by admin | Jul 27, 2022 | Blog
Question: Our company currently offers a general-purpose health FSA. If we switched to an HDHP/HSA, could our employees receive tax-free reimbursements for the same types of expenses from their HSAs?
Answer: Yes, and they might acquire a few additional options. Like health FSAs, HSAs can provide tax-free reimbursement of out-of-pocket expenses for medical care. But HSAs also can reimburse certain expenses that health FSAs cannot. Those differences are highlighted below.
- Nonmedical Expenses: Unlike health FSAs, HSAs can make distributions at any time and for any purpose, although only distributions for qualified medical expenses are tax-free. Some taxable distributions may also be subject to a 20% excise tax.
- Insurance Premiums: While HSAs generally cannot reimburse health insurance premiums or coverage contributions on a tax-free basis, there are a few exceptions:
- Qualified long-term care insurance
- Any federally required continuation coverage (e.g., under COBRA or USERRA)
- Health plan coverage while the HSA account holder is receiving unemployment compensation under state or federal law
- For HSA holders who are age 65 or older, any health insurance other than a Medicare supplemental policy
- Qualified Long-Term Care: Unlike health FSAs, HSAs can reimburse qualified long-term care services on a tax-free basis.
In addition, HSAs cannot limit the types of expenses that are reimbursable on either a taxable or tax-free basis because they are individual trusts to which account holders must have unrestricted access, subject only to reasonable restrictions on the frequency or minimum amounts of distributions. HSAs are also different in terms of whose expenses they can reimburse tax-free. Health FSAs can provide tax-free reimbursements for the expenses of employees’ children who are under age 27 at the end of the taxable year, regardless of their status as tax dependents. However, HSAs can only provide tax-free payment or reimbursement of the expenses of an HSA account holder’s child if the child qualifies as a dependent. Keep in mind that other requirements (e.g., regarding substantiation of expenses) will also apply and may vary from arrangement to arrangement.
Source: Thomson Reuters
by admin | Jul 25, 2022 | Blog
A limited-purpose FSA (LPFSA) is a Health Savings Account (HSA) eligible FSA plan that allows you to set aside pre-tax dollars for dental, vision, and orthodontia expenses for you and your dependents, even if they are not covered under your primary health plan. The Limited Purpose FSA covers these eligible expenses, tax-free while your HSA covers eligible medical expenses. It’s a great way to save on HSA dollars – especially if you choose to use your account to invest.
There is an abundance of benefits by enrolling in a LPFSA, notably:
- At the outset of the plan year, your LPFSA is pre-funded, and your full contribution amount is immediately available for use.
- In addition to your HSA contributions, you are able to set aside additional LPFSA tax-free contributions, up to $2,850 in 2022.
- Preserve HSA funds for other purposes, like investing or saving for retirement.
- Money contributed to a limited-purpose FSA is tax-free when it’s spent on eligible dental, vision, and orthodontia expenses, including dental exams, x-rays, vison exams, and much more.
by admin | Jul 18, 2022 | Blog
In the event of employment termination for an account holder, there are several notable procedures and regulations that occur:
- Any participation in a Flexible Spending Account (FSA) – Health Care FSA, Limited Purpose FSA, Dependent Care FSA, Adoption Assistance, or Commuter Account – will end along with the ability to incur additional expenses for reimbursement.
- All future salary reductions will end.
- If you have a NueSynergy FSA benefit card, the card will be deactivated on date of termination.
- You will have 30 days from your date of termination to submit manual claims to NueSynergy by mail, online, fax, or mobile application.
- Manual claims submitted during a 30-day window must have dates of service prior to date of termination.
by admin | Jun 20, 2022 | Blog
A flexible spending account (FSA) is a powerful tool to help save on health-care costs, tax-free. However, FSAs are often misunderstood. Here are four “fact or fiction” statements for current or future account holders to know about.
Fiction
- You have to be enrolled in a certain type of health plan to be eligible for an FSA.
- You can only spend up to the amount you have already contributed to your FSA.
- You will lose unused FSA dollars at the end of the plan year.
- You can only adjust your annual FSA election amount during open enrollment.
Fact
- In addition to medical expenses, FSA funds can also be used for vision, dental, and prescription expenses, as well as many additional eligible items such as first aid supplies.
- Your entire FSA election amount is available on the first day of the plan year.
- You can roll over up to $570 of unused dollars into the following plan year or receive a 2.5-month grace period after the plan year to use any remaining FSA dollars.
- You can make adjustments to FSA election amount in the case of a qualifying event such as marriage or birth of a child.
by admin | Jun 20, 2022 | Blog
A health FSA cannot treat employees’ premium payments for other health coverage as reimbursable expenses. Thus, for example, a health FSA cannot reimburse premiums for COBRA coverage, accidental death and dismemberment insurance, long-term or short-term disability insurance, or coverage under a plan maintained by an employer of the employee or the employee’s spouse or dependent. This rule would also prohibit the reimbursement of Medicare premiums.
Some employers are surprised by the rule that health FSAs cannot reimburse insurance premiums. A health FSA can only reimburse expenses for medical care and premiums for health coverage fall within that definition. However, IRS regulations state that insurance premiums cannot be reimbursed under a health FSA, and the IRS has repeatedly reaffirmed this rule.
Likewise, monthly retainer or similar access fees (e.g., a monthly fee that is payable whether or not the patient visits the office, perhaps accompanied by a reduction or elimination of the fees for actual office visits) generally are not reimbursable. In our view, they are like insurance because they are payable whether or not medical care is provided. Thus, they fall under the “no reimbursement of insurance premiums” rule that applies to health FSAs and should not be reimbursed. In 2020, the IRS issued proposed regulations regarding the treatment of amounts paid for direct primary care arrangements, health care sharing ministries, and certain other medical care arrangements. The preamble to the proposed regulations clarifies that payments for such arrangements typically would be viewed as payments for insurance. As such, health FSAs would be prohibited from reimbursing these fees based on the “no reimbursement of insurance premiums” rule. Payments for health care sharing ministries would also be treated as payments for insurance under the proposed regulations.
In a variation on this type of arrangement, patients receive preferential “extras” from their doctors in exchange for a fee (e.g., priority when scheduling appointments, 24-hour telephone access to the doctor, less time in the waiting area before appointments, a special waiting room, etc.). Fees for such programs generally should not be reimbursed either, because the payments would not be for medical care. The same is true of a monthly fee that a patient must pay in addition to any copays, deductibles, or other charges for office visits.
Note that there could be variations on these access fee arrangements under which some services might be reimbursable, depending on how the program is structured (for example, a fee might include payments that can be separately allocated to services that are for medical care). Additionally, health FSA administrators should not put too much stock in the particular name given to the fee (retainer fee, concierge fee, direct primary care, etc.).
These terms may mean different things for different providers. Consequently, it is important to determine exactly what services are involved before deciding whether to reimburse part of a fee—it may be necessary to ask the participant for additional substantiation. Where a fee relates solely to a specific rendered service (such as a copay) rather than being a retainer, part or all of it might qualify for reimbursement as an eligible medical care expense. For example, the preamble to the 2020 proposed regulations indicates that payments for a direct primary care arrangement that provide solely for an annual physical exam or an “anticipated course of specified treatments of an identified condition” would not be treated as insurance.
Source: Thomson Reuters
