Flexible spending accounts and health savings accounts offer some of the best ways to save money on health and dependent care expenses. You can enroll in one or more of these accounts each year, and contribute up to the maximum to each, potentially saving thousands of dollars annually.

In this week’s Benefits Spotlight, we’ll explore these plans in detail, including the benefits and some of the unique, lesser-known features.

Health Savings Account

The Health Savings Account, or HSA, is available to employees who enroll in the Anthem High Deductible Health Plan and meet the IRS eligibility requirements. Here are some benefits of enrolling in an HSA:

• Triple tax advantages: HSA contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified health expenses are also tax-free. This triple tax advantage can result in substantial long-term savings.
• Wide range of qualified expenses: HSA funds can be used for a wide range of IRS-eligible health,  including doctor’s visits, prescriptions, dental and vision care, medical equipment and certain over-the-counter items. You can use the funds for expenses incurred by yourself, your spouse or your tax-dependent children.
• Higher contribution limits: HSAs typically have higher annual contribution limits compared to Flexible Spending Accounts, or FSAs. In 2024, you can contribute up to $4,150 for an individual or $8,300 for a family, plus an additional $1,000 if you are age 55 or older. IU also makes biannual contributions to your HSA totaling $1,300 for an individual or $2,600 for a family.
• Debit card convenience: When you enroll in the HSA or Healthcare FSA, you’re provided with an IU Benefit Card, a debit-type Visa card that makes it easy to pay for qualified expenses directly at the point of service.
• Portability: HSAs are portable, meaning the account is yours to keep and continue using for eligible expenses, even if you leave IU or retire.
• Savings for the future: HSAs can be a valuable tool for saving for future medical expenses or healthcare costs in retirement. Balances over $1,000 in your HSA cash account can also be invested in a wide range of mutual funds, which can help you build a substantial healthcare nest egg.
• No “use it or lose it”: Unlike traditional FSAs, HSAs do not have a “use it or lose it” provision. All unused funds roll over from year to year, allowing you to accumulate savings over time.

Flexible spending accounts

IU offers two FSAs, the Healthcare FSA and the Dependent Care FSA. Like the HSA, contributions are deducted from your paycheck before taxes, reducing your taxable income. Here are some benefits of these accounts:

Wide range of eligible expenses:

• • Healthcare FSAs cover the same broad spectrum of qualified healthcare expenses as the HSA. The funds can be used for expenses incurred by yourself, your spouse, or your children through age 25, even if they’re not covered by your health insurance plan.
  • Dependent Care FSAs cover a wide range of day/evening care expenses, such as home care from a nanny or au pair, nursery school fees, before- and after-school care and elder care in your home. The funds can be used for care expenses for your children under age 13, totally disabled dependents or dependents otherwise eligible for federal income tax purposes, including adults.

• Availability of funds: When you enroll in the Healthcare FSA, your account is funded with your entire annual pledge in a lump sum. For the Dependent Care FSA, your annual pledge is divided over the number of pay periods in the year and your account is funded with each payroll deduction.
• Grace period: FSAs traditionally require that expenses be incurred during the plan year (January 1 – December 31). However, the Dependent Care FSA allows you to continue incurring dependent care expenses for an additional 2.5 months following the end of the plan year (until March 15).
• Carryover option: The Healthcare FSA has a carryover option ($570 for 2023 and $610 for 2024), which allows you to roll a portion of unused funds into the next year, reducing the “use it or lose it” aspect of traditional FSAs.

Rules for the Healthcare FSA and HSA

There are special rules for how you can spend the funds when you enroll in the Healthcare FSA and the HSA in the same year. When enrolled in both accounts, your FSA funds can only be used for dental and vision expenses until your annual High Deductible Health Plan deductible has been met. Once the deductible is met and proof of meeting the deductible has been provided to IU’s HSA/FSA vendor, Nyhart, the funds in your Healthcare FSA can be used for medical and prescription expenses incurred from that date forward. Enrolling in both accounts can be a great option if you’re expecting large vision or dental expenses during the upcoming year.

Lesser-known eligible items and services

Here are some unique items and services that HSA and Healthcare FSA funds may be used for. The full list of eligible expenses is available by logging in to iu.nyhart.com and selecting the Expense Eligibility Table from the main menu. The list can change without notice, and some expenses may include stipulations, so be sure to check with Nyhart before making a purchase.

• Acupuncture
• Chiropractic care
• Home improvements such as exit ramps, widening doorways, or support bars in bathrooms
• Orthopedic shoes or inserts
• Lactation items like breast pumps and consultations
• Diaper rash ointment
• Infertility treatments
• Over-the-counter pain relievers, contraceptives, first aid supplies, and COVID-19-related PPE
• Menstrual care products
• Sunblock
• Thermometers
• Reading glasses and contact lens solution
• Crutches, canes, and wheelchairs
• Medical alert bracelets
• Transportation costs to receive medical care

Learn more

With the time to make 2024 benefit elections right around the corner, you’re encouraged to visit the Open Enrollment website to learn more about these unique accounts and how they could benefit you and your family. While the choice between them depends on your specific financial situation, goals, and eligibility, all three can contribute to your financial well-being and provide peace of mind when it comes to managing health and dependent care costs.

For questions about Open Enrollment or IU benefits contact AskHR at askhr@iu.edu.