Flexible Spending Accounts are invaluable tools that your employees can use to offset the oftentimes overwhelming and expensive costs of medical care. They provide an additional layer of financial protection for families beyond insurance and a certain peace of mind along with it.
These account types, while simple, can seem quite complex upfront, so let’s delve into a quick overview of them to help you better understand how they work, who they benefit from, and what expenses they can help cover.
For more information on flexible spending accounts, or to receive a quote, contact Beckham Insurance Group today.
What is a Flexible Spending Account?
A flexible spending account (FSA) is a specialized kind of financial savings account that employees can use to cover health-related expenses. This account type, unlike other savings accounts, never requires individuals to pay taxes on the money they contribute to the fund. This means that in the long run, they’ll be able to use more money to cover expenses instead of paying it down against tax expenses.
Because FSAs, unlike other health savings account types, are employer-owned, they tend to be much more rigid. For 2022, the IRS set the account contribution limit at $2,850, a $100 increase from the 2021 limit because of inflation. Spouses of employees may also contribute up to $2,850, but only if they hold a separate flexible spending account under a separate employer plan.
Who Will Your Flexible Spending Account Cover?
One of the great benefits employees get out of using their flexible spending accounts is the ability to cover not only their own medical costs, but also the medical costs of those nearest and dearest to them. However, those potential beneficiaries are regulated under specific rules that dictate who in relation to the account holder is eligible to use the FSA to cover their healthcare expenses. To better understand how this works and who can use the account, let’s look at the top five relatives who may be eligible for coverage.
The Account Holder’s Spouse
Any spouse of a flexible spending account holder is eligible for medical coverage so long as they were married to the holder either at the time medical services were used or at the time the medical expenses were paid for.
The Account Holder’s Dependant(s)
Similar to the conditions associated with spouses, individuals must be the dependent of the account holder either at the time the medical services were rendered or when those expenses were paid for.
Typically, to qualify as a dependent in this situation, a person must be a qualifying child or relative and they must also be a citizen, national, or resident of the U.S., Canada, or Mexico. Exceptions are in place to provide FSA coverage if the dependent is an adopted child without citizenship, nationality, or residency in the U.S., Canada, or Mexico.
Which Medical Expenses are Eligible for Reimbursement?
There are numerous medical expenses eligible for coverage when your insurance or other plans fall short. But despite the wealth of healthcare options that are covered, it’s important to note that no money from an FSA account can be used unless the products, treatments, or services rendered are adequately substantiated by a licensed medical professional. Typically, conditions and treatments that are covered by FSA funds must be to directly alleviate or prevent mental or physical illness.
Let’s take a look at a few key medical expenses an FSA account can cover.
Alcoholism and Drug Addiction Treatment
While many insurance companies and policies do not cover treatment for alcoholism or other drug-related addiction treatment, the funds accrued under an FSA program are eligible for use there. They can be used to cover inpatient treatment, therapy, meals, lodging, stay at treatment centers, transportation to and from support group meetings, and a host of other related fees.
Capital expenses are those associated with special medical equipment that must be installed in an individual’s home on a permanent basis. Equipment and construction types that typically fall under this kind of coverage include entry and exit ramps, widening doorways and halls for wheelchair access, installing railing and other support structures, lowering and modifying kitchen equipment, moving smoke and fire alarms, modifying hardware, and grading the ground.
Long-Term Care Services
If an individual is in need of long-term care, funds accrued in an FSA can help offset the costs of that care for those who have need of diagnostic, preventative treatments, and rehabilitative services to ensure their quality of life is high.
Other Items Covered Under an FSA Fund Include:
Annual Physical Exams
Artificial Teeth and/or Limbs
Birth Control Pills
Breast Pumps and Supplies
Contact Lenses or Eyeglasses
Drug and Alcohol Addiction Treatment
Eye Exams and Surgeries
Learning Disability Treatments
Employee Benefits Made Easy
At Beckham Insurance Group, our knowledgeable and experienced employee benefits representatives are here to help make your benefits administration as easy and stress-free as possible. Contact us today to learn more about how we can help you build a competitive and comprehensive benefits program.