Does anyone know what this is or how you set one up? I've heard it applies to orthodontic work, is this correct? Can you use it for adult orthodontics? Anyone have experience here? Thanks!

By Ginny~moderator on Thursday, February 3, 2005 - 09:48 am:

Most flex accounts are set up at the workplace, where you agree to have a certain about of pre-tax dollars taken out of every paycheck and you use them for specific kinds of expenses, usually medical, dental (including orthodontics), child care. The general rules are set by the feds, but each company should have a booklet or information sheet about its particular plan.

The catch is to calculate your probable expenses for the coming year very carefully because if you have any unused money left in your flex account at the end of the year YOU LOSE IT. My new job offers this and I spent a couple of hours calculating probable prescription, doctor visit and dentist expenses for 2005 to calculate the deduction amount. I am told that there is usually a flurry of prescription refills in early December by people wanting to use up the balance in their flexaccounts.

I am not sure but I believe there is some tax provision (or is this just in the planning stages?) where you can set up a medical savings account and get a tax deduction, but if I am right about this, I believe you have to offset it by taking a high deductible on your health insurance plan.

By Kate on Thursday, February 3, 2005 - 10:42 am:

Thank you, Ginny! Now, this type of stuff always goes right over my head so I'm still confused.

What is the benefit here? Is it that if you make, say (for sake of easy math) $100,000 and put $5,000 into your flex account, is it that at the end of the year you are only taxed on an income of $95,000 instead of $100,000?

Or is it something like the $5,000 is yours and used by you, whereas otherwise it would have gone to the government?

Is it really any great beneficial thing? Does it really save you any significant money?

By Missmudd on Thursday, February 3, 2005 - 10:54 am:

What makes these so good for daycare or medical expenses is that the money you put into these accounts are tax free. For us we put in the max of $3000 dollars into the medical account because of a not so good medical plan, 4 kids, and numerous prescriptions. I knew I was going to have extensive dental work done and my son needs to have a nevi removed surgically. It meant about $300 tax savings on our federal return this year and we had $2000 put into the account. I dont remember what the daycare cap is, I think it might be $5000.

If you set up a medical account this can be used for dental, medical, eyecare including contact solution, alternative therapies like accupuncture, orthodonics, and over the counter meds. It really is a great deal. If you have a specific question, let me know I have been dealing w/ the reimbursement account for about 4 years now. It is kind of a hastle but I DO get paid in that I get a big break on the taxes.

Also for our medical account if I go in Jan 1 and have a $500 deductable, I bill the reimbursement account and they issue a check for $500 even though I havent made $500 worth of payments into the account. So actually it is an interest free loan if you dont have the money in your medical account. I dont know if this is a universal thing I think it is, check your HR department. I know that the daycare account wasnt like that, payments had to be made into the account before payment was made. So if you know you need $3000 in orthodonics, the dentist bills the insurance if you have it, the explanation of benefits come back, you submit to your reimbursement plan, they issue you a check, you go pay the orthodontist however much you put in the account. Then out of your paycheck for the year it is taken out. Only be careful if you plan on quiting or if your job status is shakey. If you have a neg balance in your account they will take it out of your final paycheck.

By Kate on Thursday, February 3, 2005 - 11:12 am:

Soooo, you're still paying for the bill, it's just that you get to count it as a deduction? And out of the $2000 you put into it, you only got a $300 savings? So you're still out $1700? I'm not scoffing at $300, but it's not as great a deal as I had hoped. See, I have a tooth that's driving me crazy...it's a top front tooth and it has come out of place and it really doesn't look bad unless you look at me from below, LOL! But I'd like to move it back into place and it would be $3000. Now that is a chunk of change for a 'vanity expense' that is NOT necessary so I'm trying to find a way to cut the cost, but cut it by a LOT.

By Missmudd on Thursday, February 3, 2005 - 11:30 am:

Well the way I look at it for us, we have a ton of medical expenses a year, and they are unavoidable. I would rather pay the $1700 vrs the $2000. To us it is worth it, but if you only have a small amount of expenses you could probably take it or leave it. When you said orthodontics, I was thinking like huge amount for braces.

By Kate on Thursday, February 3, 2005 - 11:33 am:

Oh dear...is $3000 not a lot for braces? I better brace myself for later on as I have an eight year old who looks like she'll need them!

I am starting to understand this....yes, if you HAVE to pay X number of dollars for medical expenses no matter what, then it's great to get ANY amount back and paying $1700 vs. $2000 is definitely better. But this expense is not something I HAVE to undertake so I was really hoping a flex account was some magical thing that would cut significantly into the cost. Thanks for helping me understand this!

By Missmudd on Thursday, February 3, 2005 - 11:52 am:

I think $3000-$5000 is the going rate on braces, scarey huh?

By Ginny~moderator on Thursday, February 3, 2005 - 12:22 pm:

You're right, Kate, the only benefit is that this is before-tax money, so what you are saving is the federal income tax you would have paid on that money. I don't know what your tax rate is, but the top tax rate on the top dollar these days is, I think, around 25%, so if you are looking at a $3,000 bill, you would save 25% of $3,000, or $750, if you are in the top tax bracket for your last dollar. If you are in the lower bracket, you would save something like 16% of your $3,000 or approximately $480, and in the lowest bracket 10%.

What I mean is that, as we all know, the federal income tax is a gradual tax - the more you earn, the higher the tax rate. But what that really means is that for each bump in income level, the money that puts you into that income level (top dollar) is what you pay the higher rate on. The income below that level is taxed at the lower rate. If that isn't clear, I'll ask my tax expert son to explain it to me in words I can understand, and pass that on.

I think it really pays off for the people at my firm who are paying for childcare, and if you were contemplating something expensive (like orthodonotics) or something that wasn't covered by your health insurance (I don't know if fertility treatments, for example, are covered by all health plans). Or, if your health insurance doesn't have a prescription plan or the plan has a high co-pay. Since one has to pay these costs anyhow, it is nice to pay with pre-tax (untaxed) dollars, as it is a bit of a savings.

By Kay on Thursday, February 3, 2005 - 12:44 pm:

Amy's braces are going to be costing us around $4000.

By Dawnk777 on Thursday, February 3, 2005 - 11:42 pm:

We did the spending account thing last year and DH thought it was more trouble than it was worth. He had to jump through hoops getting special receipts and all, so we didn't do it for this year.

By Kittycat_26 on Friday, February 4, 2005 - 08:13 am:

We have both a dependant flex account and a medical flex account at the hospital where I work. I use both but then ours seems much simpler than some of yours.

Our dependant account is allowed $5000 and since I use the hospital's child care center, the money is paid to them automatically through our finance dept. I don't have to submit anything.

Our medical account is allowed $5000 as well, but I don't use that much. We use a special debit card to use this money. So again, there are no special forms unless the company questions whether or not the card was used for non-medical supplies.

For us, it is well worth it. I lower my taxable income by almost $7000 each year which keeps us in a lower tax bracket.

If we had to pay up front and go through submitting the forms and all, I doubt I would use it. That seems like alot of trouble.

By Lauram on Friday, February 4, 2005 - 08:36 am:

THe way I understood it is that it is income that is not taxed. THey take it out of your paycheck, you claim it, but then you get it in full. In the end, you make less money that year that is taxable too which also may lower your tax bracket. The catch is being accurate with your estimation because as was said, you do lose it if you're not careful. We take out the max for both daycare and medical. For daycare our max is $5000 and for medical the max is for $2000. We actually get a credit card for the medical one so that's kind of convenient. We just pay with that card. It also applies to copays and prescription copays as well. In the end if we are low, we just get glasses and contacts.

By Missmudd on Friday, February 4, 2005 - 01:27 pm:

Couldnt have said it better . Also w/ our plan you could even spend it on a years supply of tylenol.