It’s time to check the balance in your healthcare spending accounts

You don’t want to lose any of the money you’ve set aside

As the end of the year approaches, it’s time to check the balance in any healthcare spending accounts you have. Whether you can carry a balance forward into next year depends on the account, but you should double-check to ensure you won’t lose any of the money set aside for you.

There are three types of healthcare spending accounts: health reimbursement accounts (HRA), health savings accounts (HSA), and flexible spending accounts (FSA). Let’s take a quick look at each of these account types.

Health reimbursement accounts

An HRA is set up and funded by your employer. You’re not able to make any contributions to your HRA, and HRA dollars don’t earn interest. The account is meant to help you pay for out-of-pocket costs related to your health.

Each employer can decide whether unused dollars roll over into the following plan year, or whether they return to the employer. But giving unused dollars to employees is not an option.

Health savings accounts

HSAs are only available to people enrolled in high-deductible health plans. An HSA protects you from unexpected healthcare expenses before you meet your deductible, when you are responsible for all your healthcare costs.

Either you or your employer can start an HSA, and both parties can contribute to the account. But you own it. That means the money in the account is yours, even if you switch jobs. Any balance carries over into the next plan year, too.

Your HSA contribution dollars are deposited before taxes are withheld. You earn interest on the money in the account, and you don’t pay taxes on HSA dollars as long as you use them for qualified medical expenses.

Flexible spending accounts

An FSA is similar to an HSA, but there are limits on how high your balance can be and how much of any unused balance you’re allowed to carry over. In addition, you lose any balance in your FSA if you leave your employer.

Only your employer can start an FSA for you, but either party can contribute pre-tax dollars. The maximum balance you can carry is $2,850, although you and your spouse or domestic partner each can have your own FSA.

At the end of the year, your employer has the option to let you carry over up to $570 from any unused balance. They also have the option to give you until mid-March to spend the previous year’s FSA dollars.

A note about qualified medical expenses

Each of these accounts can only be used to pay for qualified medical expenses. The Internal Revenue Service (IRS) decides what expenses are included, and they keep an updated list.

Your health insurance premiums, or monthly payments, are not considered qualified medical expenses, but prescription medications and out-of-pocket healthcare expenses are. This includes menstrual care products as well as over-the-counter medications and health products.

Using spending account balances on your prescriptions

Remember, any money you spent on prescription medications in 2022 can be applied to any remaining balance in your accounts. And you can start planning for next year by estimating how much you’ll spend on any maintenance or ongoing medications.

Updated: September 21, 2022