A Health Care Reimbursement Account (HCRA) allows you to set aside before-tax money out of each paycheck so you can pay yourself back for certain health care expenses.
Although your health plan benefits will cover a large part of your health care expenses, you may have bills for health care services that you’ll have to pay for out of your own pocket. These might include medical and dental deductibles, copayments, vision care costs, and other expenses that your health plan does not cover. When you participate in the HCRA, you can set aside before-tax money to reimburse yourself for these eligible health care expenses.
The Health Care Reimbursement Account is not currently available to County of Orange retirees.
You may contribute the allowable annual limit to your HCRA each year. The tax free funds in your account can be used to reimburse you for eligible out-of-pocket health care expenses incurred by you and your family. Eligible health care expenses include:
- Deductibles, co-payments, and other amounts you pay out of your own pocket to cover health care expenses
- Medical, dental, vision, and prescription drug expenses that are not covered or are only partially covered by your health plans.
- Over-the-counter medications are not covered unless prescribed by a physician.
Frequently Used HCRA Resources
Expenses That Are Not Eligible
The following are examples of expenses not eligible for reimbursement through HCRA, as determined by the IRS.
- Insurance premiums
- Expenses associated with long-term care
- Expenses incurred prior to your enrollment in HCRA or after your participation ended
For a list of eligible and ineligible expenses, contact your tax advisor, call the IRS at 1-800-829-3676, or visit the IRS Web Site at www.irs.gov.
Things to Consider before Enrolling in a HCRA
Before participating in a HCRA, you need to carefully estimate the expenses you’re likely to incur and consider whether those expenses are eligible for reimbursement. To help you plan, consider these questions:
- What were your out-of-pocket costs for health care this year?
- What do you expect your out-of-pocket health care expenses to be next year?
- Are you expecting any health-care expenses that are not totally covered by your benefits (e.g., orthodontia)?
- Does your spouse have a HCRA available through his or her employer? If so, how do you want to coordinate your accounts?
- Do you have other eligible dependents for whom you want to use the HCRA?
Determining Your HCRA Contributions
You may want to review your bills and checkbook register for the previous 12 months as you estimate your upcoming expenses.
Remember to estimate conservatively – the IRS requires that you forfeit any amounts in excess of $500 left in your accounts after the claim-filing deadline. In addition, you cannot change the amount you elect unless you experience a Qualified Life Event.
How to File HCRA Reimbursement Claims
- Click to view and print HCRA instructions and claim form
Limited Annual Carryover
Federal regulations allow HCRA plan participants to carry over up to $500 of unused funds in HCRA to be used for expenses incurred in the following plan year.
As such, you will be allowed to carry forward a maximum of $500 of unused funds. It is important to note that the carryover does not affect the maximum allowed for pre-tax contributions, meaning you may elect the full amount allowed if desired, and have any carryover funds available for use during the following plan year.
If you do not enroll for HCRA for the following year, you will forfeit any funds left over in your current account. If you elect HCRA for the following year, up to $500 of unused funds from your current plan year rolls over automatically to the following year. However, you will lose any money above $500 if you do not use it by the end of the plan year.
The tax savings available through the HCRA are made possible by Section 125 and Section 105(h) of the Internal Revenue Code. These sections of the tax law also impose some restrictions on these types of accounts.
Use it or lose it
Any money in excess of $500 left in your account at the end of the Plan Year, for which you have not incurred an eligible expense, will be forfeited back to the Plan. All claims must be received by March 31 of the following year for expenses incurred during the previous Plan Year.
You must incur expenses before you can be reimbursed
In order to receive reimbursement from your HCRA, you must incur an expense, and pay for that expense, before filing a claim for reimbursement. Once you incur an eligible expense, you must fax or mail a Flexible Spending Account Reimbursement Form to the Plan Administrator.
You cannot transfer money between accounts
If you also elect participation in the County Dependent Care Reimbursement Account, you cannot transfer funds from your Health Care Reimbursement Account to pay for dependent day care expenses, nor can you use money from the Dependent Care Reimbursement Account to pay health care expenses.
You cannot change your elections during the year
Once you have enrolled and made your HCRA elections, you cannot make changes until the next year’s open enrollment period, unless you have a qualifying change in family or employment status.
- You can’t use HCRA dollars to pay dependent care expenses
- You can’t stop, start, or change your HCRA deposits outside Open Enrollment unless you have a qualifying life event such as marriage, birth of a child, divorce, change in spouse’s employment, etc., Change in dependent care provider charges.
Please consult the Plan Document regarding events that allow you to change your HCRA deposits. For more information, obtain a copy of the County’s Section 125 Plan Document which is available on the Benefits Center Web Site or by calling the Benefits Resources Line and speaking with a Benefits Specialist. For additional information, you may also call the IRS at 1-800-828-3676 or visit www.irs.gov
About This Information
This information is intended to give you an overview. Actual benefits are determined under the provisions of the Plan Document. Should any conflicts exist between this website information and the Plan Document, the Plan Document shall prevail. You may view and print the Plan Document by logging onto the Benefits Center Web Site and click on “Benefits Enrollment Guide & More” and Section 125 Plan. You will need your Social Security Number and PIN to access the Benefits Center Web Site.