Flexible Spending Accounts: What you need to know about Healthcare Reimbursement

October 31, 2012 in Best of Both, Finances, Healthcare benefits by MyBestofBothWorlds

Flexible Spending Accounts: What you need to know to make the best selections for you and your family.  As many employers will be having healthcare benefit fairs as it is open enrollment season ( the time of year where employees that have insurance benefits get to make adjustments for coverage for the following calendar year) I want readers of My Best of Both Worlds to be as informed as possible when it comes to making decisions that will impact their families’ finances as well as healthcare decisions.  With that in mind this will be a two-part blog.  The first flexible spending account we will discuss is the Healthcare Reimbursement account and part two will focus on Dependent Care Reimbursement accounts.

Flexible Spending Accounts

Healthcare Reimbursement account

The Healthcare Reimbursement Account offers a real tax savings advantage for your pocketbook.  Many people find it a cost-effective way to pay for such items as medical and dental plan deductibles / co-payments, eyeglasses, contact lenses, orthodontics and other healthcare related expenses that are not covered by insurance.  Even taxpayers who do not itemize their expenses can take advantage of this tax break using the Healthcare Reimbursement Account.

FAQ’s

Who should enroll?

The Healthcare Reimbursement Account is beneficial for anyone who has medically necessary out-of-pocket medical, dental vision or hearing expense beyond what their insurance covers.

Who is a qualified dependent?

If a person qualifies as your dependent for federal tax purposes, he/she qualifies as a dependent under the Healthcare Reimbursement Account.

How does it work?

Review your healthcare expenses from the previous year.  You are allowed to include out-of-pocket expenses for yourself and anyone claimed as a dependent, for tax purposes.  If you find you had $100 or more in out-of-pocket expenses, including reoccurring or predictable expenses, this account can help you stretch your income.  After you have determined your estimated annual expenses and arrived at a contribution dollar amount that you are comfortable with, divide this amount by the number of pay periods for the plan year.  The maximum contribution is set by your employer.  This amount will be deducted in even amounts from each paycheck and contributed to your  Healthcare Reimbursement Account.

You will need to plan carefully, as the IRS requires that any unused money left in your account at the end of the plan year be forfeited.

When you submit an expense for reimbursement, you will need to complete a request for reimbursement claim form, along with the following, the insurance, explanation of benefits, (EOB for services covered by insurance) or itemized bill for services not covered by insurance, complete with the name of the provide, amount of the service and description of the services rendered.  Services submitted must be incurred within the plan year.

Do I have to re-enroll during every open enrollment period?

The IRS requires that employees make new selections for each and every plan year.  This makes sense as year to year your out-of-pocket expenses may increase or decrease.

Examples of healthcare reimbursement Account Eligible expenses include:

Dental Services Practitioners Prostheses
Crowns Allergist Syringes
Bridges Chiropractor Wheelchair
Dental X-rays Christian Science Wigs (due to hair loss disease)
Dentures Dermatologist Vision Services
Exams/ Teeth cleaning Homeopath Artificial eyes
Extractions Naturopath Contact lenses
Fillings Osteopath Contact lens solution
Gum Treatment Physician Eye exam
Oral Surgery Psychiatrist Eye glasses
Orthodontia / Braces Psychologist Laser Eye surgery
Insurance Related Items Other Medical Treatments & Procedures Ophthalmologist
Co-pays / Co-insurance amounts Acupuncture Optometrist
Deductibles Alcoholism (inpatient treatment) Prescription sunglasses
Pre-existing condition Reconstructive surgery if medically necessary LASIK
Private hospital room differential Hearing exams Obstetric Services
Lab Exams / Test Hospital services Lamaze Class
Blood test Physical therapy Mid-Wife expenses
Cardiographs Speech Therapy OB/ GYN exams
Diagnostic Vaccinations Post natal treatment
Laboratory fees Well baby care Prenatal treatment
Metabolism tests Other supplies & services
Spinal Fluid tests Abdominal / back supports
Urine / stool analyses Ambulance services
X-rays Arches / Orthopedic shoes
Medication Counseling
Insulin Crutches
Prescribed vitamins Hearing aids/ batteries
Prescription drugs Hospital bed

 

Disclaimer—check with your individual employer and or your attorney or tax advisor what is the appropriate tax advice for your situation.