Health Savings Accounts and Limited Purpose Flexible Spending Accounts
Carnegie Mellon offers both a Health Savings Account (HSA) and a Limited Purpose Flexible Spending Account (LPFSA) to employees who are enrolled in one of the High Deductible PPO with HSA medical plans. These plans are offered to help you lower your medical, prescription, dental and vision expenses by paying with tax-free money.
- You must be full-time benefits eligible (37.5 scheduled hours per week) and enrolled in a High Deductible PPO with HSA plan to participate. Members of the Campus Police Association must be scheduled to work 40 hours per week to be eligible.
The IRS prohibits employees from making HSA contributions if they are:
- Medicare enrollees (Part A, Part B or Part D)
- Health Care Flexible Spending Account enrollees
Health Savings Account (HSA)
Health Savings Accounts accompany a high deductible health plan and allow you to invest money to pay for qualified medical, prescription, dental and vision expenses. You own this account and can take the account dollars with you even if you leave the university or retire.
Contributing to an HSA
- Individuals may contribute between $0 and $3,850 per year. Families may contribute between $0 and $7,750 per year. 55 years and older are eligible to make an annual catch-up contribution of $1,000.
- You may log in to Workday to change your contribution amount at any time, based on your financial situation.
- In 2023, if you are enrolled in the High Deductible PPO with HSA, CMU will contribute toward your HSA at the amount of $250/year for individuals and $500/year for families.
Qualified medical, prescription, dental and vision expenses including deductibles, copays and coinsurance.
Limited Purpose Flexible Spending Account (LPFSA)
The LPFSA is a special type of FSA that can be paired with an HSA and allows you to use pre-tax dollars to pay for qualified dental and vision expenses. Using funds from your LPFSA instead of your HSA allows your HSA to continue to grow tax-free into retirement. An LPFSA cannot be paired with a Health Care Flexible Spending Account.
Contributing to an LPFSA
- You must make a new election each year to participate. Elections do not rollover from year to year.
- You may contribute between $60 and $3,050 per year. Contributions will be deducted in equal amounts each pay period.
- Qualified dental and vision expenses only, including:
- Dental and orthodontia office visits and expenses; dental implants, veneers, dentures and bridges
- Optometrist and ophthalmologist visits and expenses; eye glasses, contacts, prescription sunglasses, solutions and drops; laser eye surgery
- Expenses incurred by you and your IRS-qualified dependents may be covered by the LPFSA. (Note: the law only permits you to reimburse claims incurred by dependents listed for federal tax purposes. Most domestic partners do not meet the IRS dependent definition.)
- Expenses must be incurred during the plan year (calendar year plus 2½-month grace period), while you are contributing.
- If you initiate a reimbursement account mid-year, you can only use the contributions to reimburse yourself for expenses incurred AFTER you enrolled.
- If you increase the amount of your contributions due to a life change, you can only use the additional contributions to reimburse yourself for expenses incurred AFTER the event.
- If you stop contributing to the account, you can only use the funds to reimburse claims incurred during your participation. To use HCFSA funds for expenses incurred AFTER your participation ends due to a loss of benefits-eligibility, you must enroll through COBRA. However, you will be using post-tax funds after your eligibility ends, and therefore will lose the tax advantages of the HCFSA from that time on.
You can save up to 25% on the money you spend on eligible expenses by contributing to spending accounts on a pre-tax basis. However, you should be aware of the other financial implications of using these accounts:
- Impact on Social Security: When you reduce your taxable income for Social Security purposes, you may also reduce by a small amount what you may claim in Social Security benefits at retirement.
- Earned Income Tax Credit: Paying for benefits on a pre-tax basis may put employees who are eligible for the Earned Income Tax Credit [pdf] at a disadvantage when they file for federal income tax credits.