If you anticipate incurring any out-of-pocket health care expenses, you should consider the advantages of paying for those expenses with tax-free money you contribute to a health care FSA. Eligible out-of-pocket health care expenses include:

All employees can use the Health Care FSA to pay for out-of-pocket costs such as deductibles, copayments, and coinsurance.

Employees who are not eligible for health coverage under any LAUSD-sponsored plan and who are responsible for their entire medical bill each time they receive health care or buy prescription drugs can pay for these expenses through the Health Care FSA.

Only health care expenses incurred by yourself and people you claim as a dependent on your federal tax return can be reimbursed through the Health Care FSA. Therefore, expenses for domestic partners and children of domestic partners are not eligible.

Annual Contribution

You may set aside up to $5,000 per year per "household" into the Health Care FSA. Your annual contribution will be divided equally and deducted from your pay over 12 pay periods. The minimum contribution is $10 per pay period.

Reimbursing Yourself

As soon as you have an eligible health care expense, you can file a claim. There's no need to wait until the money is in your health care FSA. As long as the total claims for the year have not exceeded your annual election, your claim will be processed immediately.

Eligible Health Care Expenses

To help you plan, we've listed some predictable expenses that typically occur on an annual basis.

• Prescription drugs, especially medication for chronic conditions such as asthma, allergies, high cholesterol and high blood pressure
• Over-the-Counter Medications. (OTC Medications)
• Birth control pills
• Preventive care, including physicals, well-child care, annual vision exams, and semiannual dental checkups
• Durable medical equipment
• Mental health care (Inpatient and Outpatient Services)
• Orthodontia or other planned dental treatments, such as bridgework, crowns, and root canals
• Physical therapy, speech therapy, chiropractic treatment, and acupuncture
• Prescription eyewear and contact lenses, including over-the-counter contact lens cleaners and Solutions
• Vision correction procedures, such as LASIK, PRK, and radial keratotomy
• Smoking cessation program
• Physician-prescribed weight reduction programs to treat a specific disease such as high blood pressure (excluding food replacement).

Ineligible Health Care Expenses

Examples of ineligible health care expenses include:

• Expenses paid by a health care plan or other type of insurance
• Maternity clothes
• Fees or dues for exercise clubs or classes
• Premiums on health care plans and long term care plans
• Consumer products for general well being, such as exercise equipment, whirlpools, and saunas
• Charges for vitamins
• Cosmetic surgery, unless it is directly related to a mastectomy

For a complete guide of eligible and ineligible health care expenses, log on to www.irs.gov to retrieve IRS Publication 502.

Federal Tax Deduction vs. the Health Care FSA

Although the IRS offers a tax break for taxpayers whose health care expenses exceed 7.5% of their adjusted gross income, keep this in mind:

• Most people with health care coverage never reach the 7.5% threshold. So, if you're like most people, the only tax-saving method currently available to you is the Health Care FSA.
• For those who do meet the 7.5% federal threshold, only the amounts over the threshold are eligible for a tax deduction. If you expect your out-of-pocket costs will be greater than 7.5% of your AGI for the next calendar year, be sure to ask your tax advisor which tax-reducing method is better for your family.

The State of California follows federal tax treatment of FSAs, so you'll also reduce your state income tax when you participate in the Health Care FSA.