Flexible Spending Accounts & Health Savings Accounts

Flexible Spending Accounts (FSA)

Flexible Spending Accounts (FSA) enable you to put aside money for important expenses and help you reduce your income taxes at the same time. Michigan Tech offers three types of FSAs: Healthcare, Limited-Purpose and Dependent Care. Governed by the Internal Revenue Service (IRS), these accounts allow you to set aside pre-tax dollars to pay for certain, allowed out-of-pocket healthcare and/or dependent care expenses.

Healthcare FSA

The Healthcare FSA is a pre-tax benefit account that you fund to pay for eligible health care expenses. With the Health FSA, you can pay for eligible medical, dental, and vision expenses for you and your eligible dependents that are not covered or are only partially covered by your health insurance plan.

Employees enrolled in a high-deductible health plan (HDHP) are not eligible for a Healthcare FSA, but would be eligible for a Limited Purpose FSA (defined below). For employees enrolled in a high-deductible health plan, eligible medical expenses could only be paid with a Health Savings Accounts (HSA) (defined below).

Limited Purpose FSA

A Limited Purpose FSA lets you pay for out-of-pocket dental and vision care expenses only, and is the only FSA option for those who are enrolled in a high-deductible health plan. For employees enrolled in a high-deductible health plan, eligible medical expenses would be paid with a Health Savings Account (HSA) (defined below). 

• Medical and Dental Expenses (IRS Pub. 502)

Dependent Care FSA

A Dependent Care FSA is a pre-tax benefit used to pay for eligible dependent care expenses for the care of a dependent child up to age 13 or a dependent adult.

Some eligible dependent care services are summer day camp, preschool, before or after school program, and child or adult daycare.

You may contribute up to $5,000, based on IRS guidelines.

• Dependent Care Eligible Expenses (IRS Pub. 503)

Annual IRS Limits for Flexible Spending Accounts

How Flexible Spending Accounts Work

1. Each year during the open enrollment period, you decide how much to set aside for healthcare, dental and vision, and/or dependent care expenses.
2. You must actively re-enroll in each FSA plan during the open enrollment period. You are not automatically re-enrolled.
3. Your contributions are deducted from your bi-weekly paycheck on a before-tax basis in equal installments throughout the calendar year.
4. There are "use it or lose it" rules imposed by the IRS, so any unused funds remaining in your FSA account at the end of the plan year will be forfeited.

The table below shows some common eligible expenses. Please note that these accounts are separate; you may choose to participate in any of the options. You cannot use money from the Healthcare FSA to cover expenses eligible under the Dependent Care FSA or vice versa. These examples are not exhaustive.

Health Savings Accounts (HSA)

The high-deductible health plan options offered by Michigan Tech give you access to a Health Savings Account (HSA).

The HSA allows you to set aside money on a pre-tax basis to pay for qualified healthcare expenses, like your medical, dental and vision deductibles, coinsurance and copays. You can decide whether to enroll in an HSA and how much (if any) pre-tax money you want to contribute when you enroll. You can change the amount you contribute at any time throughout the year. Please note, you must actively re-enroll and set contributions to your HSA plan each year. You are not automatically re-enrolled.

What are the Advantages of an HSA?

• It's tax-free when it goes in. You can put money into your HSA on a pre-tax basis through convenient payroll deductions.
• It's tax-free as it grows. When you spend your HSA funds on qualified healthcare expenses, you don't pay any taxes. That means you're saving money on your qualified medical, dental and vision expenses.
• It's always your money. You can carry over your unused HSA balance from year to year. Just like a bank account, you own your HSA, so it's yours to keep and use even if you change medical plans, leave the University, or retire.

Annual IRS Limits for Health Savings Accounts

Are You Eligible For an HSA?

To be eligible to contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP). If you're covered by another medical plan in addition to your own health plan, it also must be an HDHP. For example, if you're also enrolled in your spouse's coverage, that plan must be an HDHP, too.

You can't contribute to an HSA if:

• You're enrolled in another medical plan that is not a qualified high-deductible health plan.
• You're enrolled in a veteran's medical plan.
• You're claimed as a dependent on someone else's federal tax return.
• Your spouse participates in a general-purpose healthcare flexible spending account (FSA).
• You're enrolled in Medicare

Although you can enroll your children up to age 26 in your medical coverage, you can't use money from your HSA to pay their healthcare expenses unless you can claim them as dependents on your federal income taxes.

You can't have an HSA and use a general-purpose healthcare flexible spending account (FSA) for medical expenses at the same time. If you currently have money in a healthcare FSA, use it before you begin contributing to your HSA. This includes any "grace period" that applies during a new plan year (generally before April 1). Your HSA can be used for eligible medical, dental and vision expenses. You can have an HSA and a limited purpose FSA at the same time. The limited purpose FSA can only be used for eligible dental and vision expenses.