Tuesday, March 13, 2007
It's been saving my behind
With the coming of the baby and all the doctor's visits, copays and other medical expenses are racking up. Twenty dollars here, ten there can really add up. And there's nothing better than getting a bill in the mail saying your insurance company didn't cover the last $5.86.
Thank goodness that when annual benefit enrollment rolled around for 2007 I enrolled in our Health Care Spending Account. For those of you not familiar with this, it can be a bit overwhelming. I know it was when I first thought about enrolling and I'm glad I sat down and researched it a little bit.
This plan takes money out of your paycheck each pay period BEFORE taxes for you to use for your medical expenses. As you may know, medical expenses are tax deductible when you file your taxes each year, but it must be a certain percentage of your income to be tax deductible. This plan allows any money you want to put back to be tax free!! In our plan all you have to do is contribute at least $120 a year but no more than $15,000. It's a great plan and if your job has it, snatch it up. Even if you don't have a lot of medical expenses, it does pay for over the counter medicine and you can always stock up on it should you have money left over at the end of the year.
Now let me explain why this is the most awesome plan ever if you are somewhat of a hypochondriac or you always seem to end up in the hospital or in our case, have a baby on the way. I can't speak for every plan that is similar to this, but with ours you get a pre-filled debit card at the first of the year. I like to view not as a debit card but a zero-percent APR CREDIT card.
When enrolling for the plan you designate how much you would like to contribute to the acount for the year. Personally I chose $1,200 or $50 a paycheck. Now if I needed to and had an absolute medical emergency in January, I would have had a $1,200 "credit" card with me and could have paid for the medical expenses right then and there. The downside to that is that I couldn't have used it for the rest of the year. Now if this was a true credit card, I would have had to make a $1,200 purchase and then make monthly payments on it with interest added on. But since I have the money coming out of my paycheck, I am making $50 tax-free, interest-free payments twice a month.
Now a downside to this plan is that you can't change the amount you want going to the plan unless you have a change in status in your life, which is a marriage, death, divorce, birth of a child. So you do have to be wise to how much you think you may need for the year. When I first enrolled and came to the conclusion that I would need to put $1,200 away a year for medical expenses, I thought I was a little bit crazy to do that. But I also knew that if I didn't use all of it, I could send in receipts for my wife's braces and get a check back in the mail for that amount. So with us getting married in Febuary, I called back in to tell them about my change of status and upped the amount to $3,000 for the year. This is going to up my contribution from $50 a check to about $144 or $288 a month. I will probably be like where'd all my money go when I see my check with that money missing from my net income line. The great thing about this is that I've already sent in receipts for 2 braces payments and should be receiving a check in the mail soon. That check will be used to pay down some debt. And I can't wait!!
Thank goodness that when annual benefit enrollment rolled around for 2007 I enrolled in our Health Care Spending Account. For those of you not familiar with this, it can be a bit overwhelming. I know it was when I first thought about enrolling and I'm glad I sat down and researched it a little bit.
This plan takes money out of your paycheck each pay period BEFORE taxes for you to use for your medical expenses. As you may know, medical expenses are tax deductible when you file your taxes each year, but it must be a certain percentage of your income to be tax deductible. This plan allows any money you want to put back to be tax free!! In our plan all you have to do is contribute at least $120 a year but no more than $15,000. It's a great plan and if your job has it, snatch it up. Even if you don't have a lot of medical expenses, it does pay for over the counter medicine and you can always stock up on it should you have money left over at the end of the year.
Now let me explain why this is the most awesome plan ever if you are somewhat of a hypochondriac or you always seem to end up in the hospital or in our case, have a baby on the way. I can't speak for every plan that is similar to this, but with ours you get a pre-filled debit card at the first of the year. I like to view not as a debit card but a zero-percent APR CREDIT card.
When enrolling for the plan you designate how much you would like to contribute to the acount for the year. Personally I chose $1,200 or $50 a paycheck. Now if I needed to and had an absolute medical emergency in January, I would have had a $1,200 "credit" card with me and could have paid for the medical expenses right then and there. The downside to that is that I couldn't have used it for the rest of the year. Now if this was a true credit card, I would have had to make a $1,200 purchase and then make monthly payments on it with interest added on. But since I have the money coming out of my paycheck, I am making $50 tax-free, interest-free payments twice a month.
Now a downside to this plan is that you can't change the amount you want going to the plan unless you have a change in status in your life, which is a marriage, death, divorce, birth of a child. So you do have to be wise to how much you think you may need for the year. When I first enrolled and came to the conclusion that I would need to put $1,200 away a year for medical expenses, I thought I was a little bit crazy to do that. But I also knew that if I didn't use all of it, I could send in receipts for my wife's braces and get a check back in the mail for that amount. So with us getting married in Febuary, I called back in to tell them about my change of status and upped the amount to $3,000 for the year. This is going to up my contribution from $50 a check to about $144 or $288 a month. I will probably be like where'd all my money go when I see my check with that money missing from my net income line. The great thing about this is that I've already sent in receipts for 2 braces payments and should be receiving a check in the mail soon. That check will be used to pay down some debt. And I can't wait!!
Labels: benefits, debit vs credit, HCSA, health
Comments:
Links to this post:
<< Home
First, thanks for posting about the HSA. My mother uses hers, and likes it although she says it is a paperwork nightmare. I have HSA available through my company, but haven't gone that route...yet.
Second, I wanted to say this is the first time I've seen your blog, and I've skimmed all your previous posts. Nice job!
Post a Comment
Second, I wanted to say this is the first time I've seen your blog, and I've skimmed all your previous posts. Nice job!
Links to this post:
<< Home
Subscribe to Posts [Atom]
