Dentists are more flexible than ever before when it comes to accepting different methods of payment for costly dental work. Among the latest payment strategies are Flexible Spending Accounts and Health Spending Accounts. SO, which one is right for you as a patient?
What is a Flexible Spending Account?
A flexible spending account allows you to set aside a percentage of your gross, pre-taxed income to pay for eligible health care expenses for you, your spouse, and your dependents. This type of medical expense program is offered exclusively through your participating employer.
What is an HSA?
A Health Savings Account differs from a Flexible Spending Account in that its main purpose is to help cover the cost of deductibles and provide reimbursements for out-of-pocket expenses.
It’s very important to remember that if you make a reimbursement claim under your FSA, the IRS does not permit you to file the same claim on your HSA. In fact, you cannot legally have both a General Purpose FSA in tandem with an HSA.
However, you can keep an HSA if you opt for a Limited Purpose FSA account, which would only cover eligible dental and vision costs. You can maximize savings and collect additional tax benefits by managing both a Limited Purpose FSA and an HSA.
FSAs are only offered through your employment benefits package, so coverage will vary based on your employer’s account. In general, Flexible Savings Accounts will help cover any expenses for tools and services used for the treatment and prevention of illness and disease. In some situations, transportation costs may also be eligible for coverage. Most FSAs will cover the following out-of-pocket expenses:
- Cost of your insurance deductible
- Cost of prescription medication and doctor’s appointments
- Cost of over the counter medication and equipment
- Cost of dental exams, X-rays, and routine cleanings
- Cost of vision exams, contact lenses, and reading glasses
- Cost of transportation to receive medical care (in some cases)
How Can FSA Be Used For Dental Care?
A Flexible Spending Account can help you offset the cost of expensive preventative and restorative dental services. Depending on the scope of your employer’s coverage, dental procedures eligible for reimbursement include:
- Crowns (Inlays & Onlays)
- Routine Cleanings
- Exams & X-Rays
- Cavity Fillings
How Does a Flexible Spending Account Work?
Strict rules set forth by the IRS must be abided if you’re planning to use an FSA account to cover your dental or medical expenses.
- The amount set aside from your pre-taxed income will likely be capped by your employer at $2700 or less per year.
- Depending on your method of payment at the point of care and your employer’s policy details, you will receive total reimbursement or monthly reimbursement.
- Medical costs can only be expensed ONCE through a single FSA account; coverage found to be expensed through multiple FSA accounts are subject to audit.
- In most cases, up to $500 of unused FSA funds can be carried over to the following year for use.
Are FSA Contributions Tax Deductible?
Contributions to a Flexible Spending Account are not tax-deductible because the funds are extracted from your pre-taxed wages. One reason FSAs are so appealing is because they reduce the taxable amount on your remaining wages once the FSA funds are taken out.
FSAs have predetermined start dates and end dates dictated by the IRS, so keep in mind that reimbursement must correspond to services received within this time frame.
What Happens to Unused Flex Spending Money?
FSAs follow a use-it-or-lose-it approach. A Flexible Spending Account might only be a good option for you and your family if you anticipate a large amount of annual medical expenses.
It is understood that not every penny of an FSA can be used in a given year, which is why your employer will “flexibly” allow you to roll-over up to $500 of unused money to the following year. However, if you consistently find yourself rolling over your unused funds, you might want to consider making smaller contributions to your account.
If you have any questions about covered medical services through your FSA, contact your employer’s Human Resources Manager. Before you schedule your next dentist appointment, call ahead to ask if your FSA is accepted and whether the cost of your care is eligible for reimbursement.