Overview Examples of eligible expenses
Enrolling in the HFSA Questions & Answers
How to file a claim SMART employees
Resouces HFSA worksheet

 

Healthcare Flexible Spending Account Highlights

A SMART way to stay within your game plan
We all work with a financial game plan. The Healthcare Flexible Spending Account allows you to stretch your budget further. The HFSA is a voluntary pretax benefit plan that allows you to set aside money from your paycheck to be used to pay the out-of-pocket medical, prescription, dental and vision expenses that you and your dependents incur. The money you contribute to the HFSA comes out of your paycheck before taxes, and you do not pay taxes on the reimbursements you receive for qualified health-care expenses. This means you get more bang for your buck.

Insider Tip

Because you never pay taxes on this money, you can save up to 35 percent in federal taxes on the amount that you put into your HFSA. The amount you save will vary depending upon your individual income-tax bracket. See Example of Tax Savings.

What expenses are reimbursable?

  • Copayments, coinsurance and insurance deductibles for medical, dental and vision services
  • Copayments, coinsurance and insurance deductibles for prescriptions
  • Prescription and over-the-counter drugs not covered in the medical plan
  • Orthodontia and dental expenses
  • Eye glasses, contact lenses and contact-lens solution
  • Items and services that you can deduct from your income tax, according to Internal Revenue Code 213
  • And many more. See an expanded list of eligible items.
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Why should I play this game?
The game of life can get rough sometimes. If you’re like most of us, you and your family will have health-care expenses in the next 12 months. Your medical and dental plans will pay the majority of those expenses. But what about the part that isn’t covered, like copayments? Your HFSA will reimburse you for those expenses and may help you save tax dollars on these out-of-pocket expenses.


How does this work?
Determine how much money you want to contribute to your account for the plan year, which runs May 1 - April 30.

  1. This amount is then deducted in 24 equal deductions from your paychecks BEFORE taxes are calculated.
  2. The per-pay-period deduction is credited to your personal reimbursement account.
  3. When you incur eligible expenses during the plan year, you submit claims to FLEXONE.
  4. FLEXONE processes each claim for reimbursement.
  5. You are eligible to receive reimbursement for claims submitted, even if you have not yet contributed the amount of the claim.
  6. FLEXONE will reimburse you via mail or direct deposit. After you have incurred claims equal to your annual election, FLEXONE will no longer pay claims.
  7. You have until July 29, 2010, to file claims that were incurred during the previous plan year.
  8. If you do not incur any claim expenses that equal your full elected amount, the balance in your account is forfeited. Similarly, if you are reimbursed for eligible expenses and leave the city before contributing the full elected amount, the city cannot seek reimbursement from you.
  9. At the end of the calendar year, your W-2 will reflect a lower taxable income. That’s when you really feel SMART!
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Who can play this game?
Any employee who is eligible for city benefits is eligible to participate in the HFSA. You do not have to be enrolled in the city’s medical or dental plans.

Why is HFSA a SMART play?
In the example below, you earn $35,000 per year as a single person, and you decide to put $500 into the HFSA to pay for medical and prescription copayments that you know you will incur in the next 12 months. You can save $125 by lowering your taxable income.

Without the HFSA, you pay taxes on every dollar you earn, and then you pay for medical expenses. With the HFSA, you can set aside a portion of each paycheck for medical expenses. This amount is deducted from your paycheck before taxes are calculated, so the taxes you owe should decrease. In other words, you won’t pay taxes on the money you spend on qualified out-of-pocket medical expenses through this plan!


Annual tax savings example*
 
With HFSA
Without HFSA
If your taxable income is:
$35,000
$35,000
And you deposit this annual amount into an HFSA:
-$500
-$0
Your taxable income is now:
$34,500
$35,000
Subtract federal and Social Security taxes:
-$4,806
-$4,931
If you spend after-tax dollars for eligible expenses:
-$0
-$500
Your net take-home pay is:
$29,694
$29,569
Your tax savings with an HFSA is: $125

* This example is for illustration only and assumes a combined tax rate (income, FICA, Medicare) of 25 percent. Your personal tax situation may differ. Check with your tax advisor to see how much the HFSA will benefit you.

How much can I put in my HFSA?
If you decide to participate in the HFSA, you may contribute from $240 to $2,000 per year. During open enrollment, you will estimate next year’s medical expenses and elect the amount you wish to put into in the HFSA.

If you decide to put $240 into your HFSA, $10 will be deducted from your paycheck for 24 paychecks from May through April. A $500 annual contribution is $20.83 from each paycheck.


 
 
 
 
 
 

Employee Guide | Retiree Guide | HFSA (SMART) Guide | Home | Mayor's Letter
Enrollment Materials | Important Dates | Contacts

 

If there exists a conflict between this Enrollment Guide Website and the official plan documents for each plan, the official plan documents will prevail. The city of Houston reserves the right to change, modify, increase or terminate any benefits.