There’s a lot of information out here, we’re available if you want to talk some more in person. Select a plan type below to review frequently asked questions and answers.

Please contact us as you need us, we’re here to help.

A flexible spending account is a special employee benefit offered by your employer. From this unique account you can set aside money from your paycheck without ever paying tax on it. You then use this tax free money to pay for things you are already buying. Eligible expenses include medical, vision, dental and hearing expenses like prescriptions, doctor office visits, prescription glasses. You can also set aside tax free money for work-related dependent care expenses, child care expenses you incur so you can go to work. Upon new hire eligibility, and then again at the beginning of each plan year, you have the option to elect how much you want to deposit into your FSA. You then make withdrawals for eligible expenses…tax free!

Let’s talk a little more about what tax free really means.
Tax free is easy to understand when put into everyday language. We all earn gross income, but your gross income is not the amount of money you take home. Take-home pay is the amount of money you actually get to put into your personal checking account. Take-home pay is what is left over and can be used to buy groceries, make your car payment, and buy everything else. You spend your entire life buying things from your take-home pay.

It takes about $1.30 of gross income to take home $1.00.
To take home $1.00, you actually have to earn about $1.30 because you have to pay Federal, State, Local and Social Security income taxes before you take any money home.

Pay expenses from your gross income!
Being able to pay for expenses before you pay taxes is known as tax free. What if you could pay for things before you paid Federal, State or Social Security taxes? What if there was a bank account you could use to legally pay for expenses from your gross income…before you had to pay income taxes? What if there was a way you only had to earn $1.00…to pay $1.00?

A bank account this good really exists! It’s known as a Flexible Spending Account and it is approved by the IRS. With an FSA, you only have to earn $1.00 to spend $1.00 because you don’t have to pay income taxes first. You don’t have to earn $1.30 to spend $1.00.

At the beginning of each plan year, you need to do a little budgeting. You need to decide how much money you plan to send on qualifying expenses in the coming year. Based on this budgeting process, contributions are then made through payroll deduction into your FSA. These contributions are made on a tax free basis. As expenses are incurred, you request tax free reimbursements from your account.

 

Health care FSAs help budgeting in two ways!

1st Budgeting Advantage: Making contributions through payroll deduction is easy! If you choose to enroll, you will make deposits to your FSA each pay period through payroll deduction. It’s a lot easier to accumulate money if it is withheld from your paycheck before you see it. In this next year, let’s say you know you are going to continue to take medication for high blood pressure. In addition, you know your daughter will be seeing the doctor for her allergies and, oh yes, you really should get that tooth crowned before you lose it altogether. Sound familiar? These are things you are already going to spend money on. What if the total of these expenses was $520? Your FSA allows you to deposit money each pay period through payroll deduction so you will have enough money to pay for all these expenses. Budgeting $10 through payroll deduction each week is a lot easier than coming up with $520 all at once.

2nd Budgeting Advantage: Your entire annual health care FSA election can be withdrawn any time during the year regardless of year to date deposits. What? Say that again. Your entire annual health care FSA election can be withdrawn any time during the year regardless of year to date deposits. With any other bank account, you can only withdraw what you have deposited. A health care FSA is not a normal bank account. For the health care FSA, the IRS rules say your employer must make your entire annual election available for withdrawal any time during the year. This means if you go to the eye doctor for new eyeglasses in July, you could be reimbursed for the full cost (up to your annual election) even though you may not have deposited the entire amount of that expense by that time. Read this last statement and believe it! It’s true. There is no other bank account like it. The full amount you elected for health care expenses will be reimbursed even though you may not have deposited the entire amount by that time. It’s a whole lot better than making minimum monthly payments on a credit card.

The work-related dependent care FSA works a little differently, more like a regular bank account, but still tax free. We’ll talk more about this later.

 

Tell me some of The Rules.

There are always rules when Uncle Sam gives us a tax break. Your retirement plan has rules. There are rules when you deduct the interest payable on your home loan. We all like a tax break. Nobody likes rules. But, rules aren’t hard to live with once you know what they are.

The rules aren’t hard to live with once you know what they are. FSAs let you to pay for certain qualified expenses . . .TAX FREE. . but you have to: plan ahead because you can only enroll once a year; and your election, with few exceptions, can’t be changed during the year; and any money left in your account at the end of the year cannot be returned to you.

So how do you know in advance how much money to put into your FSA?

The Secret of living within the rules!
Look for eligible expenses that are “repetitive or predictable” and you know you will be buying anyway!

Repetitive Expenses (costs you have all the time)
Prescriptions – maintenance medications
Dr. office visits – for visits you go to regularly
Dental cleanings & exams
Orthodontics / Braces

Predictable Expenses (costs where you can plan for them and decide when)
Surgeries that are planned
Dental fillings, crowns, etc.
Eye exams & prescription glasses

 

Work-Related Dependent Care
Use this account to keep the kids, tax free, at the sitter or at daycare while you work. It shouldn’t be too hard to “guess-t-mate” the annual amount paid to them.

In the situation of divorce, only the custodial parent may participate in the work-related dependent care FSA.

 

Knowing The Secret makes living with the rules OK.
All these expenses are for things you know you will be buying anyway and therefore the rules don’t really mean anything. You know at the beginning of the year how much you will spend ….. you are going to spend the money anyway …. so you don’t have to worry about leaving any money in the account at the end of the year.

There are choices with health care FSAs and the one for you depends on your specific situation.

A general purpose health care FSA provides reimbursement of medical, vision and dental expenses for you, your spouse and your kids.

A limited purpose health care FSA is for those who contribute to a health savings account (HSA) or whose spouse does. A limited health care FSA reimburses dental and vision expenses for you, your spouse and your kids.

An employee only or employee + children provides reimbursement of medical, vision and dental expenses for everyone in the family except the employee’s spouse. This FSA type is for an employee whose spouse contributes to an HSA.

FSAs are typically use it or lose it during the plan year. You have 90 days after the end of the plan year to submit all of your receipts for reimbursement for services incurred during the plan year. This is an IRS rule. Your employer doesn’t want you to leave any money in your account. To avoid this “use it or lose it” rule, you should carefully plan how much money you want to deposit each year. To help you use up all deposits for each year, you will receive a “left to spend” report approximately 30 days before the end of your plan year detailing any money left in your account to spend. You will then have time to spend the money before the end of the plan year.

Your plan may include an optional feature called a “grace period” or a “carry over”. Check with FlexBank to be sure. There’s more information on these features under Participant Forms & Brochures.

All deposits to your account will end with your last paycheck. You may continue to submit requests for reimbursement for eligible expenses incurred while you were employed.

You may not be reimbursed for expenses incurred while you were on leave (paid or unpaid leave) as you were not actively at work or looking for employment.

Yes. However, the reasons you can change your contribution for group insurance premiums and the health care FSA are limited. Permissible changes are primarily due to changes in eligibility. The following circumstances are examples of “life events” that may permit an election to be changed: marriage, divorce, death, birth, adoption, change of employment status that affects eligibility, or termination of employment. The change of election must be “on account of the event” and must also be consistent with the request.

No. Participation is optional beyond your group insurance premiums. However, if you do not use your flex account to pay for allowable expenses, you will be paying too much in taxes.

We want to make it as easy as possible for you to make withdrawals. Your employer hired FlexBank to help them follow all of the IRS rules. So, in order to process your request, we need the information required to make sure your request is for an allowable expense. Itemized receipts must say who, what, why, where, when, and how much. To assure prompt reimbursement, please follow these simple steps.

Always use a claim form, it’s short and easy to complete. One can be found in the Participant, Forms & Brochures section of this website.

Reimbursement requests are processed on a daily basis. It will generally take one day plus mailing time or two business days for direct deposit into a checking account.

You may request reimbursement at any time. However, many participants accumulate a number of bills and submit them all at once.

No. You have up to 90 days after the end of the plan year to make requests for reimbursement.

Rx
For prescription drugs, submit a copy of the tag (showing the cost, medication, date of service, and the patient name) attached to the prescription bag.

Office visits
For doctor office visits or other professional providers, submit a copy of the doctor’s receipt showing the date of service, the patient’s name, preprinted provider information, the treatment rendered, and the amount of the expense.

Insured expenses
Where you are responsible for a deductible or a percentage of the expense, before we can reimburse you, you must first submit these types of expenses to your insurance company. Your insurance company will then send you a summary of the claims you submitted indicating what amount, if any, they have paid. This is known as an “Explanation of Benefits” (EOB). We need a copy of this EOB in order to reimburse you.

Over-the-Counter Medicines
For over-the-counter medicines, the IRS says you must have a prescription from your doctor prescribing the over-the-counter medicine and the condition being treated. Submit this along with a copy of the itemized cash register receipt showing the date, the item and the amount. If FlexBank cannot identify the item from the cash register receipt, we require that you also submit the box top.

Orthodontia
For orthodontia, if your company’s plan limits reimbursement to a down payment with monthly installments, you will need to first submit a copy of the orthodontic agreement. You will then need to submit either a copy of the payment coupon or a statement showing what you owe for that month.

Other health care expenses
For expenses where The bill must show:
(a) pre-printed provider name & address
(b) the date of service and the amount of the expense
(c) the type of service rendered and the patient’s name

Balance due bills, visa receipts and cancelled checks are not acceptable because they don’t include all the information we need to make sure the expense is eligible.

Work Related Dependent Care
A receipt must accompany this type of withdrawal for expenses incurred, which should include:
(a) the provider’s name, address and Tax ID Number or Social Security Number
(b) the date of service and the amount of the expense

Where do I send my receipts?

You’ll send them to FlexBank.

Mobile Secure Upload: FlexBank.net
Scan/email: Claims@FlexBank.net
Mail: 1250 W Dorothy Lane, Dayton, OH 45409
Fax: 937.299.7992

 

It’s up to you. You may receive your reimbursement via check or direct deposit. Some employers may require FlexBank reimburse you via direct deposit, similar to requiring direct deposit for payroll.

No. Funds may not be transferred between accounts. Careful estimates should be made at the beginning of the year for each different type of expense.

No. Reimbursements are made based on your date of service, not when you paid the bill. In this case, you would be reimbursed with money from the prior year, if you have any available, because that is the year you incurred the expense.

Not immediately. Where you are responsible for a percentage of the expense, before we can reimburse you, you must first submit these types of expenses to your insurance company. Your insurance company will then send you a summary of the claims you submitted indicating what amount, if any, they have paid. This is known as an “Explanation of Benefits” (EOB). We need a copy of this EOB in order to reimburse you.

You must first obtain a Note of Medical Necessity (NMN) or a prescription from your doctor in order to be reimbursed for over-the-counter medicines. You can continue to use your FSA funds to purchase over-the-counter items that are not considered a drug or medicine (i.e. bandages, wound care, contact lens solution).

If your employer’s plan limits reimbursement to a down payment with monthly installments, you will need to first submit a copy of the orthodontic agreement. You will then need to submit either a copy of the payment coupon or a receipt showing what you owe (or paid) for that month.

Parents may be reimbursed tax-free for their child’s medical expenses through the calendar year in which the child attains age 26, even if your child is not your tax dependent. This means you can use your FSA to pay for your child’s medical expenses even if your child is not living with you, is married or is working.

A child over age 26 may generally be considered your dependent if you provide over 50% of the child’s support. In this scenario, you could use your health FSA for their qualified expenses.

The IRS defines a child as your son, daughter, stepson, step-daughter as well as a legally adopted child, a child placed for adoption and a foster child. Your child’s expenses are eligible for reimbursement through age 26.

No. Only the custodial parent may be reimbursed tax-free for work-related day care expenses.

No. Group insurance premiums are deducted tax free from your paycheck and immediately sent to the insurance company.

In order to be considered eligible for reimbursement, the expense must have been incurred so that you and your spouse*, if married, can be gainfully employed. Gainful employment includes being a full time student. A few examples are: day camps, nursery schools, before/after school programs, daycare centers and private sitters who claim payment as income on their personal tax return.

A few examples are: activity fees (i.e. for field trips); late payment fee made to a daycare provider; overnight camp (including the day-time portion); babysitting fees paid for a healthy child while parent is recuperating from an illness (regardless of doctor’s advice.); tuition for schooling in kindergarten or higher; care provided by your child under 19 at the end of the calendar year or any other person for whom the employee could claim a tax dependent deduction.

Unfortunately, no. You may only participate in this account if the care provided enables both you and your spouse to work, seek gainful employment or go to school.

•a dependent of the taxpayer who has not attained age 13;

• a dependent of the taxpayer who is physically or mentally incapable of caring for himself or herself (i.e. a dependent child 13 years and older or other dependent adult) and lives with the tax payer for more than ½ the year;

• a spouse* of the taxpayer if the spouse (same or opposite sex) is physically or mentally incapable of caring for himself or herself and has the same principal place of abode as the taxpayer for more than half of the year.  All qualifying individuals must have the same principal place of abode as the employee for more than half the year. Please contact FlexBank to discuss your specific situation. My spouse* and I are divorced and my spouse* is the custodial parent of our children. May I be reimbursed for dependent care expenses incurred while they live with me and I am at work? (A) Only the custodial parent (the parent having custody for the greater portion of the calendar year – regardless of which parent claims the child as a tax dependent) may be reimbursed tax free for dependent care expenses.  When the time with each parent is the same, the parent with the higher adjusted gross income is treated as the custodial parent.

No. Only the custodial parent may be reimbursed tax-free for work-related day care expenses.

Only the parent who claims the child as a qualifying child on their tax return will be able be reimbursed for the child's dependent care expenses under the dependent care FSA. The other parent cannot be reimbursed, even if he or she works for an employer that offers dependent care reimbursement benefits. If both parents attempt to claim the child and the child resided with both parents for the same amount of time during the taxable year, the child is the qualifying child of the parent with the higher adjusted gross income.

$5,000 is the maximum if you are single or married and filing a joint tax return. $2,500 is the maximum if you are married and filing separate returns. However, your contribution may not exceed your earned income, nor your spouse’s earned income. This maximum is per family, per calendar year.

The spouse of a married employee is deemed to be gainfully employed and to have an earned income of not less than $250 per month ($500 per month if there are two or more qualifying individuals) in each month during which he or she: (a) is a full-time student; or (b) is incapable of self-care and has the same principal place of abode as the employee for more than half the year.

In the situation of divorce, only the Custodial parent may use this account.

When you complete the enrollment form, you specify how much you want to contribute to your dependent care FSA each pay period through pre-tax salary deduction. Your dependent care account will be credited each pay with the amount you elected. The amount available for reimbursement at any particular time will be whatever has been credited to your account less any reimbursements already paid.

Yes. You may change your election for any one of the following reasons within 30 days of the event.

  • marriage or divorce
  • death of a spouse or child
  • birth or adoption of a child
  • change of employment status (i.e. full-time to part-time)
  • your  provider increases or decreases the cost
  • you change day care providers

The change of election must be on account of the event, consistent with the request and on a prospective basis. Please see your benefits administrator for additional information as to how and when you can change your election.

Dependent care expenses must have been incurred during the plan year. A dependent care expense is incurred when the service that gives rise to the expense is provided; it doesn’t matter when the expense is paid, it’s the date of service that is important. If you have paid for the expense but if the services have not yet been rendered, then the expense has not been “incurred” for this purpose. A good example is where you pay for your child’s day care on the first of the month for care given during that month, but the expense has not yet been incurred until the end of that month. You may not be reimbursed for any expenses arising before the plan became effective, before your effective date in the plan or for any expenses incurred after the close of the plan year.

 

What happens to amounts left over in my accounts if they have not been used during the plan year?

Amounts not used cannot be returned to you nor can they be rolled over into the next plan year. You do have 90 days after the end of the plan year to submit claims/receipts to FlexBank for services that were incurred during the plan year.

 

Can I request reimbursement from my account this year for expenses I incurred in another year?

No. Dates of service must be during your employer’s plan year in order for them to be considered eligible for reimbursement.

No.

No. Claims are reimbursed as monies are withheld and deposited into your Account. The dates of service must be incurred prior to reimbursement. For example, if you pay your child care provider on Monday for the entire week, the claim cannot be reimbursed until Friday, when the dates of service have been rendered.

Contributions deposited to an FSA are NOT taxable for Social Security, Federal and most State taxes. Local taxes depend on the municipality to which you pay taxes. City tax is generally not payable in Ohio. Your Social Security benefits may be slightly reduced because of participation in the program.

If you participate in the dependent care FSA, Box 10 of your W-2 will automatically reflect the amount contributed for the year. There isn’t W-2 reporting required for the health FSA.

Yes for the dependent care FSA. To qualify for tax free treatment, you will be required to file IRS Form 2441 (Child and Dependent Care Expenses) with your annual tax return (Form 1040) or a similar form. You must list on Form 2441 the names and taxpayer identification numbers of any persons who provided you with dependent care services during the calendar year for which you have claimed a tax free reimbursement. Ultimately, it is your responsibility to determine whether each payment to you under this plan is excludable for tax purposes. You should talk with your tax advisor.

You may not claim any other tax benefit for the tax free amounts reimbursed by the plan.

In general, if your total household income is less than $25,000, the Federal tax credit is better. The dependent care FSA is probably better if your income is higher than $25,000. The FSA may also be better because it has a lump sum limit of $5,000 for all work-related child care expenses regardless of the number of children. The Federal credit is a percentage of expenses. You should check with your tax advisor to be sure.

Yes.

A Health Reimbursement Arrangement (HRA) is benefit funded 100% by the employer. It is designed to help employees pay for certain out of pocket expenses, tax-free. As the cost of providing medical insurance benefits continues to rise, employers are looking for creative ways to maintain benefit levels while at the same time attempting to contain costs. An HRA is one way to accomplish these two goals.

Eligible expenses are determined by your employer. If you are not familiar with your company’s HRA plan design, please see your Human Resources representative or contact FlexBank.

We want to make it as easy for you to obtain reimbursement. In order to process your request, we must have the information required to make sure your request is for an allowable expense. To assure prompt service, please follow these simple steps.

  1. Always use a claim form, it’s short and easy. You can find a general claim form under the Participants, Forms & Brochures section of this website. However, for a claim form for your specific HRA plan design, contact your Human Resources representative or from FlexBank.
  2. Attach appropriate receipts. Your claim form will explain the types of receipts you
    will need to submit for reimbursement. The types of receipts vary dependent on your HRA plan design.

Where do I send my receipts?
You’ll send them to FlexBank.
Mobile Secure Upload: FlexBank.net
Scan/email: Claims@FlexBank.net
Mail: 1250 W Dorothy Lane, Dayton, OH 45409
Fax: 937.299.7992

It’s up to you. You may receive your reimbursement via check or direct deposit. Some employers may require FlexBank reimburse you via direct deposit, similar to requiring direct deposit for payroll.

Reimbursement requests are processed on a daily basis.

You may request reimbursement at any time. However, many participants accumulate a number of receipts and submit them all at once.

Yes. Reimbursements from an HRA are NOT taxable for FICA, Medicare, Federal, State and Local taxes.

An HSA is a savings account in your name that offers a different way  to pay for health care expenses on a tax-advantaged basis. HSAs enable you to pay for current eligible medical expenses and save for future ones on a tax-free basis. In order to be eligible to contribute to an HSA, the HSA owner 1) must be covered by an HSA-eligible HDHP and 2) the HSA owner cannot have other first dollar medical coverage.

You must be enrolled in an HSA-eligible high deductible health plan (HDHP) if you want to legally open and contribute to an HSA. An HDHP is a health insurance plan that generally doesn’t pay for first dollar health care expenses, other than preventive services. Your HSA is available to help you pay for qualified medical expenses, as defined by the IRS, with pre-tax dollars.

In order to qualify to open and contribute to an HSA, your HDHP must have a minimum deductible and maximum out-of-pocket limits as set annually by the IRS.

Contact FlexBank at 888.677.8373.

To be eligible for an HSA, an individual must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. Certain types of insurance are not considered “health insurance” and will not jeopardize your eligibility to contribute to an HSA.

You are only allowed to have dental, vision, disability and long-term care insurance at the same time as an HDHP. You may also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are also permitted if they do not pay significant medical benefits.

No, the policy does not have to be in your name. As long as you have coverage under the HDHP policy and you do not have any other first-dollar medical coverage, you can be eligible to contribute to an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible to contribute to an HSA even if the health plan is in your spouse’s name.

Unfortunately, you cannot establish and contribute to an HSA unless you have coverage under an HDHP.

You are not eligible to contribute to an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it and use it to pay for eligible expenses on a tax-free basis. However, you cannot continue to make contributions to an HSA after you enroll in Medicare.

You are not eligible to contribute to an HSA if you are covered by Medicaid.

If you have received any health benefits from the Veterans Administration or one of their facilities, including prescription drugs, in the last three months, you are not eligible to contribute to an HSA. Beginning January 1, 2016, you will be eligible to contribute to an HSA if you received VA health benefits for a service-related disability or for preventive care.

At this time, it is our understanding TRICARE does not offer an HDHP option, so you are not eligible to contribute to an HSA.

You can have both types of accounts, but only under certain circumstances. General Purpose Flexible Spending Arrangements (FSAs) will typically make you ineligible for an HSA. General purpose FSAs reimburse medical, vision and dental expenses for you, your spouse and your dependents. If your employer offers a “limited purpose” (limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the IRS deductible is met) FSA, then you can still be eligible for an HSA.

You can have both types of accounts, but only under certain circumstances. Health Reimbursement Arrangements (HRAs) that reimburse your medical expenses from first dollar will typically make you ineligible for an HSA. If your employer offers a “limited purpose” (limited to dental, vision or preventive care) or “post-deductible” (pay for medical expenses after the IRS deductible is met) HRA, then you can still be eligible for an HSA. If your employer contributes to an HRA that can only be used when you retire, you may still be eligible for an HSA.

You cannot have an HSA if your spouse’s FSA or HRA can pay for any of your medical expenses before your HDHP deductible is met.

Yes, if you have coverage under an HSA-eligible HDHP. You do not have to have earned income from employment. In other words, the money can be from your own personal savings, income from dividends, unemployment or welfare benefits, etc.

There are no income limits that affect HSA eligibility.

Yes, you are still eligible for an HSA. Your dependent’s non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP.

Effective January 1, 2007, regardless of your deductible, you may contribute, per calendar year, up to the IRS annually indexed maximum regardless of your coverage type (single vs. family). If you are age 55 or older, you can also make additional “catch-up” contributions.

The “full contribution rule” allows a full-year’s worth of HSA contributions for someone who is HSA-eligible for only a portion of the year. Under the full-contribution rules, an individual who becomes covered under a high deductible health plan (HDHP) in a month other than January and who is HSA-eligible on December 1 of that year, is treated as having been an eligible individual during every month of that year, and will be allowed to make contribution for those months during the year before the individual actually enrolled in an HDHP.

  • Individuals who enroll in the HDHP by December 1 can make a full-year contribution to the HSA that year.
  • Individuals must be covered by a qualified HDHP and remain an eligible individual for 12 months after the end of the calendar year in which they enrolled in an HDHP.
  • Individuals not covered by an HDHP for 12 months after the end of the calendar year in which they enrolled in an HDHP are subject to income tax and a 10% excise tax on HSA contributions for months not covered by an HDHP.

 

No, you can contribute in a lump sum or in any amounts or frequency you wish. However, your health savings account trustee/custodian (bank, credit union) can impose minimum deposit and balance requirements.

Contributions to HSAs can be made by you, your employer, or both. All contributions are aggregated and count toward the maximum amount you are permitted to contribute during the calendar year. If your employer contributes some of the money, you can make up the difference.

Your personal contributions offer you an “above-the-line” deduction. An “above-the-line” deduction allows you to reduce your taxable income by the amount you contribute to your HSA. You do not have to itemize your deductions to benefit. Contributions can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.

If your employer makes a contribution to your HSA, the contribution is not taxable to you the employee (excluded from income).

If your employer offers a “salary reduction” plan (also known as a “Section 125 plan” or “cafeteria plan”), you (the employee) can make contributions to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If you can do so, you cannot also take the “above-the-line” deduction on your personal income taxes.

You may be able to claim the medical expense deduction even if you contribute to an HSA. However, you cannot include any contribution to the HSA or any distribution from the HSA, including distributions taken for non-medical expenses, in the calculation for claiming the itemized deduction for medical expenses.

Yes, individuals 55 and older who are covered by an HDHP can make additional catch-up contributions of $1,000 into an HSA in their own name each year until they enroll in Medicare. The additional “catch-up” contributions to HSA allowed are as follows:

2009 and after – $1,000

  • Individuals who enroll in the HDHP by December 1 can make a full-year catch-up contribution to the HSA that year.
  • Individuals must be covered by a qualified HDHP and remain an eligible individual for 12 months after the end of the calendar year in which they enrolled in an HDHP.
  • Individuals not covered by an HDHP for 12 months after the end of the calendar year in which they enrolled in an HDHP are subject to income tax and a 10% excise tax on HSA catch-up contributions for months not covered by an HDHP.

Yes, if both spouses are eligible individuals and both spouses have established an HSA in their name. If only one spouse has an HSA in their name, only that spouse can make a “catch-up” contribution.

Each spouse is eligible to contribute to an HSA in their own name, up to the single IRS HSA maximum contribution as set annually by the IRS.

CLICK HERE TO VIEW THE CURRENT INDEXED AMOUNTS FOR HSAs

The following examples describe how much can be contributed under varying circumstances. Assume that neither spouse qualifies for “catch-up contributions”.

Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has self-only coverage with a $200 deductible. Wife, who has coverage under a low-deductible plan, is not eligible and cannot contribute to an HSA. Husband may contribute up to the family IRS HSA maximum contribution.

Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has self-only HDHP coverage with a $2,000 deductible. Both husband and wife are eligible individuals. Husband and wife are treated as having only family coverage. The combined HSA contribution by husband and wife cannot exceed the family IRS HSA maximum contribution to be divided between them by agreement.

Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also has family HDHP coverage with a $3,000 deductible. Both husband and wife are eligible individuals. Husband and wife are treated as having family HDHP coverage and may contribute up to the the family IRS HSA maximum contribution to be divided between them by agreement.

Example: Husband and wife have family HDHP coverage with a $5,000 deductible. Husband has no other coverage. Wife also is enrolled in Medicare. Wife is not an eligible individual and cannot contribute to an HSA. Husband may contribute the family IRS HSA maximum contribution.

Tax filing status does not affect your contribution.

Yes, you are still eligible for an HSA. Your dependent’s non-HDHP coverage does not affect your eligibility, even if they are covered by your HDHP. You can contribute up to the IRS annually indexed amount for family coverage.

No. Self-employed individuals may not contribute to an HSA on a pre-tax basis. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.

Contributions for the taxable year can be made any time prior to the time prescribed by law (without extensions) for filing the eligible individual’s federal income tax return for that year, but not before the beginning of that year. For calendar year taxpayers, the deadline for contributions to an HSA is generally April 15 following the year for which the contributions are made. Although the annual contribution is determined monthly, the maximum contribution may be made on the first day of the year.

Contributions by individuals to an HSA, or if made on behalf of an individual to an HSA, are not deductible to the extent they exceed the limits. Contributions by an employer to an HSA for an employee are included in the gross income of the employee to the extent that they exceed the limits or if they are made on behalf of an employee who is not an eligible individual. In addition, an excise tax of 6% for each taxable year is imposed on the account beneficiary for excess individual and employer contributions. However, if the excess contributions for a taxable year and the net income attributable to such excess contributions are paid to the account beneficiary before the last day prescribed by law (including extensions) for filing the account beneficiary’s federal income tax return for the taxable year, then the net income attributable to the excess contributions is included in the account beneficiary’s gross income for the taxable year in which the distribution is received but the excise tax is not imposed on the excess contribution and the distribution of the excess contributions is not taxed.

No. The same rule that applies to trustees or custodians applies to employers. Individuals who establish HSAs make that determination and should maintain records of their medical expenses sufficient to show that the distributions have been made exclusively for qualified medical expenses and are therefore excludable from gross income.

Upon death, any balance remaining in the account beneficiary’s HSA becomes the property of the individual named in the HSA as the beneficiary of the account. If the account beneficiary’s surviving spouse is the named beneficiary of the HSA, the HSA becomes the HSA of the surviving spouse. The surviving spouse is subject to income tax only to the extent distributions from the HSA are not used for qualified medical expenses. If by reason of the death of the account beneficiary, the HSA passes to a person other than the account beneficiary’s surviving spouse, the HSA ceases to be an HSA as of the date of the account beneficiary’s death, and the person is required to include in gross income the fair market value of the HSA assets as of the date of death. For such a person (except the decedent’s estate), the includable amount is reduced by any payments from the HSA made for the decedent’s qualified medical expenses, if paid within one year after death.

Yes. The rules allow for a one-time tax-free trustee to trustee transfer of IRA funds into an HSA, provided:

  • The amount contributed to the HSA is subject to the maximum annual contribution limits. Amounts transferred from the IRA plus any additional employer or employee contributions will be applied against the maximum annual contribution limit.
  • The individual must be covered by an HDHP and remain an eligible individual for 12 months after the transfer. If not, the funds transferred will be treated as taxable income and subject to a 10% excise tax.

No, SEP and SIMPLE IRAs are excluded from rollover.

In general, if you, or your spouse want to be eligible to own/contribute to an HSA, you must have a zero balance in a general purpose health FSA by the end of your FSA plan year in order to be HSA-eligible on the first day of your new plan year.

In general, if you, or your spouse want to be eligible to contribute to an HSA, you must: 1) have a zero balance in your general purpose health FSA at plan year end, 2) elect to convert your general purpose health FSA to a limited purpose health FSA for the next plan year (for dental and vision expenses, if offered by your employer) or 3) elect to forfeit your carryover funds. You must choose your “election” prior to the end of your plan year. Call FlexBank to discuss in detail how the carryover may affect you.

HSA funds can pay for any “qualified medical expense”, even if the expense is not covered by your health plan. For example, most health insurance does not cover the cost of prescription eyeglasses, but you can use your HSA dollars to pay for those. If the money from the HSA is used for qualified medical expenses, then the money spent is tax-free.

Unfortunately, we cannot provide a definitive list of “qualified medical expenses”. A partial list is provided in IRS Pub 502 (available at www.irs.gov).  To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental illness. The determination often hangs on the word “primarily.” Contact FlexBank as you have questions about eligible expenses.

CLICK HERE TO VIEW A LIST OF SAMPLE QUALIFYING AND NON-QUALIFYING EXPENSES

You are responsible for that decision, and therefore should familiarize yourself with what qualified medical expenses are (as partially defined in IRS Publication 502) and also keep your receipts in case you need to defend your expenditures or decisions during an audit.

If the money is used for purchases other than for qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to an additional penalty.

Generally, yes. However, cosmetic procedures, like cosmetic dentistry, would not be considered qualified medical expenses.

Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent. This is one of the great advantages of HSAs.

Health care reform did not change the rules governing HSAs when it comes to paying for a child’s medical expenses. This means you can only use your HSA to pay for your child’s medical expenses if your child qualifies as your tax dependent (other than the income limitation).

There are two ways a child can be your tax dependent. The first way is if your child is considered a Qualifying Child and the second way is if your child is considered a Qualifying Relative. The following lists the requirements for each category.

I. Qualifying Child

a) The child lives with you for more than half the year;

b) The child is under age 19 or is a full time student under age 24

c) The child does not provide more than half of his or her own support; and

d) The child does not file a joint tax return with his or her spouse.

II. Qualifying Relative

a) You must provide at least 50% of the child’s support

Yes.

You can use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or you have COBRA continuation coverage through a former employer. HSA holders age 65 or over (whether or not they are entitled to Medicare) may use HSA funds for any deductible health insurance (e.g., retiree medical coverage) other than a Medicare supplemental policy. The insured must also be age 65 or over if different than the HSA owner.

Yes, if have an HSA through a cafeteria plan and you have tax-qualified long-term care insurance. However, the amount considered a qualified medical expense depends on your age. Click here for annually indexed LTC premium limitations.

Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

Funds deposited into your HSA remain in your account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution to your HSA for the year based on a full year’s coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again.

Yes, the unused balance in a Health Savings Account automatically rolls over year after year. You won’t lose your money if you don’t spend it within the year.

You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare (age 65 or older), you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy.

Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and an additional penalty on the amount withdrawn.

No. You cannot reimburse qualified medical expenses incurred before your high deductible health plan is effective AND your health savings account is established (opened & funded). We recommend you establish your account as soon as possible. According to IRS ruling, state trust law determines when an HSA is established. Most state trust laws require that for a trust to exist, it must be funded to be established.

If the effective date of your HDHP is mid-month, you may use your HSA for eligible expenses with dates of service on or after the first of the following month.

It is your responsibility to keep track of your expenditures and keep all of your receipts.

If you are still covered by your HDHP and have not met your policy deductible, you will be responsible for 100% of the amount agreed to be paid by your insurance policy to the physician. Your physician may ask you to pay for the services provided before you leave the office. If your HSA custodian has provided you with a checkbook or debit card, you can pay your physician directly from the account. If the custodian does not offer these features, you can pay the physician with your own money and reimburse yourself for the expense from the account after your visit.

If your physician does not ask for payment at the time of service, the physician should submit a claim to your insurance company, and the insurance company will apply any discounts based on their contract with the physician. You should then receive an “Explanation of Benefits” from your insurance plan stating how much the negotiated payment amount is, and that you are responsible for 100% of this negotiated amount. If you have not already made any payment to the physician for the services provided, the physician will then send you a bill for payment.

HSAs act just like a regular checking account in that you can only spend what has been deposited to date. Just like your personal checking account, checks can bounce and debit cards will reject if there isn’t enough money in your account.

You should always watch your health savings account balance via on-line access and/or your statements from the HSA custodian.

If you need to pay for an expense before there is enough money in your HSA, you can pay for the eligible expense out of your pocket, save your receipt and pay yourself back later from your HSA.

The HSA owner is responsible for using the account within the rules. As you are purchasing medical goods and services, you should save your itemized receipts showing date of service, patient name, services rendered and how much insurance paid, if any.

If you are ever personally audited, you will be asked to present receipts for eligible expenses matching the amount you have withdrawn from your HSA. Your HSA custodian is not determining if your purchases are for qualified medical expenses nor are the transactions on your monthly statement enough to prove the purchases are permitted. Save your receipts.

Distributions from your HSA should only be used for qualifying medical, vision, hearing or dental expenses.