Horizon MyWay FSA
Unreimbursed Medical and Dependent Care Spending Accounts are a tax-advantaged way to pay for out-of-pocket health care expenses, and work-related daycare expenses. This benefit allows you to reimburse yourself for eligible expenses with “pre-tax” dollars, which means that you get a tax deduction for these expenses before you ever file your tax return. You don’t pay federal income or Social Security taxes on this money and, in most states, you don’t pay state taxes either.*
Authorized by the IRS, these accounts let you set aside money from your salary before taxes are withheld. As you incur health care expenses or daycare expenses throughout the year, you submit a claim for those expenses, and are reimbursed with tax-free dollars from your account(s).
- The Unreimbursed Medical Spending Account reimburses you for out-of-pocket health care expenses for medical, dental, vision, or hearing expenses.
- The Dependent Care Spending Account reimburses you for dependent daycare expenses you incur in order to allow you (or you and your spouse) to work.
- When you use these accounts, your taxable income is reduced, therefore you will pay less in income taxes.
How The Accounts Work
You decide during the annual open enrollment period to elect in the Unreimbursed Medical and/or the Dependent Care Spending Account. This is how it works:
- You estimate the amount you will spend on out-of-pocket health care expenses and/or daycare expenses during the year.
- You decide how much you wish to set aside into your Unreimbursed Medical and/or Dependent Care Spending Account.
- The amounts you wish to set aside into your account(s) will be deducted from your paycheck in equal amounts each pay period on a “pre-tax” basis.
- As you receive services and incur health care expenses or daycare expenses throughout the year, you submit a claim for the expenses, and are then reimbursed from your account(s).
- You may file claims as often as you wish—weekly, monthly, etc.
- Any dollars left over in your account at the end of the year are forfeited. Therefore, you should contribute only what you know you will spend on predictable expenses. There is a run-off period (typically 3 months) following the end of the plan year for employees to submit expenses incurred in the previous year.
The Tax Advantage
The advantage of the Flexible Spending Accounts is that you don’t pay federal income or Social Security taxes on this money before it goes into your account, and you don’t owe taxes on it when it is paid out to you. In most states, you don’t pay state taxes either.*
By participating in the Unreimbursed Medical and/or Dependent Care Spending Accounts, you will lower your taxable income, which means less income taxes.
Eligible health care expenses are defined by the IRS as amounts paid for the diagnosis, cure, mitigation or treatment of a disease, and for treatments affecting any part or function of the body. The expenses must be primarily to alleviate a physical or mental defect or illness.
With this definition in mind, we have listed below many of the medical expenses eligible for payment under the Unreimbursed Medical Spending Account, to the extent such expenses are not covered by your medical or dental insurance. This list is not meant to be all-inclusive. Other expenses not specifically mentioned may also qualify (for additional information, please refer to IRS Publication 502 Medical and Dental Expenses, or Section 213 of the Internal Revenue Code).
Dental Services
- Crowns/bridges
- Dental x-rays
- Dentures
- Exams/teeth cleaning
- Extractions
- Fillings
- Gum treatment
- Oral surgery
- Orthodontia/braces
Insurance-Related Items
- Preexisting condition expenses (medical)
- Private hospital room differential
Lab Exams/Tests
- Blood tests
- Cardiographs
- Diagnostic
- Laboratory fees
- Metabolism tests
- Spinal fluid tests
- Urine/stool analyses
- X-rays
Medication
- Eligible over-the-counter drugs with a prescription*
*Effective January 1, 2011, most of these eligible drugs will require a prescription to be reimbursable - Insulin
- Prescribed birth control
- Prescribed vitamins (to treat specific disease & not available over-the-counter)
- Prescription drugs
Obstetric Services
- Mid-wife expenses
- OB/GYN exams
- OB/GYN prepaid maternity fees (reimbursable after date of birth)
- Post-natal treatment
- Pre-natal treatment
- Prescribed pre-natal vitamins
Practitioners
- Allergist
- Chiropractor
- Christian Science
- Dermatologist
- Homeopath
- Naturopath
- Osteopath
- Physician
- Psychiatrist
- Psychologist
Other Medical Treatments/Procedures
- Acupuncture
- Alcoholism (inpatient treatment)
- Bio-feedback therapy (in medically necessary situations)
- Cosmetic surgery (if medically necessary due to a congenital defect)
- Drug addiction
- Hearing exams
- Hospital services
- Infertility
- In-vitro fertilization
- Norplant insertion or removal
- Patterning exercises
- Physical examination (not employment related)
- Physical therapy
- Speech therapy
- Sterilization
- Transplants (includes organ donor)
- Vaccinations/immunizations
- Vasectomy and vasectomy reversal
- Well baby care
Other Medical Equipment, Supplies and Services
- Abdominal/back supports
- Ambulance services
- Arches/orthopedic shoes
- Contraceptives, prescribed
- Counseling
- Crutches
- Guide dog (for visually/hearing impaired person)
- Hearing aids & batteries
- Hospital bed
- Learning disability (special school/teacher)
- Lead paint (if not capital expense, and incurred for a child poisoned)
- Medic alert bracelet or necklace
- Oxygen equipment
- Prescribed medical and exercise equipment
- Prosthesis
- Splints/casts
- Support hose (if medically necessary)
- Syringes
- Transportation expenses (essential to medical care)
- Tuition fee at special school for disabled child
- Wheelchair
- Wigs (hair loss due to disease)
Vision Services
- Artificial eyes
- Contact lenses
- Contact lens solution
- Eye examinations
- Eyeglasses
- Laser eye surgeries
- Ophthalmologist
- Optometrist
- Prescription sunglasses
- Radial keratotomy/LASIK
The IRS does not allow the following expenses to be reimbursed under the Unreimbursed Medical Spending Account. Expenses to promote general health are not eligible expenses unless prescribed by a physician for a specific medical ailment. This is not an all-inclusive listing.
- Baby-sitting & child care
- Canceled appointment fees
- Contact lens insurance
- Cosmetic surgery/procedures
- Dancing/exercise programs
- Diaper service
- Discounts/write-offs
- Electrolysis
- Eligible over-the-counter medicine without a prescription
- Exercise equipment*
- Eyeglass insurance
- Fitness programs
- Hair loss medication
- Hair transplant
- Health club dues
- Herbs & herbal medicines
- Homeopathic drugs
- Illegal operation or treatment
- Insurance premiums
- Insurance premium interest charge
- Lamaze class
- Marriage counseling
- Massage therapy**
- Maternity clothes
- Personal trainer
- Prescription drug discount program premiums
- Retin A*
- Rogaine*
- Special foods* (cost difference of common product)
- Student health fee
- Supplements*
- Swimming lessons
- Teeth whitening/bleaching
- Toiletries, toothpaste, etc...
- Vision discount program premiums
- Vitamins
- Weight loss programs**
- Swimming lessons
* Generally ineligible; in limited situations, eligible only with Doctor’s certification identifying a qualifying medical diagnosis, medical necessity, and length of treatment program.
** Eligible only with Doctor’s certification identifying the physical nature of the medical condition and length of treatment program. Massage therapy for the sole purpose of tension/stress relief does not qualify as an eligible expense.
*State taxes are not exempt in New Jersey for the Unreimbursed Medical and Dependent Care Spending Accounts. State taxes are not exempt in Pennsylvania for the Dependent Care Spending Account.