Insured Through Work? Save Money on Health Costs
Flexible Spending Account (FSA) continued...
To protect yourself from losing any money:
- 1st: You need to carefully estimate how much you'll spend for health care. (You may hear this called your out-of-pocket medical costs.) That way, you're only saving as much as you think you'll use.
- 2nd: You need to stay on top of the paperwork to cover or get reimbursed for each expense. Some expenses covered by your FSA may be automatically submitted to the account, but all claims will not be automatic. You might find it helpful to learn in advance which claims are automatically submitted and which are not, and the last date that you can turn in receipts.
Health Reimbursement Arrangement (HRA)
With an HRA, your employer reimburses you for certain medical expenses up to a maximum amount for the year. Your employer may offer an HRA with other health savings plans, such as FSAs.
Requirements: Only employers can offer HRAs. If you're self-employed, you're not eligible. You are only eligible for an HRA if you are enrolled in a group health plan and one is offered by your employer.
Amount you can save a year: There is no maximum limit on how much your employer can set aside.
Benefits: Your employer entirely funds an HRA. You don't pay taxes on the amount your employer contributes. Plus, you might be able to carry the money over from one year to the next.
Warnings: As with other savings plans, you'll only be reimbursed for qualified medical expenses.
A Dependent Care Flexible Spending Account
You can use this type of savings account for a child's day care or for adult day care, such as for your spouse, parent, or grandparent.
Requirements: The dependent you want to cover must live in your home at least 8 hours a day. Children must be 12 or younger unless they have a disability.
Amount you can save a year: You can put up to $2,500 a year in this account if you're single. If you're married and file a joint tax return, you can put up to $5,000 a year in this type of account.
Benefits: The day care can be in your home, a sitter's home, or a day care center.
Warnings: You can't claim expenses reimbursed from an FSA as part of the dependent care tax credit on your tax return.
As with an FSA account, you must use the funds during the benefit year. If you don't, you'll lose the money left in the account.