What is Open Enrollment? Open Enrollment is the time of year when your employer allows you to make benefit elections on things like health insurance, dental and vision coverage, life insurance, disability insurance, etc.
We decided to take a look at two tax-advantaged ways for you to pay for out-of-pocket medical expenses – the Flexible Spending Account, also known as an “FSA” and the Health Savings Account, also known as the “HSA”.
So what are they?
A Health Savings Account allows an employee who is enrolled in a high-deductible medical plan to put away pre-tax dollars in the amount of $3,400 for an individual and $6,750 for a family in 2017. One of the benefits of a Health Savings Account is if you don’t use the money during the year for qualified medical expenses, the money is rolled over indefinitely and can even be invested within the Health Savings Account.
A Flexible Spending Account allows an employee who is enrolled in a traditional health care plan, not a high-deductible plan, to put away pre-tax dollars in the amount of $2,550 in 2016. The 2017 contributions limits at this point have yet to be released. The catch with the Flexible Spending Accounts is if you don’t use the funds in the given plan year – you lose them. However, most employers offer a grace period of about 2.5 months to spend any unused funds, or the ability to roll over $500 to the next plan year.
Depending on your elected health insurance plan you can have an HSA or an FSA, but not both. Keep in mind however, some employers offer Limited Purpose Flexible Spending Accounts which can be used for Vision and Dental medical expenses. This type of Flexible Spending Account can be paired with an HSA.
The bottom line is if you are a part of a high-deductible medical plan we recommend you try maximizing the contribution to your Health Savings Account every year, in addition to reviewing your options around Limited Flexible Spending Accounts. If you are not a part of a high-deductible plan and contribute to a Flexible Spending Account make sure you try and forecast what you expect your health expenses to be, as you don’t want to run into a scenario where you lose any of the funds.
If you have any questions about Open Enrollment or Health Savings Accounts and Flexible Spending Accounts don’t hesitate to reach out!