With health care open season now underway at many workplaces, the Internal Revenue Service recently reminded workers they could be eligible to use tax-free dollars to pay their medical expenses that are not typically covered by other health insurance plans.
Eligible employees of companies that offer a health flexible spending arrangement or FSA need to act before their medical plan year begins to take advantage of an FSA during 2020. Unfortunatkym self-employed individuals are not eligible, according to an Internal Revenue Service news release.
An employee who opts to participate can contribute up to $2,750 through payroll deductions during the 2020 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA.
Using FSA Funds
Throughout the course of a year, employees can use FSA funds for qualified medical expenses not covered by their health plan. These can include co-pays, deductibles and a variety of medical products. Also covered are services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.
Under the FSA use-or-lose provision, participating employees normally must incur eligible expenses by the end of the plan year or forfeit any unspent amounts. However, employers can, if they choose to, offer an option for participating employees to have more time to use FSA money, the news release said.
- Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year. For example, an employee with unspent funds at the end of 2019 would still have those funds available to use in 2020.
- Under the grace period option, an employee has until two and a half months after the end of the plan year to incur eligible expenses. For example, March 15, 2020, for a plan year ending on Dec. 31, 2019.
- Employers can offer either option (not both) or no option.
Finding Out More
Employers are not required to offer FSAs, according to the IRS news release. Interested employees should check with their employer to see if they offer an FSA. More information about FSAs can be found at IRS.gov in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.
Publication 969 explains the following programs:
- Health savings accounts (HSA).
- Medical savings accounts (Archer MSA and Medicare Advantage MSA).
- Health flexible spending arrangements (FSA).
- Health reimbursement arrangements (HRA).Your health, as well as your loved ones, is important so make sure you are doing everything you need to ensure they are staying safe and sound in the months and years ahead.Source: IRS