Information on Health Insurance Pre Tax Contributions

Heath insurance pre tax contributions are made to flexible savings accounts by employees. These accounts allow an employee to meet certain unreimbursed medical expenses such as deductibles, co-pays and office visit fees that are not paid for by health insurance. Having the ability to set aside a pre-determined amount of an employee’s salary on a pre-tax basis allows the employee to lower their taxable income.

Flexible Spending Accounts

Flexible spending accounts are offered by an employer as a way to lower health care costs.  The IRS allows individuals to designate an amount to be set aside on a pre tax that is held in an account for the employee’s benefit. As various unreimbursed medical expenses arise throughout that plan year, the employee can seek reimbursement of those expenses. This lowers out-of-pocket costs for the employee.

Flexible Spending Accounts Limitations

Flexible spending accounts are subject to certain limitations with respect to the contributions and use.  The list of unreimbursed medical expenses that can be paid for with flexible spending account contributions is extensive but not exhaustive.  In addition, contributions made to a flexible spending account must be used in the plan year in which they are made.  Any unused contributions will be forfeited if they remain in the account on December 31.

 

 

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