Rockford Insurancea promise that gives peace of mind
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Having a HSA
and a Flexible Spending Account

Most of us are spending more and more out of our pockets these days for medical expenses.  Health plan deductibles and co-pays keep going up.  On top of that, more and more drugs are becoming available over the counter which usually brings down the cost of these drugs however, most medical plans won't pay these.  Plus maybe one or more of the kids need braces or you want Lasik eye surgery.  These are big ticket items that you pay for yourself.  So after all of that, who wants to pay more taxes?

Flexible Spending Accounts (FSAs) were designed to help with these expenses.  When your employer has these available, you can have part of your paycheck deposited into a FSA tax-free.  That's right, any money that you have deducted from your paycheck into your FSA is totally tax-free!  The tax savings will be the same as payroll deduction into your HSA. Most employees will save at least 25% on this part of their paycheck (depending on your tax bracket).  Then you can use this tax-free money for out-of-pocket medical expenses. So can you use both a HSA and a FSA?  Yes, but:

  • If you have both a Health Savings Account (HSA) and a Flexible Spending Account (FSA), then the FSA must be a limited FSA.  This means that money in your FSA can only be used for non-medical expenses.  By non-medical, that means that you can not use it for your deductible and co-insurance expenses on your High Deductible Health Plan.  You can however, use your FSA for dental, vision, and over the counter medicines and use your HSA for medical expenses.
  • You must make an annual election.  Unlike your HSA, you must decide ahead of time how much money you want to go into the account for the plan year.  The plan year is a 12 month period set up by your employer.  It may be the calendar year, but doesn't have to be.  The total annual amount is then divided by the number of payrolls in a year and that determines how much money comes out of your paycheck each time.  Example:  If you wanted to put $2000 into the account and you are paid on a weekly basis, then you would divide that $2000 by 52 paychecks and come up with a weekly tax-free payroll deduction of $38.46.  The IRS does not allow you to change this amount in the middle of the plan year (that 12 month period) unless you have a qualifying event such as marriage, divorce, birth, or death.
  • You must use your annual election or you lose it.  Maybe you've heard of the use it or lose it rule.  Unlike your HSA, the IRS states that any money you put in the account must be used for eligible expenses that you incur during the plan year or you lose it.  That's right, you heard that correctly, you lose it.  For this reason, be careful when you plan how much money you want to go into the account for the year.  If you know you are going to have certain expenses such as a regular drug expense or co-pay, then that is a safe amount to put into the account.  If you know you are going to buy new glasses or contacts during the year, then that is a safe amount to put into the account.  Add up what you know what you are going to spend on all these eligible medical expenses and that is how much you will want to put into the account. There is no use it or lose it rule for HSAs.
Contact Information:
Rockford Insurance in Michigan
PO Box 265
Rockford, MI 49341
Phone 616.361.2550
The Rockford Insurance promise that gives peace of mind

Our mission is to make insurance "a promise that gives peace of mind". We understand that insurance is a promise, a promise that when sickness, accident or death occurs, the insurance will provide a source of funds to help make you whole again. The promise isn't only the insurnace policy but also the on-going service and personal care needed during a time such as this.  
Our complete Mission Statement