Tax-Advantaged Accounts

ABC Company gives you three options to set aside funds for medical costs on a pretax basis. This means that you don’t pay income tax on the money you put towards these kinds of accounts.

Flexible Spending Accounts (FSA) comes in three varieties, Health Care, Dependent Care, and Limited Purpose. Before you enroll, you should estimate your annual expenses for health care, dependent care, dental, and/or vision for the plan year (January 1 – December 31, 2019). You choose how much to put into each account. However, please note that you forfeit unused FSA funds at the end of the year, so estimate carefully. Your contributions are deducted from your paycheck on a pretax basis in equal amounts throughout the year.

If you enroll in the Health Care FSA, you may not enroll in the HSA.

Health Care FSA

Use pretax dollars to pay for eligible health care expenses such as:

  • Copays
  • Prescription drugs
  • Contact lenses
  • LASIK procedures
  • Orthodontia services

To see a complete list of eligible expenses, visit www.IRS.gov and view publication 502. You may participate in the Health Care FSA even if you are not enrolled in one of our health plan options.

In 2019, the maximum amount you can contribute to your health care FSA is $2,700.

Dependent Care FSA

Use pretax dollars to pay for dependent care expenses, including:

  • Day care for your children under age 13 (if both you and your spouse work or go to school)
  • In-home care for your adult dependents who are physically or mentally incapable of caring for themselves

To see a complete list of eligible expenses, visit www.IRS.gov and view publication 502. Like the Health Care FSA, no health plan enrollment is required to participate in the Dependent Care FSA.

In 2019, the maximum amount both you and your spouse can contribute to a Dependent Care FSA is $5,000 ($2,500 each if you are legally married and file taxes separately from your spouse).

Limited Purpose FSA

The Limited Purpose FSA is available to members enrolled in the HDHP. Because HDHP members have access to pre-tax savings through the HSA, the Limited Purpose FSA can only be used for eligible dental and vision expenses, until you meet your deductible.

Health Savings Accounts

When you enroll in an HDHP, you can also elect to fund a Health Savings Account (HSA). With an HSA, you can use pretax dollars to pay for your out-of-pocket health care expenses. Contributing to an HSA helps you save for health care expenses, lower your taxable income, and earn tax-free interest on your account balance.

In addition to your contributions, ABC Company will add on $500 (individual) and $1,000 (family) per year. The total amount you and the company can contribute to your HSA cannot exceed $3,500 for individuals and $7,000 for families. If you are age 55 or older, you may also make a catch-up contribution of up to $1,000. Keep in mind, you will have a prorated annual contribution limit if you enroll in an HDHP for less than a year.

The funds in your HSA roll over from year to year, and they are yours to keep (even if you leave the company or change your medical plan election). These features can be especially helpful as you prepare for retirement, so consider your HSA as an additional way to save for retirement.

You may use your HSA to pay for eligible medical, prescription drug, dental and vision expenses. To see a complete list of eligible expenses, visit www.IRS.gov and view publication 502.

HSA Eligibility

You may not participate in an HSA if you or your spouse have medical coverage through Medicare or any other plan that is not a qualified health plan.

Health Reimbursement Account

If you participate in the CDHP plan, ABC Company will set up and contribute to an HRA to reimburse you for eligible health care expenses. Unlike your FSA, the funds in your HRA roll over from year to year (up to the maximum account balance).

  • ABC Company will contribute $100 per month you are eligible
  • The maximum account balance in your HRA is $1,200

HRA with Health Care FSA

With the HRA, you may also participate in a Health Care FSA. The funds in your FSA will be used first, and then your HRA will reimburse you for eligible health care expenses. Unlike your FSA, the funds in your HRA roll over from year to year (up to the maximum account balance).

Features Health Care FSA Dependent Care FSA Limited Purpose FSA HSA HRA
Used to pay for Eligible medical expenses Day care for children under 13 or in-home care for adult dependents Dental and Vision expenses Eligible medical expenses Eligible medical expenses
At the end of the plan year Leftover funds are forfeited Leftover funds are forfeited Leftover funds are forfeited Funds are yours to keep regardless of employment status Funds roll over from year to year
Types of medical plans PPO, HMO PPO, HMO HDHP HDHP PPO, HMO
Annual contribution maximum $2,700 $5,000 [$2,500 each if married and filing taxes separately] $2,700 $3,500 for individuals and $7,000 for families $1,200
ABC Company contributions N/A N/A N/A $500 (individual), $1,000 (family)/year $100/month eligible
Changes to elections Only at open enrollment or in the case of a qualifying life event Only at open enrollment or in the case of a qualifying life event At any time for any reason At any time for any reason TBD