Healthcare Flexible Spending Account account - is it worth the hassle?

[Kayzmum]

I've spent about an hour this morning dealing with website sign-on issues and finding, organizing, scanning and uploading receipts. I've been wondering if it's worth it. Since I know ahead of time I'll meet my yearly deductible with my health insurance company, either way I'll pay the same out-of-pocket cost whether it's pre-tax dollars or not. Is there anything I'm missing here?

 

[GenXguy]

I've spent about an hour this morning dealing with website sign-on issues and finding, organizing, scanning and uploading receipts. I've been wondering if it's worth it. Since I know ahead of time I'll meet my yearly deductible with my health insurance company, either way I'll pay the same out-of-pocket cost whether it's pre-tax dollars or not. Is there anything I'm missing here?

I do this as well. I rather pay with those pre-tax dollars than after-tax dollars. That's the whole point - saving money, so you're not paying income taxes on the income used to pay for healthcare expenses funded from your flex account. It's about a 35% savings for me.

 

[disneysteve]

either way I'll pay the same out-of-pocket cost whether it's pre-tax dollars or not. Is there anything I'm missing here?

With the FSA, you get to pay with pre-tax dollars, so you save on taxes on that money. That's the benefit of the FSA (or HSA for those who have that option).

 

[RunningBum]

Whether you use all of your deductible or not is irrelevant. Consider the amount you put in your FSA in a year. If you have an FSA, that amount is not taxed. If you don't have an FSA, that amount is taxed. So go back to your 2021 taxes and add the amount you put in your FSA as income and see how much more you pay in taxes. That's where you see the difference. Is that enough for you to make it worthwhile for one hour of work?

Of course you want to make sure you use all of your FSA, unless it can be rolled over to the next year. I'm not current on FSA rules.

To help with the struggles you are having, get more organized. Put all eligible receipts in a folder so you don't have to search for them. Use a password manager for login issues, if this was the problem.

 

[pb4uski]

I've spent about an hour this morning dealing with website sign-on issues and finding, organizing, scanning and uploading receipts. I've been wondering if it's worth it. Since I know ahead of time I'll meet my yearly deductible with my health insurance company, either way I'll pay the same out-of-pocket cost whether it's pre-tax dollars or not. Is there anything I'm missing here?

As others have said, the benefit is not paying taxes on that money. So if you know that you'll spend $10k and you are in the 22% tax bracket then you'll save $2,200... and perhaps more if you are subject to state income taxes.

 

[Rianne]

While on ACA contributing to the HSA kept our MAGI down. We'll be on Medicare this year so we won't contribute anymore. There's enough in the HSA to cover major dental, and vision issues in the future.

 

[qwerty3656]

So I have an HSA and keep receipts in a file, but isn't that just if you get audited? I'm not uploading receipts anywhere?

 

[pacergal]

We only had a yearly use it or lose it FSA option at work, but it was still pre tax money, so worth it. At the time we had two kids at home. I always just averaged our previous two years medical expenses and had that put in.
Always used up the FSA by the end of the year, if not, then the month of December was time to refill qualified OTC meds/bandaids, etc.
I just sent in copies of EOBs and receipts each month for reimbiursement during the year.

 

[FindingForward]

participated for several years, but it was a limited FSA - just dental and vision. Way more trouble than it was worth and won't do it again next year. A lot depends upon how customer-friendly and efficient your HSA administrator is. Ours was terrible. Wasted a lot of time resubmitting claims and waiting on hold to fix payments that were wrongfully denied.

 

[euro]

Back at megacorp, the max you could fund FSA was $3000. Give or take, that amounted to a tax saving of close to $1000. So the question was: is whatever paperwork that is required worth $1000. In all my years at megacorp, the answer always was a resounding "yes". I typically just tossed any FSA related receipts into a box and then, at the end of the year, I submitted everything together with one simple form. Maybe 30 minutes' worth of work for $1000. I made good money in my job, but not $2000/hour.......so: yeah, worth it!

 

[Peter]

So I have an HSA and keep receipts in a file, but isn't that just if you get audited? I'm not uploading receipts anywhere?

My question as well.

 

[pb4uski]

So I have an HSA and keep receipts in a file, but isn't that just if you get audited? I'm not uploading receipts anywhere?

My question as well.

The receipts are to support that your withdrawals were for qualified medical expenses. So let's say that after 10 years with an HSA you have $20k of receipts for qualified medical expenses. You can take $20k out tax free and put the receipts and the withdrawal document in a file in case the IRS audits your return for the year that you made the withdrawal as documentation for your representing that you had $20k of qualified medical expenses on your Form 8889, line 15 for that year.

If you don't file a Form 8889 to do that then they send you a nice letter asking about it... ask me how I know.

 

[ScoopKona]

We have to upload receipts when we file.

I dislike this chore.

And we've also had a couple years where it was "glasses all around" to eat up the last of our fund.

 

[Peter]

The receipts are to support that your withdrawals were for qualified medical expenses. So let's say that after 10 years with an HSA you have $20k of receipts for qualified medical expenses. You can take $20k out tax free and put the receipts and the withdrawal document in a file in case the IRS audits your return for the year that you made the withdrawal as documentation for your representing that you had $20k of qualified medical expenses on your Form 8889, line 15 for that year.

If you don't file a Form 8889 to do that then they send you a nice letter asking about it... ask me how I know.

Oh, I see. When I had an HSA I used it to pay current medical expenses. All I had to do was check the 1099-SA box that says the withdrawals were to pay qualified medical expenses. The only situation where I would have to provide documentation would be an audit.

 

[qwerty3656]

We have to upload receipts when we file.

Who are you uploading receipts to? Not the IRS, not Fidelity?

 

[travelover]

An HSA and a FSA are similar but different. Generally FSA funds have to be used in the year they are designated for, HSAs carry on. Depending on the administrator, HSAs can require documentation for each withdrawal (PITA), or you can be responsible for receipts if you get audited.

 

[Northforker]

correct me if I'm wrong but I think you can also invest the cash in your hsa and any gains are tax free?

 

[Rianne]

I pay most of our medical/prescriptions out of the checking acct. and don't bother with the HSA. I'd rather use it for large expenses when needed. Once on Medicare, for any expensive dental, or vision I'll use the HSA. Right now, I know it's there if we need to cover our deductible if something major happens.

I used to fiddle with small expenses and decided to stop. It's cumbersome and annoying, not worth it. I think of it as a rainy day fund like, oh sh-t I need a root canal and 3 crowns type of thing. Then the receipts are easy to keep and verify rather than keeping a bunch of small medical receipts.

 

[travelover]

correct me if I'm wrong but I think you can also invest the cash in your hsa and any gains are tax free?

Yes, this is correct.

 

[euro]

I pay most of our medical/prescriptions out of the checking acct. and don't bother with the HSA. I'd rather use it for large expenses when needed. Once on Medicare, for any expensive dental, or vision I'll use the HSA. Right now, I know it's there if we need to cover our deductible if something major happens.

I used to fiddle with small expenses and decided to stop. It's cumbersome and annoying, not worth it. I think of it as a rainy day fund like, oh sh-t I need a root canal and 3 crowns type of thing. Then the receipts are easy to keep and verify rather than keeping a bunch of small medical receipts.

Yes, that's the best way to use an HSA, I agree. However, the OP was about FlexSpendingAccounts which have to be used up each year and can't accumulate longterm.

 

[Rianne]

Yes, that's the best way to use an HSA, I agree. However, the OP was about FlexSpendingAccounts which have to be used up each year and can't accumulate longterm.

Oh right. HSA and FSA somehow got mixed up in the thread.

 

[Kayzmum]

I do this as well. I rather pay with those pre-tax dollars than after-tax dollars. That's the whole point - saving money, so you're not paying income taxes on the income used to pay for healthcare expenses funded from your flex account. It's about a 35% savings for me.

I see. Thanks for reminding me it's pre-tax dollars. I was very frustrated this morning.

 

[Aiming_4_55]

I think it's worth it, since it's pre-tax dollars. I try to max out both FSA and HSA accounts. FSA has to be used that year and HSA can be long term hold/ invested.

I would not bother with a FSA if it's $100 or $200 per year, so depends on your use.

We are a family of 4, 3 out of 4 wear glasses/contacts along with typical dental needs. With a $2850 2022 contribution cap, consider your Federal and State taxes savings, my family saves over $1k per year.

I generally submit once a year after a few large bills. With our luck, we spend the $2850 pretty easily, crown, braces, contacts... 2 - 4 receipts and a form.

 

[ncbill]

We just use the debit card provided by our HSA...don't keep track other than that.

Back when we had a FSA once reimbursed we kept no records.

 

[badatmath]

I stopped using the FSA when they started giving me an HRA. (Not an HSAo). But it is basically the employer paying for it instead of me.