Employees may elect a pre-tax deduction from their paychecks for the reimbursement of qualified medical expenses. The maximum annual deduction is $2,500. Lesser amounts may be selected for the deduction.
Qualified expenses are defined in Section 213 of the Internal Revenue Code. Some examples are bills for doctors and dentists, drugs, hospital, clinics, eyeglasses, and physical exams. For a specific example, consider a visit to a hospital emergency room for a severe wound that requires stitches, but no admission to the general hospital. The hospital bills the injured/insured person $250, which is the emergency room deductible under the injured person’s medical insurance. The injured/insured person pays the $250 to the hospital. Later the insured person submits the hospital bill to the employer, who reimburses the $250 to the insured employee. Payroll will manage each employee’s account and manage the program. Employees must submit bills for reimbursement within 90 days of the end of the plan year. The plan year will end on December 31st.
Once the submission deadline has passed (beyond March 31) any funds up to $500 remaining in the account will be transferred to the new year and not apply towards the $2500 maximum deduction for that year. Any balance beyond $500 must be forfeited to the employer per IRS directives.
Applications may be obtained from the Payroll Office.
updated May 2015