Health Flexible Spending Account Overview
- Who may participate
- How the plan works
- Use it or lose it
- Qualified health care expenses
- HFSA vs. tax deductions
- How much to contribute
- Claiming your reimbursements
- Customer service
- Download HFSA brochure (ben049) [PDF 384K]
The health plan is designed to cover most, but not all, of your health expenses. You can elect to contribute some of your salary, pre-tax, to a Health Flexible Spending Account (HFSA) to reimburse some of your unpaid health expenses. Since your contributions are not subject to federal taxes, you pay less in taxes each year.
Who May Participate
Employees participating in the Select Benefits plan who are eligible for group health coverage, as described in Section 1.3a [PDF] of the Select Benefits Insurance Information Booklet, are eligible to participate in the Health Flexible Spending Account.
Part-time employees are eligible to participate only if they elect to participate in both medical coverage and basic life insurance as described in Section 15.1 [PDF] of your booklet, Basic Life and AD&D.
How the Plan Works
The Health Flexible Spending Account works similar to a personal checking account.
Coverage begins and ends as specified in Section 1.8, When Coverage Begins, and Section 1.9, When Coverage Ends. You decide how much you want to contribute each month, up to a maximum of $208 per month in the benefit year. Your contribution must be:
- In whole dollars
- At least $20 per month ($240 per year)
- No more than $208 per month
Your contribution will be split and deducted from your paycheck twice per month for each month that you are in pay status. This contribution is deducted from your pay check pre-tax so federal income taxes are not withheld on the amount you contribute. If you are on leave without pay or don’t have enough payroll in a given month, a contribution will not be taken that month. Your coverage will be suspended for that month.
Your contributions are deposited into your individual plan account. Claims for unpaid health care expenses are filed and you are reimbursed up to the amount of your annual contribution or the amount of the claim, whichever is less.
For example, if, prior to the benefit year beginning January 1, 2014, you elect to make monthly contributions of $100, your annual election is $1,200. By March, you have contributed $300 to your account. In April, you incur a $500 expense that is not covered by your health plan. If you are covered by the Health Flexible Spending Account for April, you will be reimbursed $500 for that expense, even though you have not yet contributed sufficient money to cover the request. During the rest of the year, you can be reimbursed for additional expenses up to $700 ($1,200 - $500).
If you stop being a participant during a benefit year, you will be entitled to reimbursements from your Health Flexible Spending Account for qualifying health care expenses that were incurred during the benefit year but before you stopped being a participant, subject to COBRA continuation coverage. In addition, you will not be entitled to reimbursement of qualifying health care expenses for any dependent after the person is no longer a dependent.
Use It or Lose It
In exchange for tax advantages of using the Health Flexible Spending Account, the Internal Revenue Service (IRS) requires that you forfeit any money left in your reimbursement account after all qualified claims for the benefit year have been paid. You must request reimbursement for expenses incurred during the benefit year no later than 90 days following the end of the benefit year (by March 31). Because of this use it or lose it rule, it is important that you plan carefully when you use this account.
Qualified Health Care Expenses
Eligible expenses must meet the Internal Revenue Service definition under Section 213(d) for medical expenses and must not be covered or paid in full by your health plan(s). The final determination for eligibility is made by the plan.
A complete list of tax deductible medical expenses is available in IRS publication #502. You will find it online at irs.gov/publications .
Most eligible services or supplies must be prescribed and/or performed by a licensed provider. Only those expenses which are not paid by any of your health plans are eligible to be reimbursed.
In addition, expenses reimbursed out of your Health Flexible Spending Account must be expenses you or your dependent incurred. For these purposes, eligible dependents include your spouse and children who meet the eligibility requirements shown in Section 1.3b, Dependents, and any other dependent you claim on your income tax return each year.
HFSA vs. Tax Deductions
If you use the Health Flexible Spending Account to pay for eligible expenses, you cannot take a tax deduction on your income tax for the same expenses (you are allowed a deduction on your tax return for expenses that total more than 7.5% of your adjusted gross income). You must choose which is more advantageous for you.
How Much to Contribute
Here are some things to think about to help you decide how much to contribute to your Health Flexible Spending Account:
- What expenses you may have not covered by a health plan but reimbursable from this account.
- How much your deductibles are expected to be for the benefit year.
- An estimate of the total out-of-pocket maximum you could pay.
- An estimate of what your coinsurance and copayments will total.
- How much you paid for health care costs during the last benefit year. For example, if your out-of-pocket health care costs were $500 during the last benefit year, they may run close to that this year.
Remember, the law requires that what you don’t use, you lose.
Claiming Your Reimbursements
Reimbursements are issued twice per month. Checks are payable to you, not to your provider. Claims for services incurred during the benefit year will be accepted any time during that year. You have a 90-day grace period after the end of the benefit year (generally until March 31) to file all unpaid claims for that benefit year.
The HFSA administrator is:
- P.O. Box 99004
- Anchorage, AK 99509-9004
- Toll-free: (877) 517-6370
View/download HFSA reimbursement forms on the claim forms page.
Use the Payroll Deduction Worksheet [XLS 63K]
Customer service professionals are available Monday through Friday, 4 a.m. to 5 p.m. Alaska Time. They can provide information regarding the status of your account and reimbursements.