Healthcare FSAs

What is a Healthcare FSA?

The Healthcare FSA allows employees to be reimbursed for medical expenses not covered or reimbursed by other insurance and consumer directed plans like HSAs and HRAs. In order for expenses to qualify for reimbursement, they must be for medical care. All expenses must be qualified medical, vision, pharmacy or dental benefit expenses as defined in Section 213(d) of the Internal Revenue Code.

How much can employees contribute to a Healthcare FSA?

Currently employers set the contribution amounts and there is no federally imposed limit. The rules are changing under healthcare reform. Effective 2013, the legislation limits contributions to no more than $2,500 annually for Healthcare FSAs. The limit is indexed to inflation for future years.

If funds aren't used at the end of the plan year, are contributions forfeited?

Yes. FSA plans are subject to "use it or lose it" rules. This rule requires employees to forfeit any money that is left in their account at the end of the plan year. The unused portion of a participant's pre-tax accounts may not be paid to the participant in cash or be used for any other benefit.

What types of healthcare expenses can be covered with a Healthcare FSA?

The Healthcare FSA allows employees to be reimbursed for medical expenses not covered or reimbursed by other insurance and consumer directed plans like HSAs and HRAs. In order for expenses to qualify for reimbursement, they must be for medical care. All expenses must be qualified medical, vision, pharmacy or dental benefit expenses as defined in Section 213(d) of the Internal Revenue Code.

Remember that starting in 2011 under healthcare reform, HSA, HRA and FSA funds can no longer be used to purchase over-the-counter medications (such as aspirin, allergy and cold medications, etc.) without a written doctor's prescription. The pharmacist must fill prescriptions for these medications to be paid for with funds from your account using your account debit card at point of purchase. There are still many over-the-counter medical products that can be purchased without a doctor's prescription (such as contact lens solutions and diabetic test kits and supplies), so be sure to check before you purchase.

Can I change my election or stop contributing money to my FSA at any time throughout the year?

Federal regulations state that once you have enrolled and selected the contribution amount, you cannot change your decision until your next open enrollment unless you have a family status change including:

• Employee marriage or divorce
• Birth or adoption of a child
• Change in work schedule (e.g., part-time to full-time status or full-time to part-time status) of employee, spouse or dependent
• Death of a spouse or covered dependent
• Employee or their spouse taking an unpaid leave of absence