What is a health savings account and a flexible spending account? What does it entail?

Do you know what a Health Saving account is and what it entails?

Do you know what flexible spending accounts are and how to use them?

I asked a colleague and friend of mine, Robert Washick, MBA, to help and write a guest blog so the public and patients can have a clear understanding of what Health Savings Account and Flexible Spending Accounts  are and what they entail.   Many companies now are setting their employees up with these accounts to use for health care services.

We all want more money and many of us miss out on two of the best tax advantage plans available, HSA (Health Savings Account) and FSA (Flexible Spending Account)or do not use them to their full potential.

Both of them allow funds to be put into an account and not taxed going in or coming out, as long as it is for valid IRS approved services, such as medical, dental, vision and prescriptions costs.

To simplify what they are I have the following guidelines:

HSA- Health Savings Account

1.                   Must be enrolled in a qualifying high deductible plan (off exchange)

2.                   Employer and/or individual funded and is entirely owned by the individual, even if terminated

3.                   Funds deposited are not taxable when deposited nor when spent on approved services

4.                   Funds roll over and in some cases can be put into investments within account for higher potential gain in value

5.                   Funds are available once deposited

6.                   Since you have access to the funds for you and your dependents and there is no concern of forfeiture, put as much as possible into this account that meets your household’s needs

FSA- Flexible Spending Account

1.                   No mandatory plan requirements

2.                   Minimum and Maximum guidelines are provided by IRS and Plan decides within those limits

3.                   Typically Employee funded through payroll deduction, but Employer can fund as well. When terminated only funds and claims up to that date can be utilized, unless COBRA is taken or employer allows extension

4.                   Funds are not taxable when deposited nor when paying for valid services

5.                   Currently, there is no rollover and any funds remaining are forfeited to the plan – Be careful to watch your balance

6.                   Plan year specific, must incur within plan year and spend all funds by end of runout period or available funds will be lost

7.                   All funds are usually available from first day of plan year

8.                   Make sure to determine how much you will spend and deposit as close to that or more as meets your household’s needs

 By Robert A. Washick, MBA

Robert Washick

VP/CEO

Professional Benefit Administrators, Inc.

407-671-7331

800-762-4130

fax: 407-671-1580

Thanks Robert!  Hopefully this blog post clears up any misunderstanding of what these accounts are.  Our next post will review what you can use these accounts on and how to use it.  Can you use these accounts at Pursuit Physical Therapy???  Yes and an example of this will be in the next post.