SPENDING ACCOUNTS
ABC Client provides the opportunity to participate in several spending accounts. The Health Savings Account (HSA), will continue to be administered by HSA Bank. The Health Reimbursement Arrangement (HRA), Healthcare Flexible Spending Account (FSA), and Dependent Care Spending Account will continue to be administered by HealthEquity. Since the funds are pre-tax, every dollar you contribute earns you more in tax savings.
ABOUT THE HRA
- The HRA plan has a $4,000 individual/$7,500 family deductible.
- ABC Client will fund $1,500 for an individual and $3,000 for all other tiers directly into your HRA.
- HRA funds can be used to pay all eligible medical and prescription expenses, including deductible and coinsurance amounts, for the plan year January 1, 2023—December 31, 2023.
- Any unused funds in your HRA from the current plan year do not carry over into the January 1, 2024 plan year.
- Deductible and coinsurance charges are based on BCBSIL’s negotiated discounted rates.
HealthEquity HRA
The HRA reimburses part of your eligible expenses including deductibles. Funded entirely by your employer, this benefit makes healthcare more affordable. Use a convenient debit card to pay for eligible expenses. Submit receipts for reimbursement right from your mobile device.
Keep your receipts
- The IRS requires that all expenses are verified with receipts
- Receipts should be either an Explanation of Benefits (EOB) or a detailed statement.
Use available resources
- Use the HealthEquity Card and account to easily access and manage your account.
Use your HealthEquity Card to pay instantly
- Works like a credit card; just swipe and go. Funds come directly from your HRA
- No PIN required
Health Savings Account (HSA)
If you enroll in the HSA Plan, you have the option of opening a Health Savings Account (HSA) offered through HSA Bank and Associates. An HSA is a financial account that you can use to accumulate tax-free funds to pay for qualified health care expenses. The account is similar to a regular savings account with a debit card. All money in the account is owned by you and is fully vested as soon as it is deposited. By participating in the HSA program, you can take advantage of triple-tax savings. Money goes in tax-free, money comes out tax-free, and any interest earned grows tax-free as long as the funds are used for eligible medical expenses. You are responsible for ensuring the money is spent on qualified purchases only and maintaining records to withstand IRS scrutiny.
Frequently Asked Questions on HSA
Q: Am I eligible to participate?
A: In order to contribute, you must be enrolled in a qualified HDHP, not covered under a secondary health insurance plan, not enrolled in Medicare, and not another person's dependent. There are no eligibility requirements to spend previously-contributed HSA funds.
Q: What expenses are eligible for reimbursement?
A: Health plan co-pays, deductibles, co-insurance, vision, dental care, and certain medical supplies are covered. The IRS provides specific guidance.
Q: Do I have to spend all my contributions by the end of the plan year?
A: No. HSA money is yours to keep. Unlike a flexible spending account (FSA), unused money in your HSA isn't forfeited at the end of the year; it continues to grow, tax-deferred.
Q: Can I have both a healthcare FSA and an HSA?
A: No, but you can have an HSA and a limited-purpose FSA, which can only be used for eligible dental and vision expenses and not for medical and prescription drug expenses.
HEALTH SAVINGS ACCOUNT (HSA)
- An HSA is a personal bank account that is yours to keep.
- It’s portable. Even if you change jobs, you get to keep your HSA.
- You can use your HSA to pay for qualified medical expenses.
- It allows for an improved retirement account. Funds roll over at the end of each year and accumulate tax-free, as does the interest on the account.
- Once you reach the age of 55, you are allowed to make additional “catch-up” contributions up to $1,000 to your HSA until age 65.
- Please note if you are enrolled in Medicare, you are not eligible to contribute to an HSA.
2022 ANNUAL CONTRIBUTION LIMITS $3,650 for Individual / $7,300 for Family Catch-Up Contributions: $1,000/year (HSA owners 55 and older)
FLEXIBLE SPENDING ACCOUNTS (FSA)
ABC Client offers Healthcare and Dependent Care Flexible Spending Accounts to all Full-Time employees. You can elect up to $2,850 annually to the Healthcare FSA and $5,000 annually to the Dependent Care FSA. Your annual election is subject to the use-it-or-lose-it rule, which means you will forfeit any unused funds remaining in your account when the next plan year begins on Janurary 1, 2024.
Employees who choose to enroll in an FSA will be receiving a debit card from HealthEquity to access their funds. If you already participate in an FSA and wish to continue to participate in the 2023 plan year, your funds will be re-loaded onto your debit card. If your card is set to expire, you will receive a new one if applicable.
If you are enrolled in a general purpose FSA, you are not eligible to contribute to an HSA. If you would like, you can contribute to a Limited Purpose FSA, for dental and vision expenses only.
HEALTHCARE FLEXIBLE SPENDING ACCOUNT (GENERAL PURPOSE)
Eligible expenses include medical, dental, and vision expenses and some over-the-counter items. You are able to purchase eligible items online as well through the FSA Store, please visit https://fsastore.com for more details. You can elect up to $2,850. With the Healthcare FSA, you have a 2 1/2 month grace period after your plan year ends to submit any claims incurred throughout the January 1, 2024 - December 31, 2024 plan year. This means you have until March 15th, 2024 to submit any claims incurred during the 2023 plan year.
You are able to have both an HRA and a Healthcare FSA, however, it is important to note that HRA funds will be exhausted first in this situation.
For the most recent update of eligible expenses, please click below.
HEALTHCARE FLEXIBLE SPENDING ACCOUNT (LIMITED PURPOSE)
To establish a Limited Purpose FSA, you must be enrolled in both a high-deductible health plan and an HSA. Under current IRS rules, you cannot deposit money into an HSA if you participate in a standard healthcare FSA. However, because an LPFSA restricts reimbursements to specific dental and vision care expenses, the IRS allows you to participate in both an LPFSA and an HSA at the same time. By having both accounts, you can maximize your tax and savings benefits. You can elect up to $2,850.
DEPENDENT CARE SPENDING ACCOUNT
If you have a child (under the age of 13) or a disabled loved one, you might rely on services like daycare, or home aide to be able to go to work. Lessen the financial burden by enrolling in this account. The IRS allows you to claim work-related dependent care expenses credit on your annual tax return.
Eligible expenses include daycare, day camps, babysitting, and before/after school programs. You are able to elect up to $5,000. Please note this is a use-it-or-lose-it election, which means you will forfeit any unused funds remaining in your account when the next plan year begins on January 1, 2024. Funds cannot be carried over into the new plan year on January 1, 2024.
You can use a Dependent Care FSA and claim the tax credit, as long as you do not claim the same expenses for both. A rule of thumb is that if you earn less than $39,000 annually it is more beneficial to forgo the Dependent Care FSA and take the full dependent care credit on your income tax credit. Please consult your tax advisor to determine what scenario may make sense for you.
Why Enroll in a Flexible Spending Account?
Everyone has out-of-pocket costs for health care, dental care, and vision care that is not covered by insurance. Additionally, many working parents have Dependent Care costs.
An FSA plan provides a way to pay for these expenses on a pre-tax basis. When you make an FSA election, the annual amount you elect is divided by your number of pay periods and is deducted from your paycheck in equal installments on a pre-tax basis.
How can I access my FSA funds?
Healthcare FSA ABC Client will make your entire FSA election available to you on your effective date. You will repay ABC Client via weekly payroll deductions. Employees are able to contribute up to the 2022 IRS maximum of $2,850 yearly.
Dependent Care FSA Your Dependent Care FSA election is available on a pay-as-you-go basis. You can only draw an amount equal to what you have deposited. If you are married and file a joint tax return, the maximum amount you may exclude is $5,000. You and your spouse may not each claim $5,000. If you are married but filing separate returns, the maximum amount available is $2,500.
How Does an FSA Increase my Spending Income?
Joe and John both earn $35,000 annually and have out-of-pocket medical and dental costs of $2,000 annually. Joe does not set aside the $2,000 in an FSA. John takes advantage of the FSA. Look below to see who has more spending income at the end of the year:
