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What are the tax-favored accounts for health care expenses?

There are two tax-favored accounts available. Which you use will depend on what medical plan you choose. The two accounts are a Health Savings Account (HSA) and a Health Care Flexible Spending Account (FSA). The HSA is available to those people enrolled in an IRS-qualified high-deductible health plan. The only university medical plan that qualifies is the Healthy Savings Plan. The Health Care FSA is available to those employees enrolled in the Custom Network Plan or the PPO Plan, or those benefit-eligible employees who are not enrolled in any university medical plan. More information is available on the understanding your HSA and understanding your FSA webpages.

(Keep in mind that a Dependent Care FSA is different than a Health Care FSA. A Dependent Care FSA is available to every benefit-eligible employee, regardless of which medical plan you choose.)

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What is an FSA?

Faculty and staff enrolled in the Custom Network Plan or the PPO Plan, as well as faculty and staff who are benefit-eligible but not enrolled in any university medical insurance, can enroll in a Health Care Flexible Spending Account (FSA). Retirees are not eligible for an FSA. An FSA allows money to be deducted from your paycheck on a pre-tax basis to pay for qualifying health care expenses. (Note: Any benefit-eligible faculty or staff member, regardless of the medical plan they are enrolled in, may also use a Dependent Care FSA for child/day care expenses, but this is a separate election.) By reducing your taxable income, a Health Care FSA can save you a substantial amount on a wide range of IRS-qualified medical, dental, and vision expenses that are not covered by your insurance. Contributions to your FSA accounts are exempt from federal and, in some cases, state income taxes.

It is important to carefully budget your contributions and expenses. The University FSA Health Care Account has a 2.5-month Grace Period (through March 15 of the following year), which allows you extra time to incur expenses to use your flexible spending health care balance after the close of the plan year. The FSA Dependent Care account does not have the extended period of coverage so those expenses must be incurred during the plan year (i.e., by December 31). If you do not use all your contributions within the plan year (including the Grace Period for FSA health care), you forfeit any money left in your account.

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Can I have an HSA account if my spouse has a Health Care FSA through his/her employer?

You cannot have an HSA account if your spouse has a general purpose health care FSA through his/her employer under which money can be reimbursed for your eligible health care expenses. However, if your spouse is enrolled in a limited purpose FSA (limited to qualifying dental and vision expenses) you are eligible to contribute to an HSA.

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