FLEX

How A Medical Reimbursement Account Works

A Medical Reimbursement Account works very much like a savings account except, instead of earning interest, you save taxes on the contributions you make. Your tax savings will be immediately reflected in your paycheck. The less taxes you pay … the more money you take home!

How Your Medical Reimbursement Account Saves You Money

For example, let's assume that you expect to have $500 in various medical, dental and vision expenses during the year. Let's also assume that you are in a 15% tax bracket and pay 7.65% in FICA taxes. If you elected to contribute $500 to your Medical Reimbursement Account, your tax savings would be 22.65% of $500 or $113.25! If you are in a higher tax bracket, your savings would be even greater! (*Actual tax savings will vary by individual.)

Your Medical Reimbursement Account Is For Your Entire Family

You can use your Medical Reimbursement Account for eligible expenses incurred by you, your spouse or any dependent. There is no requirement that you have your insurance coverage through your employer to establish an Account, and you can take advantage of the Account even if you, your spouse or your dependents are covered under insurance elsewhere. This means you can set funds aside tax-free for deductibles or copayments that your spouse or dependents may incur.

What Kind of Expenses Are Eligible

A wide range of expenses are eligible for reimbursement from your Medical Reimbursement Account. A few examples include expenses that are applied to a deductible or coinsurance, copayments, and prescription copayments. Other expenses that would qualify include physicals, prescription eyeglasses, contact lenses (including disposable contacts and saline solution), dental exams, chiropractors, prescriptions, and expenses that may not be covered by insurance because of a pre-existing condition or for which you have no insurance.

Medically necessary orthodontia expenses are also reimbursable, however, certain restrictions apply on how you can be reimbursed for these expenses. Generally, reimbursement of orthodontic expenses must be pro-rated over the course of the treatment plan. This means that even though you may pay the orthodontia fee at the beginning of the treatment, or pay the orthodontist on a quarterly or semi-annual basis, you cannot be reimbursed an amount greater than the actual number of treatments received during the Plan Year. For more information on the special rules that apply toward orthodontia expenses, please call EBS/Atlanta at 1-800-647-3709.

Are over-the-counter drugs eligible for reimbursement?

Generally not. However, if you obtain a prescription from your physician for an over-the-counter medicine this item may be eligible.

What Kind of Expenses Are Not Eligible

While the vast majority of medical, dental and vision expenses qualify for tax-free reimbursement, there are nevertheless some expenses that do not qualify. To be eligible for reimbursement, an expense must be "medically necessary". Expenses for solely cosmetic reasons generally are not considered expenses for medical care and therefore are not reimbursable. Also, expenses that are merely beneficial to an individual's general health do not qualify for reimbursement. Examples of expenses not eligible for reimbursement include vacations, weight loss programs, over-the-counter items, or drugs that do not require a prescription to be dispensed (with the exception of insulin). Always check with EBS/Atlanta regarding whether a specific expense qualifies for reimbursement before you elect to contribute to a Medical Reimbursement Account.

An Important Message About Insurance Premiums

While your Medical Reimbursement Account can reimburse you for many expenses not covered by insurance, federal regulations prohibit any insurance premium from being reimbursed through a Medical Reimbursement Account. You should not include any insurance premium when considering how much to contribute to your Account. This includes any insurance premium paid by you or your spouse, including the cost of service warranties or replacement insurance for contacts or other similar items. Remember, your Medical Reimbursement Account can reimburse expenses not covered by insurance, but not the cost of the insurance itself.

How To Establish A Medical Reimbursement Account

To establish a Medical Reimbursement Account, you should first decide how much you want to contribute during the Plan Year. The amount you should consider contributing should be no greater than the amount you expect to spend for eligible medical, dental and vision expenses during the Plan Year. To determine the maximum amount you may contribute to your Medical Reimbursement Account, please refer to your Summary Plan Description, Plan Overview, or contact EBS/Atlanta. On your Election Form, you simply check the box stating you want to establish an Account and enter the amount you want to contribute. Your contributions will be set aside each pay period and credited to your Medical Reimbursement Account. All contributions are made before your federal income taxes, state income taxes, and FICA taxes are calculated.

How To Receive Reimbursement From Your Account

As you incur an eligible expense during the Plan Year, you reimburse yourself by making a withdrawal from your Medical Reimbursement Account. To receive reimbursement, you first complete a special request from that will be supplied to you and attach a copy of the Explanation of Benefits (EOB) statement that you receive from your insurance carrier. This means that you will need to submit the expense to the insurance company before you make a claim for reimbursement. If you or your family are covered under a Health Maintenance Organization (HMO), you will need to attach a copy of the statement that you receive from your HMO provider. For reimbursement of prescriptions, you would attach a copy of the tax receipt you receive at the time your prescription is filled which shows the cost of the drug or the prescription copay you paid. If you do not have insurance coverage for the medical, dental or vision expense, simply attach a copy of the itemized statement that you receive from the doctor, dentist or other provider. The important thing to remember is that the documentation must show the provider's name, address and telephone number, the date the service was provided, the nature of the service provided, for whom the service was provided, and the cost of the service. Since all reimbursements made to you are free of income and FICA taxes, it's like getting a discount on your health-related expenses so you don't have to earn as much to pay for them!

What Affect Would My Flexible Benefit Contributions Have On Future Social Security Benefits?

Since contributions to a Flexible Benefit Plan lower annual earnings against which Social Security deductions or employer contributions are made, there is a valid concern that participation in these plans would result in reduced Social Security benefits at retirement.

For a person born after 1928, the Social Security benefits are calculated using a 35-year average of earnings. A reduction of $2,000 a year or even $5,000 a year over some portion of this 35-year span would have little effect on the average salary and, therefore, minimal impact on the Social Security benefits.

The Social Security Administration has provided the U.S. Division of Pensions and Benefits with an example of an employee who retired in 1998 at age 65 whose wages had been at the maximum wages subject to Social Security deductions. Upon retirement, this individual's monthly Social Security allowance was $1,343. If that same person had been contributing $2,000 a year for the last 10 years to a Flexible Benefits Plan, the subsequent reduction in Social Security wages would have produced a monthly Social Security allowance of $1,335, a difference of less than $10 per month.

In contrast, that person's $2,000 a year contribution to a Flexible Benefits Plan would have yielded a $63 per month tax savings."