Tuesday, May 25, 2010

What do you call a tax free medical account?

What is it called when your company allows you to set aside tax free money from your check to put towards medical, dental, or vision expenses. My company doesn't have vision or dental so I want to convince them to do this. What should I say to them?
What do you call a tax free medical account?
Flexible Spending Plan, Cafeterial Plan, Section 125 Plan (different names of the same thing), Health Savings Account. Tell your company if they do this, it will lower the taxable payroll that they will have to pay payroll taxes on. That should help convince them. I've attached a links to these to help you.
Reply:A Flexible Spending Account would allow you to set aside pre-tax money to pay medical expenses. Information for employers on setting up such an account is detailed in the following IRS publication:





http://www.irs.gov/publications/p15b/ar0...





A second option for your employer is to allow you to establish a Health Savings Account in connection with a high-deductible health insurance policy. You and/or your employer could make contributions to the HSA. Medical expenses paid for with the HSA would be tax-free. After-tax contributions you make to the HSA would be tax-deductible.





The above link also discusses the HSA from the employer's perspective.





Finally, if your employer doesn't set up either the FSA or the HSA for you, you could still establish an HSA for yourself as long as you carry high-deductible health insurance.
Reply:Section 125 plan


Flex Spending Plan


Cafeteria Plan





3 names for the same item.
Reply:There are a couple. One is a Flexible Spending Account where you can use the funds for various purposes such as child care or unreimbursed medical expenses. Any funds remaining in the account at the end of the year are forfeit, so you have to be careful about how much you put in so that you don't lose anything.





Another is a Medical Savings Account. This is like an IRA (you can set one up yourself or your compnay may sponsor one) and allows you to accumulate earnings without tax as well as take a deduction for the contributions. No tax or penalty is levied if you use the funds for unreimbursed medical expenses.

No comments:

Post a Comment