Understanding Medicare and Flexible Spending Accounts

Medicare is a complex system, but it's essential to understand the basics. Medicare is a federal health insurance program for people 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD).

There are four parts to Medicare: A, B, C, and D. Medicare Part A covers hospital stays, while Part B covers doctor visits and other medical services. Part C, also known as Medicare Advantage, is offered by private companies and can provide additional benefits.

Flexible Spending Accounts (FSAs) can help you save money on medical expenses. FSAs allow you to set aside pre-tax dollars for qualified medical expenses, such as copays, prescriptions, and medical equipment.

A Flexible Spending Account (FSA) can be a great way to save money on income taxes and pay for healthcare and dependent care expenses. You can set aside pre-tax dollars from your paycheck to cover eligible expenses.

The annual limit for a health care FSA is $3,200, as of 2024. This limit is set by the Internal Revenue System (IRS).

With a health care FSA, you can use pre-tax dollars to pay for eligible medical, dental, and vision care expenses not covered by your health care plan. You get access to the full amount of your account on the first day of the plan.

Eligible expenses include medical expenses such as co-pays, co-insurance, and deductibles, as well as dental expenses like exams, cleanings, and X-rays. You can also use FSA funds for vision expenses, professional services like physical therapy, and prescription drugs.

Some employers choose to issue a debit card to their employees who participate in the FSA. This allows participants to pay for their FSA-eligible expenses at the point of sale.

To enroll in a health care FSA, you need to decide how much money you want to allocate to your FSA at the beginning of a plan year, and this amount will be automatically deducted from your paycheck. You can't change the amount unless your employment changes.

If your employer offers an FSA, you'll either receive a debit card tied to the account or need to submit receipts to the FSA administrator to receive reimbursement. Not all employers offer FSAs, so it's worth reading your employer's plan to see if they do.

You can enroll in an FSA during your first 60 days of employment or a qualifying life event prior to October 1 of the calendar year. To enroll, you must go to the FSAFEDs website, as NIH OHR does not process FSA enrollments.

Dependent care is a crucial aspect of Flexible Spending Accounts (FSAs).

If you're married and filing jointly or are head of household and single, the maximum contribution for a Dependent Care FSA is $5,000. However, if you're married and filing separately, the maximum contribution is $2,500.

The FSA can be used to pay for various expenses, including preschool, summer day camp, before or after school programs, and child or adult daycare. You can also use it to pay for in-home care for a spouse or relative who is physically or mentally incapable of self-care.

To be eligible for a Dependent Care FSA, both spouses must earn income, unless the non-earning spouse is disabled or a full-time student. If one spouse earns less than $5,000, the benefit is limited to whatever that spouse earned.

Here are some eligible expenses for a Dependent Care FSA:

It's worth noting that the FSA cannot be used for long-term care for individuals who live in an outside facility, such as a nursing home.

To enroll in a health care FSA, you need to decide how much money you want to allocate to your account at the beginning of the plan year, and this amount will be automatically deducted from your paycheck. You can choose to receive a debit card tied to the account or submit receipts to the FSA administrator to receive reimbursement.

If your employer offers an FSA, you can enroll during your first 60 days of employment or a qualifying life event (QLE) prior to October 1 of the calendar year. After that, you can enroll during the Federal Benefits Open Season.

To enroll, you must go to the FSAFEDS website, as NIH OHR does not process FSA enrollments. You can contact FSAFEDS directly at 877-372-3337 for questions.

You can also ask your employer about enrolling in an FSA today, as it's a smart way to save on out-of-pocket costs. With a health care FSA, you can use pre-tax dollars to pay for eligible medical, dental, and vision care expenses.

Here are the steps to enroll in a health care FSA:

Note that the amount you can set aside in a health care FSA is limited by the IRS, and the limit for 2024 is $3,200.

The plan year grace period is a valuable option for employers to consider. In 2005, the Internal Revenue Service authorized an optional grace period of up to 2½ months that employers can use in their plans.

This allows use of the funds for up to 2½ months after the end of the plan year, giving employees some extra time to make the most of their accounts. Employers can choose to implement this grace period in their plans.

In 2020, the Consolidated Appropriations Act, 2021 included provisions to allow employees to roll over the remainder of their accounts from 2020 into 2021 and from 2021 into 2022.