How does flexible medical spending account work?

[Shelly21]

I'm thinking about contributing to flexible medical spending account next year because I want to get an implant (for a tooth, long story)

Now, This seems like a VERY good deal. Because if the procedure costs $5000, I can contribute 5k to the account over the year. Have the procedure and get reimbursed immedately in the beginning of the year.
So it is like a tax free loan AND it's like you are getting paid $5000 before you contribute all the amounts.

What am I missing here? I should've done this every year for co-pays and over the counter drugs.

 

[cherrytwist]

Bump for info, I have a lot of dental work ahead of me too.

<insert obligitary implant joke here>

 

[GasX]

Yup - it's a way to pay for medical expenses with pre-tax dollars. The big catch is that if you don't spend money in the year it was put into the account, you lose it.

 

[Hoober]

Originally posted by: Mwilding
Yup - it's a way to pay for medical expenses with pre-tax dollars. The big catch is that if you don't spend money in the year it was put into the account, you lose it.

Yep, biggest catch is to make sure you spend it all. I've used mine over the years to pay for copays. It was real nice last year to pay for the hospital bills when my son was born. Plus, it cuts down on your taxable income.

 

[EagleKeeper]

It depends on your plan;

Some will look at how much you declared for total contribution and send you a check when you send in the invoice.

Other plans will send you a check based on your current contirbution value every pay period when the payroll has been processed.

Either way, the amount will be tax free.

It is best to always look at the co-pays from the previous year and estimate what items are re-occuring.

Then add in a little more to account for either an emergency or discressionary items (glasses, dental items, etc).

IF you do not use the funds, you will lose them, so do not go overboard unless you can burn off what is withheld.

One possible danger (depending on the plan and how it is administered) is that if you leave a company and you have money in the plan (ie waiting for Dec), you may not be albe to get those funds at a later date from that plan. There does not seem to be a method to transfer funds like you can a 401K.

 

[JDub02]

Originally posted by: Mwilding
Yup - it's a way to pay for medical expenses with pre-tax dollars. The big catch is that if you don't spend money in the year it was put into the account, you lose it.

I heard that Pres. Bush signed a bill that changed that. I heard it rolls over like a 401k now.

But I'm not an accountant, so I'm not sure.

 

[Carbonadium4]

Yeap, I did my lasik first year and this year, i got my invisialign

 

[GasX]

Originally posted by: JDub02

Originally posted by: Mwilding
Yup - it's a way to pay for medical expenses with pre-tax dollars. The big catch is that if you don't spend money in the year it was put into the account, you lose it.

I heard that Pres. Bush signed a bill that changed that. I heard it rolls over like a 401k now.

But I'm not an accountant, so I'm not sure.

Link?

 

[JDub02]

Don't have a link. I heard it on a talk radio show.

It was supposed to be some health care reform that was passed last year. The best bet would be to talk to an accountant. I'll see what I can dig up on the interweb.

 

[Beau]

WTF? $5k for a single tooth implant, and about the same for dual boobie implants? Somethings not right here...

 

[JDub02]

link

I heard this was open to anyone.

 

[JDub02]

bunch of info

google is your friend

 

[Ausm]

Originally posted by: Mwilding
Yup - it's a way to pay for medical expenses with pre-tax dollars. The big catch is that if you don't spend money in the year it was put into the account, you lose it.

Which really sux


Ausm

 

[EagleKeeper]

The MSA is different than what Shelly is asking about.

ONe is just like an IRA (controlled by you), the other is more similar to a 401K (handled by an employer).

They both offer tax deductions, however, requirements for putting funds into the acounts are different and the method of getting re-embursed from them.

 

[FoBoT]

i used my FMSA to pay for my portion of my bridge (5 front upper teeth)

it is easy (as long as you plan ahead and don't change your plan)

in the fall we fill out a form that tells payroll how much $ to take out of each check (i get paid 24 paychecks a year)

that total is then available in my FMSA during the following calendar year for approved medical/dental/eyesight related expenses. just make sure whatever you are getting done is covered, most dental stuff should be, i suppose if you were getting something done that was purely cosmetic it might not be , i dunno

anyway, once I pay for the procedure, I fill out a form that i fax to the company that administers our plan, they take about 5-7 days to process it and i get a check in the mail. they also do direct deposit to a checking account if you want.

the total amount that you are committed for is available anytime from jan 1 to dec 31 (and you actually have a couple months into the next year to file claims that were paid for during the previous calendar year)

if you were to quit/get fired before they had your full amount of $ from your paychecks, they would deduct that from your final check or send you a bill or something

it is a really good way to get medical stuff paid for pre-tax when you can plan it out ahead of time

 

[JDub02]

Originally posted by: EagleKeeper
The MSA is different than what Shelly is asking about.

ONe is just like an IRA (controlled by you), the other is more similar to a 401K (handled by an employer).

They both offer tax deductions, however, requirements for putting funds into the acounts are different and the method of getting re-embursed from them.

Gotcha.

Like I said, I'm no accountant .. just trying to help out.

 

[JDub02]

Originally posted by: EagleKeeper
F15 Air Superiority Fighter - Never has one been lost in combat

BTW, nice sig. It's always been a dream of mine to fly one. Too bad my eyesight sucks. I had a chance to work on a simulator for the military .. looking back I should have taken the job.

 

[Jeraden]

There is usually a limit on how much you can contribute to a spending account. I don't know if its an IRS limit or not, but everywhere I worked has always capped it. Where I work now its capped at 2k per year. So chances are you aren't going to be able to put 5k in it.

 

[CPA]

Originally posted by: Shelly21
I'm thinking about contributing to flexible medical spending account next year because I want to get an implant (for a tooth, long story)

Now, This seems like a VERY good deal. Because if the procedure costs $5000, I can contribute 5k to the account over the year. Have the procedure and get reimbursed immedately in the beginning of the year.
So it is like a tax free loan AND it's like you are getting paid $5000 before you contribute all the amounts.

What am I missing here? I should've done this every year for co-pays and over the counter drugs.

you're not missing anything. Just make sure that this procedure is "covered". some Flexible Spending Accounts won't reimburse you for cosmetic surgery (if this is cosmetic, in nature).

 

[FoBoT]

Originally posted by: Jeraden
There is usually a limit on how much you can contribute to a spending account. I don't know if its an IRS limit or not, but everywhere I worked has always capped it. Where I work now its capped at 2k per year. So chances are you aren't going to be able to put 5k in it.

i put in $2400 this year, i don't know if we have a limit

i actually used it for my bridge last year, ~$1500, this year we used the $2400 for my daughters braces. my wife needs some surgery next year, if she decides to have it done, we'll dump in our portion to the FMSA again

 

[Armitage]

I use both HSA (Healthcare Spending Account) and DSA (Dependent Care Spending Account). It may vary by company, but at mine, you only get reimbursed to the limit of what you have contributed. So, if I set up my HSA to total $1000 over the year, and then have $1000 of dental work done in January, I won't receive the $1000 in a lump sum. It will be paid out to me monthly, as I contribute, so I won't have the full $1000 until the end of the year.

FWIW, guess who gets to keep the money if you don't spend it all by the end of the year? The company that administers the plan! Guess they have some incentives to deny claims :roll:

 

[CPA]

Originally posted by: Jeraden
There is usually a limit on how much you can contribute to a spending account. I don't know if its an IRS limit or not, but everywhere I worked has always capped it. Where I work now its capped at 2k per year. So chances are you aren't going to be able to put 5k in it.

There is no limit on the medial flexible spending account. It is set by the employer. The dependent care spending account is limited to $5K/year per the IRS.

 

[FoBoT]

Originally posted by: Armitage
The company that administers the plan! Guess they have some incentives to deny claims :roll:

i have been at times frustrated by the claims process and had to resubmit stuff
i finally figured out that if you include your insurance statement of benifits showing your share of the cost, they never deny the claim , but your mileage may vary (i am sure the different administration companies have different policies)

 

[CPA]

Originally posted by: Armitage
I use both HSA (Healthcare Spending Account) and DSA (Dependent Care Spending Account). It may vary by company, but at mine, you only get reimbursed to the limit of what you have contributed. So, if I set up my HSA to total $1000 over the year, and then have $1000 of dental work done in January, I won't receive the $1000 in a lump sum. It will be paid out to me monthly, as I contribute, so I won't have the full $1000 until the end of the year.

FWIW, guess who gets to keep the money if you don't spend it all by the end of the year? The company that administers the plan! Guess they have some incentives to deny claims :roll:

If that last part is true, then your company did a bad part in negotiations. Normally, it would be your company that would receive the leftover money. Either way, you would be screwed out of it.

Also, most companies do allow for the lump sum payment from a medical plan prior to all contributions being put in. Your company probably went the other way to insure that you didn't take advantage of the system if you were reimbursed a large amount at the beginning of the year, then left.

 

[Armitage]

Originally posted by: FoBoT

Originally posted by: Armitage
The company that administers the plan! Guess they have some incentives to deny claims :roll:

i have been at times frustrated by the claims process and had to resubmit stuff
i finally figured out that if you include your insurance statement of benifits showing your share of the cost, they never deny the claim , but your mileage may vary (i am sure the different administration companies have different policies)

I only had one problem. When my daughter was born, we arrived at the hospital at about 11:30 PM. She was born at about 1:00 AM. Since you are allowed to change the contribution amounts for major family changes, like the birth of a child, I didn't account for her birth when I signed up for the plan, and planned to bump the amount by the actual expenses when she was born. I discussed this with the company running the plan beforehand, that was no problem.

The problem was that, when I made the changes based on my daughters birth, it was based on her birthdate ... the 11th. But the hospital bill was all dated from the admission date ... the 10th. So of course they denied the whole claim because it preceded the event that allowed me to change the amount! Even though the bill was clearly for childbirth, and a week in the NICU, and it was clearly my daughters birth that allowed me to change the witholding amount :roll:

It took about 3 months to clear that up.