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Healthcare Reimbursement Account (HRA)
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Perhaps you have health care bills that aren't completely covered by the
medical, hearing, dental, and vision plans, such as deductibles,
co-payments, or special services. If so, health care reimbursement
account can help. Under current federal law, you can pay for your
out-of-pocket health care and dependent care expenses with tax-free
dollars. This means you pay less in taxes each year. The health care reimbursement account works like a personal checking account. Each plan year, you decide how much you want to contribute to your personal account, up to the limits. You can have a certain amount deducted each month from your pay and put it into the health care reimbursement accounts. During the plan year, as you have eligible health care expenses, you file claims and are reimbursed with the tax-free dollars in your account. It's very important to calculate your annual deposit carefully. The IRS requires money left in your accounts at the end of the plan year (June 30, 2002) to be forfeited. Because of this "use it or lose it" rule, it's important that you anticipate your expenses when deciding on your account contributions. You may request reimbursement for expenses incurred during the plan year for up to 60 days after June 30, 2002. All forfeited money belongs to ASEA/AFSCME Local 52 Health Benefits Trust. Contributions to your health care reimbursement account are made from your pay before taxes are withheld. This means your taxable income is reduced. As a result, the amount of federal income tax you pay is also reduced. Assume your income is $45,000 a year and you have $2,000 of eligible health care expenses during the year. Here's what participation in the health care spending account can mean to your net pay:
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WITH PARTICIPATION |
WITHOUT PARTICIPATION |
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| Annual Income |
$45,000 |
$45,000 |
| Contribution to Account |
$2,000 |
$0 |
| Taxable Income |
$43,000 |
$45,000 |
| Estimated Taxes* |
$9,890 |
$10,350 |
| After-tax Expenses |
$0 |
$2,000 |
| Net Pay (after health care expenses) |
$33,110 |
$32,650 |
| Savings |
$460 |
$0 |
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*Assuming
federal and Medicare taxes of 23%
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REIMBURSABLE HEALTH CARE EXPENSES |
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Acupuncture - performed by a licensed practitioner |
Medical Information
Plan - fees
for maintaining medical information on computer Medicines - Prescribed and legally obtained drugs and medicines (excludes over-the-counter drugs, even with a prescription) Nursing Home - confinement for illness/injury Nursing Service - by registered nurse or licensed practical nurse for medical care Optometrist - for services within scope of license Orthodontia Oxygen Physicals Physical Therapy Psychologist - for services within scope of license Radial Keratotomy Special Schooling - to relieve handicap Sterilization Surgery - Including experimental Syringes, Needles, and Injections Telephone - Special for deaf Television - Audio display equipment for the deaf Therapy - Physical, occupational, or speech therapy by a licensed therapist Transplants Vitamins and Mineral Supplements - prescribed for treatment of illness Well-Baby Care Wheelchairs Vaccinations and Immunizations X-ray Fees NOTE: cosmetic surgery or procedures (such as tooth bleaching) and insurance premiums are not eligible expenses. |
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Here are some things to think about as you decide how much to contribute to your health care spending account:
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