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Flexible & Health Spending Accounts

With the ongoing debate regarding the Patient Protection and Affordable Care Act (PPACA) that Congress passed in 2010, we have recently conducted extensive research regarding consumers who purchase their eye care through some type of insurance or vision plan provider and who specifically use a tax deferred flex spending benefit plan.

In order to provide you with a better understanding of what is and what is not covered for reimbursement, we've prepared a document that outlines the basics of the different tax deferred flex spending benefit plans that are currently being offered.

View the complete in-depth report here or visit the condensed summary of differentiators below.

Flexible Spending Arrangement

A Flexible Spending Account (FSA), also known as a Flexible Spending Arrangement, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer.
An FSA allows an employee to set aside a portion of earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses.

Health Reimbursement Arrangement

Health Reimbursement Accounts or Health Reimbursement Arrangements (HRAs) are Internal Revenue Service (IRS)-sanctioned programs that allow an employer to set aside funds to reimburse medical expenses paid by participating employees. These may be offered in conjunction with other employer-provided health benefits.

Health Savings Account

A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers who are enrolled in a high-deductible health plan.

Summary of Differentiators At-a-Glance

	FSA	HRA	HSA
Funding	Employees annually elect an amount to be withheld from their salary pre-tax.	Funded solely through employer contributions; these contributions are not included in the employee's income.	Pre-determined amount set aside pre-tax in separate account and employee is reimbursed with receipt.
Contributor	Employee	Employer	Employer and/or Employee
Insurance requirements	None	None	Used only with High Deductable Health Plans (HDHP)
Maximum contribution	Starting in 2013: There is a cap of $2,500 annually Cannot be rolled over the following year	No limit Can roll over amounts to pay for following year's expenses	Amount varies and depends on the type of HDHP coverage, age, and eligibility date. Can roll over amounts to pay for following year's expenses
Tax benefits	Employees do not pay federal income taxes or employment taxes on contributions. Withdrawals may be tax free if paying for qualified medical expenses.	Employees do not pay federal income taxes or employment taxes on contributions. Reimbursements may be tax free if paying for qualified medical expenses.	Employees can claim a tax deduction for contributions they, or someone other than their employer, make. Employer contributions may be excluded from gross income. Tax free interest or other earnings on the account assets Distributions may be tax free if paying for qualified medical expenses.
Usage	Only expenses defined under 213(D) of IRC	Only expenses defined under 213(D) of IRC	Only expenses defined under 213(D) of IRC Money withdrawn for other expenses is applied to gross income amount, incurs 10% penalty
Vision-Specific	Covers: Eyeglasses (OTC or Rx) Eye exams Rx sunglasses Eye related equipment/materials Corrective eye surgery or treatment Does not cover: Plano sunglasses	Covers: Eyeglasses (OTC or Rx) Eye exams Rx sunglasses Eye related equipment/materials Corrective eye surgery or treatment Does not cover: Plano sunglasses	Covers: Eyeglasses (OTC or Rx) Eye exams Rx sunglasses Eye related equipment/materials Corrective eye surgery or treatment Does not cover: Plano sunglasses

For more information, contact Jason McElvaney at jason@mcelvaneypublicaffairs.com or 512-751-5555.