What Does A Flexible Spending Arrangement Mean For Health Insurance?

By Robert Fredricks Posted in Health Insurance News

Three Types Of Accounts

It sometimes arises that a person who has health insurance will incur a charge for health care that is not normally covered by their health insurance policy. For individuals who are part of group rates through their employer, different types of accounts are often set up to help with these types of health care charges. The three types of accounts are flexible spending arrangement, health reimbursement arrangements, and medical savings accounts.

A Flexible Spending Arrangement Is One Of Three Types Of Accounts In Place To Help Pay For Uncovered Health Expenses

A flexible spending arrangement for health insurance is a system set up by your employer that allows you access to funds, and will reimburse certain specified medical expenses that you are charged that are not covered under your health insurance policy. These types of plans are also known as cafeteria plans or 125 plans because they are mentioned in section 125 of the International Revenue Code.

Employers Set Up Flexible Spending Accounts To Accumulate Funds For Medical Care

With these types of plans, your employer will remove a predetermined amount of money from each of your paychecks and put it into the company’s flexible spending account. Often times employers will add money to the account as well or match the amount of funds added by the employees. The funds removed from your paycheck are not subject to either income tax nor social security tax.

Many companies will place limits of between $2,000 and $3,000 that each employees can contribute to the flexible spending account each year. It is important to know that once the amount of money to be removed for the employee’s salary is determined during the enrollment period he or she cannot change the amount until the next year. Further, the employee can not stop participating in the plan or stop having funds removed for that year. The only way around these two restrictions is if the employee experiences a major change in his or her family status. At the end of the year any funds left in the account that were not used by the employee are no longer available to the employee and are therefore lost.

Related posts:

  1. What Is A Health Reimbursement Arrangement For Health Insurance?
  2. What Is A Health Savings Account For Health Insurance Coverage?
  3. What Is A Health Care Savings Account?
  4. Do Health Savings Accounts Really Save Money?
  5. What Are Archer Medical Savings Accounts For A Health Insurance Policy?

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