08 Sep OTC meds and Health Savings Accounts
Photo: calgrin/morguefile.comQ. Why can’t I use a Health Savings Account to pay for over-the-counter medicine? My card gets rejected at the store when I try to use it for stuff like Tylenol or cold medicine.
— Confused
A. A health savings account, or HSA, can be a great took to save money of medical costs that are not covered by your insurance.
The HSA is a tax-deferred savings account which is typically paired with a high deductible health insurance plan, said Chip Wieczorek, a certified financial planner and investment adviser with Tradition Capital Management in Summit.
“The account allows individuals to set aside funds that can be used for eligible medical expenses on a pre-tax basis,” he said. “One of the key advantages of an HSA, and unlike a flexible spending account (FSA), is that the unused funds can roll over year after year.”
Wieczorek said there are certain medical expenses that are eligible for reimbursement from your account, such as deductibles, dental care, vision, medical procedures and prescription medications. Most health savings plan custodians will provide a list of what does or does not qualify under the IRS guidelines, he said.
“The reason you were not able to use your HSA account for Tylenol or other cold medicines is that in 2011, the Affordable Care Act changed the rules and no longer allows over-the-counter medication reimbursement,” he said. “Prior to 2011, those types of medications were eligible.”
Wieczorek said there are some other points to keep in mind with an HSA account.
There is a maximum deferral of $3,350 for an individual and $6,750 for a family in 2016, he said In addition, individuals over 55 years old can make a catch-up contribution of $1,000 per year.
“Funds can also be invested in a wide variety of investment vehicles such as mutual funds, real estate, precious metals, stocks, etc. which will provide for a long term `nest egg’ for medical expenses, well into retirement,” he said.
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This post was first published in September 2016.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.