Starting in 2025, active-duty military members will have the opportunity to benefit from a valuable new financial program: health care flexible spending accounts (FSAs).
These accounts will become available for enrollment during a special window in March 2025, providing service members a chance to manage their out-of-pocket medical expenses more effectively.
Understanding Health Care FSAs
Health care FSAs are designed specifically to help cover medical costs that aren’t typically included in standard health or dental insurance plans.
They’ve become a popular choice among federal employees and those working in various private industries, giving users a tax-advantaged way to save for health-related expenses.
Service members can contribute up to $3,200 annually to their FSA, allowing them to use pre-tax earnings for qualifying medical expenditures.
Contributions can start at a modest $100 each year, and the amount will be deducted directly from their paychecks.
It’s important to note that the Internal Revenue Service (IRS) sets eligibility criteria for expenses and contribution limits, which may vary annually.
Advantages and Eligible Expenses
One of the significant advantages of participating in this program is the potential for tax savings.
Since FSA contributions are not subjected to payroll taxes, service members could save approximately 30% on eligible medical costs, based on estimates from FSAFEDS, the program administrator.
To assist in planning, a calculator tool will also be available, enabling service members to estimate their savings throughout the year.
The range of eligible expenses for reimbursement is extensive, with the IRS recognizing over 300 approved items.
This broad list includes co-pays, deductibles, dental braces, vision aids (like glasses and contact lenses), prescription medications, various over-the-counter drugs, and even alternative health treatments such as acupuncture and chiropractic services.
Additionally, many health-related products, including hand sanitizers and menstrual hygiene products, qualify as well.
Enrollment Process and Resources
Active-duty personnel, along with certain members of the Reserve Component engaged in active Guard and Reserve duties, will be able to access these flexibility accounts.
It’s worth mentioning that the Department of Defense (DoD) previously launched a dependent care flexible spending account program, which started in 2024 and offers a similar financial benefit.
To utilize the health care FSA, service members will need to submit receipts and supporting documents alongside their claim forms.
When the enrollment period opens, they can register online at fsafeds.gov.
It’s crucial for participants to use their FSA funds by December 31 of the plan year.
For those who choose to reenroll, up to $640 of their remaining balance may be carried over; however, unspent funds will be lost at the end of the year.
In cases where both spouses are eligible for an FSA, they can maintain separate accounts, allowing for a combined contribution of up to $6,400 annually.
For military members looking to navigate the options presented by this new benefit, the Defense Department offers free assistance via personal finance or tax counseling.
Both the Office of Financial Readiness and Military OneSource provide valuable resources to help service members make informed decisions.
Source: Militarytimes