Colonial Group provides different tax-advantaged accounts to help you save, including one Health Savings Account (HSA) and three different Flexible Spending Accounts (FSA). The money you contribute comes out of your paycheck without being taxed, and you withdraw it tax-free when you pay for eligible expenses.
Which account is right for you?
Health Savings Account (HSA)
A Health Savings Account (HSA) is a way for you to save pre-tax dollars that can be used to pay for qualified healthcare expenses like deductibles, copays, co-insurance, prescriptions, vision, and dental expenses. They are paired with high deductible health plans that have lower premiums and may result in lower annual medical costs. These plans offer several advantages to reward you for taking an active role in your healthcare spending.
Healthcare FSA
Allows you to use pre-tax dollars for qualified medical, Rx, dental, and vision expenses, such as deductibles, copayments, and other healthcare costs. You are not eligible for this account if you are contributing to an HSA.
Limited Purpose FSA (LPFSA)
This account is offered alongside a Health Savings Account (HSA) and can only be used for certain expenses, typically dental and vision healthcare costs. It allows you to maximize your tax advantages while having an HSA.
Dependent Care FSA (DCFSA)
Allows you to use pre-tax dollars to pay for qualified day care expenses for children younger than age 13 and adult dependents who are incapable of caring for themselves. Typical eligible expenses include adult day care facilities, application fees for daycare, babysitting (work-related), extended care (before or after regular school hours), late pickup fees for daycare, licensed nursery schools and preschool tuition.
What are Qualified Medical Expenses?
A full description of qualified HSA and FSA expenditures can be found in IRS Publication 502 and is located online at www.irs.gov/pub/irs-pdf/p502.pdf
Health Savings Account (HSA)
The HSA is not for everyone. You’re eligible only if you are:
- Enrolled in our the New High Deductible Health Plan (HDHP)
- Not enrolled in other non-HDHP medical coverage, including Medicare, Medicaid, or Tricare.
- Not a tax dependent.
- Not enrolled in a healthcare Flexible Spending Account (FSA), unless it’s a “limited purpose” FSA for dental and vision expenses.
- Cannot be a veteran who has received treatment, other than preventive care, through the Department of Veterans Affairs within the past three months
A Health Savings Account (HSA) is an easy way to pay for healthcare expenses that you have today and save for expenses you may have in the future.
How the Consumer Driven Health Plan with HSA works
Employees must be enrolled in the HSA account offered by Colonial Group to receive the Colonial Group contribution. New hires will receive a pro-rated upfront contribution and additional pro-rated matches throughout the year. Colonial Group’s annual contribution to your Health Savings Account:
Four Reasons to love an HSA
1
Tax-free. No federal tax on contributions, or state tax in most states. Withdrawals are also tax-free as long as they’re for eligible healthcare expenses.
2
No “use it or lose it.” Your balance rolls over from year to year. You own the account and can continue to use it even if you change medical plans or leave the company.
3
Use it now or later. Use your HSA for healthcare expenses you have today or save it to use in the future.
4
Boosts retirement savings. After you retire, you can use your HSA for healthcare expenses tax-free, or for regular living expenses, taxable but no penalties.
HSAs and Taxes
All withdrawals from your HSA are generally tax-free, as long as you use the money to pay for eligible health care expenses. In addition, all the money in the account is yours and will never be forfeited. It rolls over from year to year, and you can take it with you if you leave the company or retire. After age 65, you can withdraw funds for any reason without a tax penalty - you pay ordinary income tax only if the withdrawal isn’t for eligible health care expenses.
Note: You won’t pay federal taxes on HSA contributions. However, you may pay state taxes depending on your residence. Consult your tax advisor to learn more.
Flexible Spending Account (FSA)
You don’t have to enroll in one of our medical plans to participate in the healthcare FSA. However, if you or your spouse are enrolled in the New HDHP health plan, you can only participate in the “limited purpose” FSA for dental and vision expenses.
Set aside healthcare dollars for the coming year
A healthcare FSA allows you to set aside tax-free money to pay for healthcare expenses you expect to have over the coming year
How Health Care FSA works:
- You estimate what you and your family’s out-of-pocket costs will be for the coming year. Eligible expenses include office visits, surgery, dental and vision expenses, prescriptions, even eligible drugstore items.
- You can contribute up to $3,200, the annual limit set by the IRS. Contributions are deducted from your pay pretax, meaning no federal or state tax on that amount.
- During the year, you can use your FSA debit card to pay for services and products. Withdrawals are tax-free as long as they’re for eligible healthcare expenses.
Pro tip: Maximize tax savings by using the Limited Purpose FSA for known dental and vision expenses, and save your HSA or Health Care FSA dollars for medical expenses only.
Use It or Lose It
Flexible Spending Accounts are a great way to save money because your eligible expenses are paid using tax-free dollars. You don’t pay federal, FICA or most state income taxes on contributions you make to the FSA. If the amount you contribute for the year exceeds your eligible expenses for that year, you forfeit the remaining balance. However, you may carryover unused funds up to $660 per year.
Dependent Care FSA
Dependent Care FSA—up to $5,000 per year tax-free
A dependent care Flexible Spending Account (FSA) can help families save potentially hundreds of dollars per year on day care.
Here's how the Dependent FSA works
You set aside money from your paycheck, before taxes, to pay for work-related day care expenses. Eligible expenses include not only child care, but also before and after school care programs, preschool, and summer day camp for children under age 13. The account can also be used for day care for a spouse or other adult dependent who lives with you and is physically or mentally incapable of self-care.
You can set aside up to $5,000 per household per year. You can pay your dependent care provider directly from your FSA account, or you can submit claims to get reimbursed for eligible dependent care expenses you pay out of pocket.
NOTE: If HSA or FSA money is used for ineligible expenses, you will pay ordinary income tax on the amount withdrawn plus a 20% penalty tax if you withdraw before age 65. After age 65, withdrawals for ineligible expenses are only subject to ordinary income tax. For a list of eligible FSA and HSA expenses, see IRS Publications 502 and 503.
