Reimbursement Accounts

Medical reimbursement accounts

Even with the best of health care plans, there are certain expenses the plans don't cover. With a Medical Reimbursement Account, you can set aside money from your paycheck to pay for those expenses. The money you set aside is exempt from taxation, so you end up owing less taxes on your income.

For most employees with out-of-pocket medical expenses (i.e., the expenses have not been reimbursed and reimbursement will not be sought from any other source), a reimbursement account offers a better tax break than claiming a deduction for those expenses on your tax return. That's because federal tax law currently allows you to deduct health care premiums and expenses on your income tax form only if your medical expenses for the year exceed 7.5 percent of your adjusted gross income. You would need to have very high out-of-pocket medical expenses and a low taxable income to reach that 7.5 percent level.

This part of the handbook explains the kind of expenses you can pay for with a medical reimbursement account and other important rules of the program. Please read it carefully. Although a reimbursement account is a great way to lower your taxes and save money for certain expenses, you will forfeit any funds left in your account if you don't claim them by the deadline. You can avoid this possibility by following these simple steps:

• Be sure expenses qualify. Once funds have been deducted from your paycheck and credited to your account, you can only claim them if you or an eligible dependent incurs an expense that's reimbursable under the program. An expense is incurred on the date the service is provided, not when it is billed or paid.
• Estimate expenses conservatively. It's better to underestimate costs than overestimate. If you overestimate how much you expect to spend on eligible medical expenses, you'll end up with more money in your account than you can claim for reimbursement. Leftover funds cannot be carried over to the following year.
• Meet the deadline for claims. The deadline to submit claims for expenses incurred in 2011 is June 30, 2012.

 

Medical Reimbursement Accounts

• Medical reimbursement account
• Medical expenses that are reimbursable
• Letter of medical necessity
• Examples of reimbursable medical expenses
• Eligible dependents
• Reminders regarding certain expenses
• Non-reimbursable medical expenses
• Annual limits on medical account deductions
• Estimating your medical deduction amount
• Annual health care expenses worksheet
• If your status changes
• Changes in status ("permitting events")
• Consolidated Omnibus Budget Reconciliation Act (COBRA)

Forms and Publications

• Reimbursement Account Enrollment Authorization - STD 701R - PDF
• FlexElect Reimbursement Claim Form - DPA 351 - PDF
• Premium Only Plan Request for Disenrollment - DPA 006 - PDF
• Letter of Medical Need - ASI - PDF
• Qualified Reservist Distribution (QRD) Request Form - DPA 902 - PDF

• Reimbursement Accounts Handbook - 2011 Plan Year - PDF | 2010 Plan Year

Updated February 16, 2011 at 4:00 PM.