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 Planning Ahead for Future Health Care Needs For many people, the time to make the decision about provisions for health care is drawing near. And the Health Care Reimbursement Account may be one of the options open to you. If you haven’t thought about setting aside part of your income in a Health Care Reimbursement Account, this might be a good time to consider the idea. This account allows you to set aside before-tax money from your paycheck to pay for eligible health care expenses that are not covered by your other medical, dental or vision care plans. Because of Internal Revenue Service regulations, the money you contribute to a Health Care Reimbursement Account is not taxed when it is credited to your account or when it is distributed to you as a reimbursement. But establishing a Health Care Reimbursement Account takes some careful thought and preparation. Here are the key steps in the process: Find out if your employer makes it available: Not all employers include the administration of a Health Care Reimbursement Account as part of their employee benefits programs. It is fairly complicated, and involves some changes in your payroll deductions. So, your first step should be to call your benefits department to see if Health Care Reimbursement is available where you work. Find out if you qualify to participate: Employers typically judge your eligibility for different benefits, using such guidelines as hours worked each week, length of service, whether you are a contract employee or a staff member. Ask your benefits person about your eligibility. Find out which of your anticipated health care expenses are already covered: Before you begin to estimate the amount you will contribute to a Health Care Reimbursement Account, you should review existing plans to determine what your insurance already covers, because you will be drawing down this account only to pay for eligible expenses that are not covered under your insurance plans. It can also be used to reimburse you for any deductibles and co-payments for which you are responsible under your primary plan. General information on medical expenses is found in the IRS Tax Publication #502. Be aware that some expenses are not reimbursable: Examples include cosmetic surgery, expenses for which you are covered by another plan, premiums for other health care plans or other coverage such as long-term care plans. Decide how much to set aside: Now you must estimate the amount of expenses you expect to have during the coming year. It is very important that you estimate them carefully, because the Internal Revenue Service requires that any unused amounts must be forfeited. That means that, unless you use the money you set aside, you will lose it. The wisest approach is to look at last year’s expenditures to see the ones that may be repeated, consider any one-time needs (such as orthodontia) and to try to underestimate rather than overestimate the total to put in the account. August 16, 2001
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