HSA plans & limited use FSA?

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unknownENG
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Joined: Tue Jan 30, 2018 9:59 pm

HSA plans & limited use FSA?

Post by unknownENG »

I've got a question, maybe I'm over thinking this here.

So I've had an HSA for years. I'm doing the "invest it for 30 years" strategy, just keeping a log of all my medical expenses for later reimbursement. I've got a nice large balance fully invested in Vanguard funds.

This year, my employer is offering us a "Limited Use FSA" for vision/dental. It's pre-tax $$ funded via payroll deductions thatis 'use it or lose it' by year end.

I guess my question is...how is this any different than what I'm currently doing? I have a medical expense, I swipe my credit card (and get the miles), log the $$ for later reimbursement, and keep the $$ invested in my HSA.
With the lu-FSA, it seems its the same, except you must reimburse yourself ASAP.

edit:
Limited Use FSA: pre-tax dollars, max $2650, for vision & dental (and other?)
FSA dependent Care: pre-tax dollars, max $2500 for day care, after-school care, summer day camp
- I have 2 kids, so maybe a good way to pay for their pre-k.
Last edited by unknownENG on Thu Oct 31, 2019 10:30 am, edited 1 time in total.
Texanbybirth
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Re: HSA plans & limited use FSA?

Post by Texanbybirth »

The FSA is limited to dental and vision, ie no medical - unlike your HSA, which is good for all three. Your HSA balance follows you for life, or until you spend it. The FSA (mostly, usually) expires each year. (If you sign up for it, you'll get plenty of notices from HR starting in November reminding you to spend down your FSA if you haven't done so.)

(We have an HSA, and we used a Limited FSA last year to pay for my LASIK surgery with pre-tax dollars. We actually had the added bonus that my employer switched plans mid-year and I did not have to pay back the rest of the FSA - like $1000. It was a nice "coupon" for LASIK.)
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
Topic Author
unknownENG
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Re: HSA plans & limited use FSA?

Post by unknownENG »

Texanbybirth wrote: Thu Oct 31, 2019 10:26 am We have an HSA, and we used a Limited FSA last year to pay for my LASIK surgery with pre-tax dollars.
yep, totally get all that, but my question is more about the paying and investing and reimbursing.
Is your HSA $$ fully invested? Do you normally reimburse yourself right away or keep it in the HSA and growing?

At the end of the day (immediately or in 30 years), you're paying for your medical/dental/vision expense w/ pre-tax dollars, right? What is the benefit of paying through the Limited FSA?
Texanbybirth
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Re: HSA plans & limited use FSA?

Post by Texanbybirth »

unknownENG wrote: Thu Oct 31, 2019 10:33 am
Texanbybirth wrote: Thu Oct 31, 2019 10:26 am We have an HSA, and we used a Limited FSA last year to pay for my LASIK surgery with pre-tax dollars.
yep, totally get all that, but my question is more about the paying and investing and reimbursing.
Is your HSA $$ fully invested? Do you normally reimburse yourself right away or keep it in the HSA and growing?

At the end of the day (immediately or in 30 years), you're paying for your medical/dental/vision expense w/ pre-tax dollars, right? What is the benefit of paying through the Limited FSA?
It afforded us $2,500 (I think, roughly) more pre-tax space to pay for stuff.

We make HSA claims immediately upon paying - can't afford to leave it in the HSA. I guess I don't understand how that would change the calculus though.
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
Mako
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Re: HSA plans & limited use FSA?

Post by Mako »

The benefit of paying with a limited FSA is you are paying your bills with pre-tax money. Sure you could pay them with your HSA, but the FSA is use or lose. So it is just an extra pot of pre-tax money you can have, but with more restrictions.

Personally, my HSA money is invested and I mostly don't touch it, sometimes I do. My FSA money is used every year.

Additionally, you may be able to rollover $500 from year to year in the FSA, but I think that is not required and depends on the plan.

Because of the use it or lose it nature, I am afraid to put too much in. I plan on the $500 rollover my plan has, and my only certain dental/vision spending is my wife's contacts. Some years we have no dental spending, sometimes quite a bit, so it is tough to plan (my health ins covers preventative dental like cleanings, some x-rays, so I only pay if we have a problem). For example, last year I rolled over like $400, but this year I already used everything cause wife had a root canal.

Your edit also mentioned dependent care FSA, we use that too, the limit is $5000 for MFJ, but I can't tell from your post if you're married or how you file. Again, this is just another pre-tax pot of money with restrictions, but it lowers my taxable income for something that I need to pay anyway.
Last edited by Mako on Thu Oct 31, 2019 10:47 am, edited 1 time in total.
Topic Author
unknownENG
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Re: HSA plans & limited use FSA?

Post by unknownENG »

Texanbybirth wrote: Thu Oct 31, 2019 10:42 am
It afforded us $2,500 (I think, roughly) more pre-tax space to pay for stuff.

We make HSA claims immediately upon paying - can't afford to leave it in the HSA. I guess I don't understand how that would change the calculus though.


So just a way to get more pre-tax $$ into play?

Regarding your HSA reimbursement...i guess maybe this depends on your bank/administrator? I am using Saturna and have it all fully invested in vanguard funds. No need to reimburse immediately if you have that principle invested and growing.
Texanbybirth
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Re: HSA plans & limited use FSA?

Post by Texanbybirth »

unknownENG wrote: Thu Oct 31, 2019 10:47 am
Texanbybirth wrote: Thu Oct 31, 2019 10:42 am
It afforded us $2,500 (I think, roughly) more pre-tax space to pay for stuff.

We make HSA claims immediately upon paying - can't afford to leave it in the HSA. I guess I don't understand how that would change the calculus though.


So just a way to get more pre-tax $$ into play? That is exactly my thought process. We do not use the LFSA every year, as we now have minimal (<$100) expenses that would be covered by it. I hope that helps answer your question.

Regarding your HSA reimbursement...i guess maybe this depends on your bank/administrator? I am using Saturna and have it all fully invested in vanguard funds. No need to reimburse immediately if you have that principle invested and growing. Yes, I could invest our HSA money. However, I can't afford to cash flow the expenses, ie tie up $7000 a year. :beer
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
Texanbybirth
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Re: HSA plans & limited use FSA?

Post by Texanbybirth »

Based on your edit, yes I would also use the dependent care FSA if you've forecasted the costs for your children's education properly. It's a no-brainer, really.
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
JediMisty
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Re: HSA plans & limited use FSA?

Post by JediMisty »

Mako wrote: Thu Oct 31, 2019 10:45 am The benefit of paying with a limited FSA is you are paying your bills with pre-tax money. Sure you could pay them with your HSA, but the FSA is use or lose. So it is just an extra pot of pre-tax money you can have, but with more restrictions.

Personally, my HSA money is invested and I mostly don't touch it, sometimes I do. My FSA money is used every year.

Additionally, you may be able to rollover $500 from year to year in the FSA, but I think that is not required and depends on the plan.

Because of the use it or lose it nature, I am afraid to put too much in. I plan on the $500 rollover my plan has, and my only certain dental/vision spending is my wife's contacts. Some years we have no dental spending, sometimes quite a bit, so it is tough to plan (my health ins covers preventative dental like cleanings, some x-rays, so I only pay if we have a problem). For example, last year I rolled over like $400, but this year I already used everything cause wife had a root canal.

Your edit also mentioned dependent care FSA, we use that too, the limit is $5000 for MFJ, but I can't tell from your post if you're married or how you file. Again, this is just another pre-tax pot of money with restrictions, but it lowers my taxable income for something that I need to pay anyway.
+1. Exactly: contribute $500 each year for LPFSA for the tax benefit. We're allowed to roll over $500 each year. Once my deductible is covered, you can use the LPFSA for regular expenses, so I do that. So far this year, have only used it for contacts/eye exam not covered by insurance. Because I'm right below the MAGI for Roth contributions, every little bit helps. I max out the HSA and invest that, though I don't have much, yet. AS a NJ resident, my HSA is invested in a Bond fund that isn't taxable as we are one of two states that tax HSA income.
Topic Author
unknownENG
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Re: HSA plans & limited use FSA?

Post by unknownENG »

Mako wrote: Thu Oct 31, 2019 10:45 am The benefit of paying with a limited FSA is you are paying your bills with pre-tax money. Sure you could pay them with your HSA, but the FSA is use or lose. So it is just an extra pot of pre-tax money you can have, but with more restrictions.

Personally, my HSA money is invested and I mostly don't touch it, sometimes I do. My FSA money is used every year.
Likewise for me. My HSA is fully invested in vanguard funds and I'm just keeping a spreadsheet of my medical expenses. I think I've got maybe $17k total in receipts over the last few years that I could reimburse at any time but am choosing to keep it invested.

OK, I think I'm all on board. I guess my final question is if I can pay for the vision/dental service w/ my credit card (to get miles/points) and then reimburse from FSA?
Mako wrote: Thu Oct 31, 2019 10:45 am Your edit also mentioned dependent care FSA, we use that too, the limit is $5000 for MFJ, but I can't tell from your post if you're married or how you file. Again, this is just another pre-tax pot of money with restrictions, but it lowers my taxable income for something that I need to pay anyway.
I'm not sure what MFJ means. :(
yes, married w/ 2 kids. 3 y/o & 1 y/o. We send them to 'school' (day care?) 2 days a week. So I guess I should sign up for the Dependent Care and budget the exact cost of school. For me, the company is saying the income >$125k/yr means Dependent FSA limit of $2500.
Topic Author
unknownENG
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Re: HSA plans & limited use FSA?

Post by unknownENG »

JediMisty wrote: Thu Oct 31, 2019 11:00 am AS a NJ resident, my HSA is invested in a Bond fund that isn't taxable as we are one of two states that tax HSA income.
NJ taxes HSA growth? Doesn't it only count as income if you distribute it out of the HSA account?
Mako
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Re: HSA plans & limited use FSA?

Post by Mako »

unknownENG wrote: Thu Oct 31, 2019 1:04 pm *snip*
OK, I think I'm all on board. I guess my final question is if I can pay for the vision/dental service w/ my credit card (to get miles/points) and then reimburse from FSA?
Mako wrote: Thu Oct 31, 2019 10:45 am Your edit also mentioned dependent care FSA, we use that too, the limit is $5000 for MFJ, but I can't tell from your post if you're married or how you file. Again, this is just another pre-tax pot of money with restrictions, but it lowers my taxable income for something that I need to pay anyway.
I'm not sure what MFJ means. :(
yes, married w/ 2 kids. 3 y/o & 1 y/o. We send them to 'school' (day care?) 2 days a week. So I guess I should sign up for the Dependent Care and budget the exact cost of school. For me, the company is saying the income >$125k/yr means Dependent FSA limit of $2500.
That's what I do, pay for services myself and then get reimbursed from the FSA.

MFJ is married filing jointly. The IRS max for a dependent care FSA is $5000 for married filing jointly, but now that you mention I think companies do not have to go to the max, so if they are saying $2500 that is probably it in your case.
JediMisty
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Re: HSA plans & limited use FSA?

Post by JediMisty »

unknownENG wrote: Thu Oct 31, 2019 1:06 pm
JediMisty wrote: Thu Oct 31, 2019 11:00 am AS a NJ resident, my HSA is invested in a Bond fund that isn't taxable as we are one of two states that tax HSA income.
NJ taxes HSA growth? Doesn't it only count as income if you distribute it out of the HSA account?
Unless you live in NJ or CA. Dividends and interest are taxable in those two states.
index2max
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Re: HSA plans & limited use FSA?

Post by index2max »

I am currently enrolled in a high deductible health plan that comes with an HSA. My state does not tax HSA contributions through payroll deductions. So I get triple tax savings on the way in (federal/state income taxes and FICA).

1. Once you turn age 65, you can take out money from your HSA for any reason, but that you must pay taxes on the money being withdrawn if it’s not for qualified healthcare expenses.

Based on the way the laws are currently written, if I am not paying FICA taxes on HSA payroll deductions, will I eventually have to pay FICA taxes on withdrawals? With a traditional IRA, you don’t pay state income or federal income taxes on the way in, but you will pay them on the way out. Not sure about HSAs.

2. I have read some conflicting information online about whether an LFSA can be used for medical expenses if you already have an HSA.

I am currently paying my medical bills out of pocket from emergency savings to avoid touching my HSA investments. Some information sources online say that an LFSA can be used for medical expenses once the deductible is reached. Others say that LFSAs can never be used for medical expenses.

Once I reach the deductible, can I pull out money from my LFSA to reimburse myself for my out-of-pocket medical expenses that were already paid before hitting the deductible?
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