescription or visit a doctor or dentist where there’s a copay, I just hand them my HSA card like any credit card. Very easy to use and you get a certain satisfaction from knowing that you’re paying a bill with money the government hasn’t taken their cut on.

 

[mhshuskies]

There are now ways to direct investment of contributions within some HSA. I can invest some of my funds into CDs. I understand some institutions have mutual fund investment within their HSA.

 

[Jackalope]

Wiki (summary) on everything you ever wanted to know about HSA's. Unbiased. There is a link within to a similar wiki on FSAs.

Health savings account - Bogleheads

 

[Jackalope]

In an HSA, the funds can roll over to the next year, however I'm not sure if they can stay in there forever.

Nan, this is exactly one of the great advantages of an HSA. You can pay out of pocket using a rewards credit card or whatever and then pay yourself back from your HSA years later. You need to save qualified receipts and EOBs that occured after the creation of the HSA in case the IRS decides to audit. In the meantime, your money can continue to grow tax free in the HSA indefinately. Read through the bogelheads link I posted in my previous message. That also has links to the appropriate IRS documents.

 

[uconnfan68]

Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) allow you to put a certain amount of money, deducted from your pay before taxes, into an account to be used to pay for approved medical expenses such as:

• Paying the deductible on insurance claims
• Eyeglasses
• Co-pays on prescriptions
• Some over the counter drug store items (first aid, medicines)

There may be other allowed expenses, depending on the plan and the insurance company. The amount you can deposit to an FSA is capped at $2700 for 2019 and an HSA is capped at $3500 for an individual, $7000 for a family.

It's a good deal because you could conceivably pay for $2700 worth of expenses with money that would otherwise have cost you $2700 + state and federal taxes. That could really help if you have some kind of health issue or need some kind of expensive medicine or treatments. I used to get allergy shots regularly and got reimbursed from the FSA - nice.

The difference between an FSA and an HSA is that the money you pay into an FSA from Jan-Dec must be spent by a certain date (I've seen March 15 of the following year most commonly) or you forfeit whatever is left in your account. My husband I have scrambled to get eyeglasses or late doctor's appointments just to spend whatever was left in our accounts because of this. In an HSA, the funds can roll over to the next year, however I'm not sure if they can stay in there forever.

Keep in mind that you can't draw cash from these accounts and they don't earn interest, at least, I'm not familiar with any accounts that accrue interest to the employee. It's also a reimbursement deal, so you can't put in claims to the FSA and have them pay your doctors.

You need to foresee what expenses you might have. Dental has been our money pit. Crowns redone, etc. , and our dental insurance is capped at $1500, so we figure 1 each.

 

[JRRRJ]

...however I'm not sure if they can stay in there forever.

Keep in mind that you can't draw cash from these accounts and they don't earn interest, at least, I'm not familiar with any accounts that accrue interest to the employee. It's also a reimbursement deal, so you can't put in claims to the FSA and have them pay your doctors.

The funds in an HSA can stay forever, and they can be inherited, though I'm not sure of the tax status to your heirs.

You can contribute to an established HSA every year until the year after you start on Medicaid, whether you are working or not.

Depending upon how the HSA is structured (in my case, decided by my employer, who matched some of my contributions) it may allow the funds to be invested in CDs, bond funds, and mutual funds. (The Enron debacle resulted in the elimination of investing in stocks.)

My HSA doesn't provide a debit card -- I must enter claims for reimbursement, which they pay promptly out of the funds which are not invested. So, every so often I sell some of the funds to maintain a cash balance in the HSA.

 

[Huskee11]

My wife and I both have HSAs. I can`t contribute any more since I am on Medicare but I did while I was working and covered under a high deductible health plan. My wife is still under such a plan for 2018 and will be for most of 2019, so she will be able to contribute $4450 by 4/15/2019 for 2018.

We have them through Health Equity. They offer an ok investment lineup - stock, bond mutual funds. We have debit cards that we use, and we can also authorize Health Equity to pay service providers directly from our accounts through our accounts online. Very easy.

The tax advantages don`t get any better than this. You can deduct the contribution from your income for tax purposes; the earnings, gains, etc. in the account aren`t currently taxed; if you use the funds for qualified expenses, the distribution/payment from the account is not taxed to you; and the minimum distribution rules applicable to IRAs, qualified plans, and 403(b)s don`t apply. Even if you don`t use it much at the current time for health expenses, it can still operate as a supercharged retirement account.

You need to be in a high deductible health plan to be eligible to contribute. But once you are no longer in such a plan, you still have your account.

If you have access to a 401(k) and an HSA and can`t contribute the max to both, I would favor the HSA because distributions for qualified expenses are tax free and the minimum required distribution rules don`t apply. Of course, if the 401(k) contributions are matched, you would want to contribute enough to the 401(k) to get the match.

 

[mhshuskies]

The funds in an HSA can stay forever, and they can be inherited, though I'm not sure of the tax status to your heirs.

You can contribute to an established HSA every year until the year after you start on Medicaid, whether you are working or not.

Depending upon how the HSA is structured (in my case, decided by my employer, who matched some of my contributions) it may allow the funds to be invested in CDs, bond funds, and mutual funds. (The Enron debacle resulted in the elimination of investing in stocks.)

My HSA doesn't provide a debit card -- I must enter claims for reimbursement, which they pay promptly out of the funds which are not invested. So, every so often I sell some of the funds to maintain a cash balance in the HSA.

You can have as many HSA as you want. You do not need to do it through an employer, so you can shop for a better HSA than your employer has set up. You are still limited to the IRS limits of annual contributions for the total of all accounts, but you can roll over from one to another a limited amount of times.

 

[Rixxx]

I'm sorry Nan - lah di dah - haven't heard that phrase in like 50 years. I love it.

 

[meyers7]

Good year for you then, relatively!

Yes, we were not at the hospital near as much this last year.

 

[tomcat]

Both of these have advantages. Unfortunately, in recent years some employers have added these onto lesser employee health insurance options, hoping that employees will; think that the lesser insurance plus the HSA amounts to a good insurance plan, which is almost never the case.

An HSA/FSA is never a bad thing in and of itself, The question is what else you are getting in terms of healthcare benefits.

Tomcat's Rule #1: Know what you're getting, and if your employer is making changes to what you are offered, know what you are giving up. Insurance companies are notorious for telling you what you are going to get without comparing it to what you've had in the last year (and how much more or less it will cost).

 

[DaddyChoc]

Yeah, we had about $800 left at the end of 2016 so I went and bought prescription sunglasses. They were designer frames from a lah di dah optician in New Haven and I cringed paying $800 for a pair of glasses. I guess I could have gone to Sears or Costco and gotten 2 pairs of glasses but the lah di dah optician was across the street from where I worked and more convenient. Still, we discontinued the FSA since my sons are on their own and we're all reasonably healthy (knock on wood). We always scrambled to spend the money at the end.

thats what Im scared of... losing the money at the end

 

[DaddyChoc]

it seems that HSA is the better of the 2

 

[Husky fanatic]

Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) allow you to put a certain amount of money, deducted from your pay before taxes, into an account to be used to pay for approved medical expenses such as:

• Paying the deductible on insurance claims
• Eyeglasses
• Co-pays on prescriptions
• Some over the counter drug store items (first aid, medicines)

There may be other allowed expenses, depending on the plan and the insurance company. The amount you can deposit to an FSA is capped at $2700 for 2019 and an HSA is capped at $3500 for an individual, $7000 for a family.

It's a good deal because you could conceivably pay for $2700 worth of expenses with money that would otherwise have cost you $2700 + state and federal taxes. That could really help if you have some kind of health issue or need some kind of expensive medicine or treatments. I used to get allergy shots regularly and got reimbursed from the FSA - nice.

The difference between an FSA and an HSA is that the money you pay into an FSA from Jan-Dec must be spent by a certain date (I've seen March 15 of the following year most commonly) or you forfeit whatever is left in your account. My husband I have scrambled to get eyeglasses or late doctor's appointments just to spend whatever was left in our accounts because of this. In an HSA, the funds can roll over to the next year, however I'm not sure if they can stay in there forever.

Keep in mind that you can't draw cash from these accounts and they don't earn interest, at least, I'm not familiar with any accounts that accrue interest to the employee. It's also a reimbursement deal, so you can't put in claims to the FSA and have them pay your doctors.

Stop contributing to and HSA 6 month’s prior to going on Medicare as there are issues if you don’t. Forgot what they are without looking it up