Disability Premiums: FSA Eligibility

Premiums are not eligible with a flexible spending account (FSA) and may be eligible on a health reimbursement arrangement (HRA) or a health savings account (HSA), unless already paid for with pre-tax dollars. Check with a benefits administrator to see which premiums will qualify. Disability premiums reimbursement is not eligible with a limited care flexible spending account (LCFSA) or a dependent care flexible spending account (DCFSA).

What is disability insurance?

Disability insurance is a type of policy that protects the beneficiary's earned income against potential losses if a person's disability will prevent a worker from being able to perform the duties of his/her position. These plans are designed to replace between 45 and 70 percent of a worker's lost income due to an illness or disability, which will be paid out on a tax-free basis. While some companies may offer this type of insurance to their employees, the vast majority of American workers have limited or no disability coverage at all.

Disability insurance plans are typically structured into two major variants: short-term and long-term disability insurance. While short-term plans usually cover workers for disabilities for up to 6 months, long-term disability insurance can potentially cover a policyholder for his/her entire lifetime if necessary. The cost of this insurance, which is paid for in monthly premiums, is largely based on factors that relate to the worker's occupation, his/her current state of health, lifestyle habits such as alcohol or tobacco use, and additional policy options (cost-of-living adjustments, guaranteed renewals, etc.) that could add to the monthly cost.

How are disability premiums reimbursed?

Consumer-directed healthcare accounts like FSAs, HSAs and HRAs are designed to help pay for medical expenditures like co-payments and medical products/services, but the reimbursement of insurance premiums varies greatly. For instance, general purpose FSAs do not cover premiums under any circumstances, but an employee-controlled HRA could allow for these funds to be used for this purpose, as well as HSAs if it is allowed in the plan's regulations. Before choosing a disability insurance plan, workers should speak with their benefits administrators to investigate whether disability insurance premiums are covered by their consumer-directed healthcare accounts to ensure that the plan is a match for their needs and budget.

Eligibility Table

Flexible Spending Account (FSA) Limited Care FSA Dependent Care FSA Health Savings Account (HSA) Health Reimbursement Account (HRA)

Eligible

Eligible with Rx

Eligible with LMN

Not Eligible

 


AZ-PROD-WEB02 11/19/2017 4:41:47 AM