When it's time to choose your benefits, you may have several different types of medical plans and spending accounts to pick from. It's important to know that you may not have to pick just one. Depending on your offerings and your life situation, you may be able to take advantage of two or even three types of spending accounts.
You'll have to pick your health plan, but some of Further®'s accounts aren't tied to health plans. However, some other account options aren't tied to specific health plans, so you can have them regardless of which health plan you choose.
For example, you may have to choose between a health savings account (HSA) plan or a health reimbursement account (HRA) plan, depending on what your employer offers. In order to have and contribute to an active HSA, you must also use a high-deductible health plan. Most HRAs do not qualify. As a result, most people won't have both an HRA and contribute to an active HSA.
However, you can pair either account, or a voluntary employee beneficiary association (VEBA) account, with a flexible spending account (FSA). You can also add on a dependent care assistance plan (DCAP) if you have a need for it. FSAs and DCAPs are supplemental accounts that give you a chance to save money by using pre-tax dollars on qualified medical or dependent care expenses.
If you still have an HSA with funds from a previous health plan, you may still use it for qualified medical expenses regardless of which account you currently have - you just won't be able to contribute to it.
Pairing an HSA and FSA
With both an HSA and FSA, you can contribute pre-tax money into an account that you can use for qualified medical expenses. Since there are annual contribution limits for both, it can be beneficial to enroll in both.
If you enroll in an FSA at the same time you actively contribute to an HSA, you can only use the FSA for vision and dental reimbursements. If you or someone you cover needs orthodontal care, glasses, or future Lasik services, an FSA is a great way to use pre-tax funds to pay for those expenses. At the same time, you can leverage the HSA for other qualified medical expenses or for saving your money for long-term investment growth.
One of the biggest differences between the two accounts is that HSA money is yours and you can keep it as long as you like, but most FSA funds must be used by the end of the plan year or you will lose them. That's something to consider when deciding whether to enroll in an FSA.
Some employers allow an FSA grace period or rollover which means employees can spend down remaining FSA funds or rollover up to $500 into the following year.
Pairing an HRA and FSA
An HRA is a medical spending account that is owned and entirely funded by the employer, so you do not contribute to it at all. The HRA is set up with a contribution amount determined by the employer and it reimburses you for eligible medical expenses.
By pairing a FSA with an HRA, you can contribute pre-tax dollars to the FSA and pay for eligible expenses that are not reimbursable by the HRA, such as chiropractic care.
With this pairing, generally the HRA pays eligible medical expenses first. When both plans are administered by Further®, Further® manages which account to pay from first.
Pairing a VEBA and FSA
A voluntary employee beneficiary association (VEBA) account is a tax-free health care savings plan that is funded entirely by the employer. Like an HSA, once an employer contributes to an employee’s VEBA account, the money belongs to the employee.
Unlike an HSA, however, the account does not allow you to make your own contributions to it. Since you can't make your own contributions to the VEBA, you can fund an FSA and use it to pay for qualified medical expenses before having to withdraw from your VEBA.
By pairing a VEBA account with an FSA, you would be able to contribute your own pre-tax dollars toward health care expenses while saving their VEBA dollars for retirement or other qualified expenses.
Adding a DCAP to any account
If you have a qualified tax dependent, regardless of whatever other accounts you choose, you can also enroll in a DCAP if your employer offers it. This account allows you to set aside funds pre-tax to pay for specific costs associated with taking care of your dependent while you work. For example, if you have a child in daycare or after-school care, you can set up an amount to be deducted pre-tax from your paycheck that you can then use to reimburse yourself for those costs.