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Compare Flexible Spending Accounts

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If ever you've had to pay out-of-pocket for medical, dental, vision or prescription expenses, you likely either already had some money set aside or wish you had... That's where Healthcare Flexible Spending Accounts (HCFSA), Limited-Purpose Flexible Spending Accounts (LPFSA) and Health Savings Accounts (HSA) come in particularly handy. As a Benefits Administration Professional, I've become acquainted with the various types of accounts available to cover healthcare costs. The similarities and differences in these account structures will be covered in this essay.

One thing these accounts all have in common is their very specific rules that are governed by IRS guidelines in Publications 502 & 969. Misuse of the accounts will lead to hefty penalties and other unfavorable tax ramifications. Each has specific eligible expenses and deviating from those strict guidelines is a recipe for a tax disaster.

HSAs are to be used in conjunction with a high-deductible health plan, which in the current plan year is defined as a medial plan with a minimum annual deductible of $1300 for self-only and $2600 for family coverage (wherein "family" consists of any combination of …show more content…

The accounts can be used for eligible medical, dental, vision and prescription expenses incurred during the plan year. The funds generally do not roll over from year to year (though some employers do allow for a run-out period at the beginning of the next plan year). The accounts are commonly referred to as "Use-It-Or-Lose-It" accounts for this reason. One key differentiator between HSA and HCFSA is that the funds are available from the very beginning of the plan year rather than becoming available as they accrue. Employers fully fund the account up front and the participant pays this back over the course of the plan year via payroll deductions (Pub

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