How to Use Your FSA and HSA for LASIK Surgery: 2020 Update

Flexible Spending Arrangements and Health Savings Accounts are popular LASIK financing options

For the tax year 2020, the IRS has announced new contribution limits for both the Flexible Spending Account (FSA) and the Health Savings Accounts (HSA).  Those who have access to these accounts may be interested to learn that laser vision correction procedures such as LASIK are an eligible expense according to the IRS. Importantly, the IRS recently extended the deadline for contributions in light of the COVID-19 pandemic. The new contribution deadline is July 15, 2020.

The 2020 limits for pre-tax contributions to both accounts rose slightly. An individual can set aside up to $2,750 in a healthcare Flexible Spending Account (also known as a Flexible Spending Arrangement). Some employers also contribute to employee FSA accounts.  Another pre-tax health funding option is known as a Health Savings Account (HSA).  For 2020, individuals can set aside up to $3,550 and families up to $7,100 in an HSA.

Because FSAs or HSAs can be used to cover some or all of the cost for LASIK surgery, they are a popular financing option and a smart long-term investment. LASIK surgery can help patients reduce or, in some cases, eliminate their need for prescription eyeglasses and/or contact lenses.

“Every day I see patients who use their flexible spending or health savings accounts to pay for their LASIK surgery,” said Dr. Eric Donnenfeld, a member of the American Refractive Surgery Council. “By doing this, they are saving money on a lifetime of vision care costs using tax-free money.”

What is an FSA?

An FSA allows you to set aside pre-tax dollars from your paycheck to pay for eligible out-of-pocket expenses. You set the level you want to contribute and your contributions to the account are spread out evenly over the year.

As we mentioned earlier, the maximum you can contribute for 2020 to the program is $2,750.

The main benefit of the program, according to Mike Travers, a senior benefits consultant at TriNet, is that you can access the full amount of your annual contribution election — even if you haven’t made all the pre-tax deductions for the year.

“It’s one of my favorite benefits,” Travers said.  “Where else can you access funds before you have contributed them to an account?”

You must use the full contribution amount within the 12 months or risk losing the balance. However, some plans have a grace period, which allows you to delay use of the funds for up to a period of 2.5 months into the new plan year, while others permit a carryover amount.

Does FSA Cover LASIK?

The IRS places restrictions on what is covered by FSA funds.  However, an FSA currently covers LASIK procedures.

What is an HSA?

An HSA is a tax-advantage bank account that allows you to save pre-tax dollars through payroll deductions. You can then use those funds to pay for out-of-pocket healthcare costs. You must be enrolled in a high-deductible health care policy to be eligible for an HSA.

As previously mentioned, the amount you can set aside for 2020 in an HSA is:

  • $3,550 (individual)
  • $7,100 (family)

“It’s slightly different than an FSA in that contributions must be deposited in the HSA before you can use the money to pay for eligible expenses.  It’s your own money, pre-tax, that’s in a bank account,” Travers explains.

There is no “use it or lose it” requirement with an HSA, like there is with an FSA.  You can allow the funds to accumulate until you are ready to use them.

An HSA also includes a “catch up” contribution provision, which allows participants 55 and older to contribute an additional $1,000 toward their HSA.

Can you use HSA for LASIK?

You can. Like the FSA, the IRS sets limits on what procedures can be covered by an HSA. LASIK surgery is an eligible expense.

How to use your FSA to pay for your LASIK

If you are a candidate for LASIK or other laser vision correction procedure, you can use your FSA or HSA dollars to help pay for it. BUT the entire cost of the procedure, particularly using the most advanced technologies, may not be covered by your FSA fund.

If your company’s plan provides a “grace period” you can combine any remaining FSA funds from the previous year with the FSA funds from the current year. The grace period is 2.5 months.

Technically, you could leave your funds in your FSA until the grace period, and then use the full amount for the next year. Using these combined FSA funds could help offset the costs of LASIK.

How to use your HSA to pay for your LASIK

Funds in HSAs are available without a time limit. You could fully fund your HSA each year, and then tap into the account when you have enough money to cover the procedure.

Provided your employer offers an FSA program, you can use it in conjunction with your HSA to fund your procedure.

Plan wisely, plan ahead

With either FSA or HSA accounts, you can pay a significant amount of your LASIK procedure pre-tax.  The key is to be aware of the contribution limits, the limits of your own health care policy, and if your employer offers you an FSA.

When you consider how you can use the FSA grace period to your advantage, it’s wise to plan ahead for your LASIK procedure, and coordinate the scheduling with your doctor. Leveraging FSA and HSA benefits for laser vision correction can be a great way to save money and achieve your vision goals.

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