Give your employees the help they need
“One fundamental purpose of an HSA,” Lupori explains, “is to allow individuals to use pretax money to offset the amount they are required to spend out of pocket before the High Deductible Health Plan begins paying their medical expenses. Many consumers prefer not to use their HSA for dental and vision care expenses. Instead, they choose to use their HSA to cover the deductible and other out-of-pocket cost associated with their high deductible health plan. That’s where our Limited Purpose FSA comes in. If you’re a small or mid-sized organization that has – or is considering – an HSA for your employees, Ceridian’s Limited Purpose FSA is ideal. This solution takes service to a new level.”
I bolded the above and my question is why “many consumers” prefer to complicate matters when they could be using their existing HSA?
Sounds like people who are gambling that they’ll go years without dental or eye care expenses and so would rather have a plan without dental/eye that has a lower deductible which is covered by the FSA which would then give the appearance of ‘free’ health care. Dumb gamble.
Not necessarily dumb. The only dental/eye care expenses I’ve had in the past 20+ years are routine checkups and eyeglasses. Oh, and one filling. I can pretty much count on other medical expenses that aren’t routine. Of course, that’s why I don’t have a high-deductible health plan, but if a high-deductible plan were my only choice, I might well go this route.
WAG, based on having researched this for myself and my husband: The point of high-deductible plans is that you expect you won’t actually use up enough medical care to cover the deductible. Also HSA allow you to roll funds over year to year, in fact they can be used as alternate retirement savings accounts. So if you have a high deductible plan then you can use it to save for either retirement or a trip to the ER, worst case is you go to the ER but at least you have the money set aside to pay for it. If you use your HSA to pay for eye glasses then you dip into that fund.
No one has addressed the basis of my question assuming that I even understand the situation correctly … it seems that even if you have an HSA that can be used for the types of expenses mentioned there must be an advantage to also have an FSA. I’m pretty sure you can’t increase the amount of money you put away.
I had a good reason to although I doubt that “many” people would do it for the same reason.
I knew that I was going to have Lasik surgery in January. With our HSA/limited FSA rules, all of a year’s FSA contributions are available for withdrawal at the begining of the plan year. HSA funds are only available after they are deposited. Since I knew I was having the surgery, I opted for the FSA route and basically had my company give me an interest free loan for the year.
Actually, you can, which is the point. http://www.conexismarketing.com/employees/faq-library/limited-purpose-fsa-faqs
It appears that the draw is that you can both max out your HSA, and put more money away for dental & vision expenses - so you essentially shield more money from the tax man. This is probably an ideal way to do it vs a regular FSA too because Dental & Vision expenses are much more predictable and easier to shift from one calendar year to another to make sure you clean out your FSA. While your HSA covers unpredictable health expenses and keeps rolling over year to year until you use it.
The way I see it, the FSA is up to 2500/yr of expenses that are “use it or lose it” while the HSA is 3100/6250 per year (single/family) that can carry over year to year. If you want to maximize your tax deductions, you’d use money from the FSA first, and then use the HSA for anything above the FSA.
I think the dental and vision thing is a red herring, actually. Perhaps they use vision and dental as predictable items that are often not covered for people on a high-deductible plan… but the thinking holds true for any kind of medical expenses.
If you have an HSA, you are restricted to also having a “limited purpose” FSA, for dental/vision only. You can’t use the FSA for regular medical expenses in that situation.
I’m leery of quoting or linking to my company’s website, but it states you can - the IRS limits on the HSA and limited purpose FSA ($6450 and $2500 for 2013) are separate, and don’t affect each other.
Even the $2500 limit on limited purpose FSAs is new (WTW: Perspective that moves you | Risk, Broking, HR, Benefits - WTW) - FSA limits used to be at the discretion of the employer and were set simply to minimize the loss if an employee left early in the year. Since FSAs are “insurance” and are fully funded on January 1, but paid over a full year, you can use your $2500 on January 2 and quit January 3 and pay only one month’s contribution and walk away owing nothing more - the flip side of losing it an the end of the year unused.
My husband’s employer changed insurance plans. The high-deductible plan allows an HSA, and that’s what we signed up for. We also signed up for the FSA.
I’m pretty sure the limit for the HSA is greater than $6250. It may have gone up for 2013. It may be higher for people (like us) over the age of 50. Husband’s employer puts $1000 into the account; we put it the rest (through payroll deduction) to max out.
They were very clear that we cannot use FSA funds for anything for which we could use HSA funds. This is we were told an IRS requirement. That pretty much limits the FSA to dental and vision expenses. We calculated what our uncovered dental and vision expenses would be (for example, I’m getting a crown later this month, and insurance covers only half) and are putting in a bit less than that estimate.
Some couples have dueling benefits. If the spouse already has vision care but it’s not as flexible, why waste your HSA on it if you have the choice? (IIRC, my and my wife’s benefits require that dedicated benefits be spent before apply HSA).
Also, many people do not need vision care. Some people, especially early in life, find they do not need a lot of dental expenses. It would be nice if that money could be repurposed to other medical expenses, which is the benefit of an HSA.
Otherwise, you might get the typical kvetching about “why do my benefits for X expire unused while I could have used that extra money for Y?”
The limit is indexed for inflation, so the value is different almost every year (in $50 increments). 6,250 was the family limit for 2012, and it is 6,450 in 2013. There are also $1000 additions for those old enough to qualify for “catch-up contributions.”
Right, HSA funds can be used for Health, Dental, and Vision expenses (but not premiums - deductibles, out of pocket, coinsurance, etc).
Normal FSAs are the same, except subject to whatever rules your employer might also put on.
Limited Purpose FSAs are dental and vision only, and that is due to IRS regulations - you CANNOT have both an General Purpose FSA and an HSA.
You can use your HSA for Dental & Vision expenses if you have a limited purpose FSA, but since an FSA is use it or lose it, it would make no sense to do so unless your FSA was exhausted.