Service members will have another way to save money on their taxes in 2025, as defense officials are working to offer health care flexible spending accounts.
Defense officials are currently coordinating with the Office of Personnel Management and aim to offer these accounts to eligible service members by Jan. 1, 2025, said Susan Mitchell, Department of Defense Tax Counsel, and executive director of the Armed Forces Tax Council.
As with DoD’s new dependent care flexible spending accounts, enrollment for the new accounts would be during this year’s open enrollment season from mid-November to mid-December, likely Nov. 11 to Dec. 9.
Those who participate can save an average of 30% of the cost of these unreimbursed expenses, according to the Federal Flexible Spending Account Program, known as FSAFEDS. Savings depend on each individual’s tax situation.
The Federal Flexible Spending Account Program, which also administers the service member dependent care flexible spending accounts, is sponsored by the Office of Personnel Management.
Eligibility rules likely will be similar to the rules for the dependent care flexible spending accounts for service members, Mitchell said — service members in the active component and Active Guard Reserve members on Title 10 orders.
These health care flexible spending accounts, already available to Defense Department civilians and to many employees in the private sector, will allow service members to set aside pretax dollars in an account. The money can be used to help pay for health care expenses that are not covered by Tricare or other health care. The maximum amount that can be set aside each year depends on the Internal Revenue Service annual contribution limits. In 2024, for example, the maximum is $3,200. The minimum is $100.
“While Tricare provides health insurance for service members and family members, the health care flexible spending accounts can help reduce the costs, the burden of paying out-of-pocket health care expenses,” said Mitchell.
The pretax dollars are deducted from the service member’s gross pay and deposited into the account.
The service member can then submit health care receipts to be reimbursed for things like co-pays for prescriptions and health care visits, orthodontia, contact lenses, glasses, prescription sunglasses, in vitro fertilization and more. Many over-the-counter items and medicines such as sunscreen, bandages and hearing aid batteries, antacids, allergy medicines, cold medicines and aspirin and other pain relievers are among the qualifying expenses, with itemized receipts.
Family advocates applaud the offering of the health care flexible spending accounts.
Eileen Huck, government relations senior deputy director of the National Military Family Association, said, “One of our goals is to reduce out-of-pocket expenses for service members and families.”
However, she said, advocates caution against a situation “where people could point to the HCFSA as a reason to increase health care costs.”
Mitchell advises service members and families who may be interested in participating in the health care flexible spending account to start tracking their unreimbursed health care expenses to get an idea of how much they spend during a typical year. Information and calculators are available at FSAFEDS.com
More information about Department of Defense’s specific program will be available later in 2024.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.
