What is covered under health care spending account?
Health care spending accounts (HCSAs) are a popular and valuable benefit offered by many employers to help employees manage their out-of-pocket medical expenses. These accounts allow individuals to set aside pre-tax dollars from their paycheck to pay for qualified medical expenses. But what exactly is covered under a health care spending account? Let’s explore the details.
Qualified Medical Expenses
The primary purpose of a health care spending account is to cover qualified medical expenses. These expenses are defined by the IRS and generally include costs related to medical, dental, and vision care. Here are some examples of what is typically covered:
– Doctor visits and consultations
– Prescription medications
– Hospital stays and surgeries
– Dental procedures, such as cleanings, fillings, and braces
– Vision care, including eye exams, glasses, and contact lenses
– Over-the-counter medications prescribed by a doctor
– Medical equipment, such as crutches, wheelchairs, and nebulizers
Eligible Dependents
In addition to covering medical expenses for the account holder, HCSAs can also be used to pay for eligible dependents. Dependents may include a spouse, children, and other qualifying individuals. It’s important to note that the account holder must be the primary subscriber to the health insurance plan, and the dependents must be listed on the policy.
Non-Qualified Expenses
While HCSAs provide a convenient way to cover qualified medical expenses, there are certain costs that are not eligible for reimbursement. These non-qualified expenses include:
– Insurance premiums
– Health club memberships
– Cosmetic surgery
– Expenses for over-the-counter medications that are not prescribed by a doctor
– Expenses for travel and lodging for medical treatments
Account Limits and Contributions
Health care spending accounts have specific limits on the amount of money that can be contributed each year. These limits are set by the IRS and can vary depending on the employer’s plan. For 2021, the annual contribution limit for an individual HSA is $3,600, and for a family HSA, it is $7,200. However, individuals aged 55 or older can make an additional catch-up contribution of $1,000.
Roll-over and Carry-over
One of the advantages of a health care spending account is the ability to roll over unused funds from one year to the next. While the IRS allows for a $550 carry-over amount, many employers offer a greater carry-over limit. Additionally, any unused funds at the end of the plan year can be rolled over into the next year, ensuring that account holders have access to their contributions for future medical expenses.
Conclusion
Understanding what is covered under a health care spending account is crucial for individuals to make the most of this valuable benefit. By being aware of the eligible expenses, account limits, and contribution rules, employees can effectively manage their out-of-pocket medical costs and take advantage of the tax benefits offered by HCSAs.
