Various defined contribution plans
As the cost of eye care and vision care can be a considerable expense, it may lead to unexpected consequences to your family budget, especially for large family. To solve this problem, you can choose defined contribution health plans which could lower your cost of vision care.
Customized health care benefits are provided
Defined contribution plans (also called self-directed health plans) are consumer directed. They differ from traditional health insurance plans. Usually, we consider that traditional health insurance plans belong to defined contribution plans because the benefits provided by the former are also pre-determined. In defined contribution plans, health care benefits which you choose from a “menu” can be customized for your needs.
Vision benefits are also covered by most defined contribution plans
In addition to these basic benefits, you can get your own vision benefits which may be unique. For employees, a portion of the fees for the heath care coverage will be deducted from your paycheck before some taxes are calculated such as social security taxes. This means that you can save money with defined contribution plans. Since defined contribution plans bring us so many advantages, it is necessary for us to get some knowledge of different types of defined contribution plans for vision care.
The basics of cafeteria plan
Benefits of a cafeteria plan include health insurance, dental benefits, vision benefits, long-term and short-term disability benefits and deposits to FSAs and HSAs. The amount of money which is deducted from your paycheck annually depends on the benefits you have chosen. Your employer also deposits a portion of your salary into a non-taxable account which will be used for health care spending.
Flexible spending accounts cover only a few eye care services
Flexible spending accounts (FSAs), another type of employer-sponsored defined contribution health plan, provide similar benefits under a cafeteria plan. But FSAs require you to deposit a certain amount of your pre-tax salary into an account which will be used for medical expenses. And the amount of deposited money is determined by the agreement between you and your employer. Generally, if you don’t use the money in the account during 12-month period, you will lose that amount of your salary. An FSA doesn’t allow you to pay for preventive care such as routine eye exams and health insurance premiums.
Health reimbursement arrangement provides more vision benefits
Unlike an FSA, a health reimbursement arrangement (HRA) allows you to use pre-tax salary in an HRA to pay for preventive care and health insurance premiums. Another advantage is that you can retain your money in the account even if you don’t spend it in a certain period. Of course you can withdraw HRA funds whenever you want and you don’t need to be responsible for the withdrawal. When your medical costs exceed the amount of money in your HRA, you need to pay the overage out-of-pocket.
Health saving account covers preventive eye care
Sometimes you are required to purchase a high-deductible health insurance plan which means you may open a health saving account (HSA). An HSA can be employer-sponsored or self-sponsored and the amount of money in it can not exceed the annual deductible of your health insurance plan. Money credited to an HSA can accrue tax-free interest, which doesn’t apply to an HRA. You also can use money in your HSA to pay for preventive care.
Member enrollment and deposit limitations of HSA
To qualify for an HSA, you must not be covered by other health insurance except for high-deductible health plan (HDHP) and you are not enrolled in Medicare. The amount of money deposited in an HSA has some limitations. In 2009, the maximum deposited amount is $3,000 for an individual and $5,950 for a family. And the minimum deductible is $1,150 for self-only coverage and $2,300 for family coverage. You can visit the US Treasury Department’s website for details.
Keep the latest information about different plans
For the criteria of programs such as FSAs, HRAs, HSAs can change from time to time, you should make sure that whether you have the latest information. After considering your need and the budget, you’d better to consult a financial advisor or professional accountant for some valuable suggestions.