Ever since it was first announced, I’ve been ready and waiting to sign up for the new (to us) military Healthcare Flexible Spending Account FSA (HCFSA). This is another way to save some money on taxes for things we’re already paying for. We end up spending a lot more for out-of-pocket medical expenses than we realize.
I signed up during the initial “Special Enrollment Period” running from March 3rd to March 31st of 2025.
I’ve been keeping track of my experience with this program, and I will outline that below. However, before I get into how I’m actually using the HCFSA, let’s take a moment to go over what it is and why it’s helpful.
What is a Healthcare Flexible Spending Account?
A Flexible Spending Account (FSA) is an account you can put money into for qualifying expenses. The money you put into the FSA is excluded from your income. It’s basically like Uncle Sam just pretends he didn’t see you earn that money. In other words, it makes it to where the money you put into the FSA is now “under the table” but legally.
The money in the FSA is a type of “triple tax advantage” because you won’t pay federal, state, or FICA (Social Security + Medicare) taxes.
There are different types of FSAs. If you have child or dependent care expenses, you should check out my article on the DCFSA for more details on that program. This article will focus on the DoD’s Healthcare Flexible Spending Account (HCFSA).
Healthcare Flexible Spending Account Contribution Limits and Carryover Amounts
You are limited on how much money you can put into the HCFSA each year. The IRS limits for 2025 are $3,300 per individual taxpayer. You can carry over up to $660. Any money you don’t use by the end of the year above the carryover limit is forfeited. In other words, it’s use or lose money.
For dual-military couples, you can each have your own account, so you could put twice as much into this account. This could be especially helpful if you have several young kids at home.
Example of Savings with the Healthcare Flexible Spending Account
As an example, let’s assume you’re in the 12% marginal tax bracket (use your highest bracket, not effective tax rate), FICA is still the standard 7.65% for your portion, and your state income taxes are somewhere around 5%. Your highest level of taxes would be taxed at a combined 24.65%. If your income is higher, this may be higher as well.
By contributing $1,000, you’ll reduce your taxable income by that amount and potentially save $246.50 for the year. If you contributed the max and have the maximum amount of qualifying expenses, you could save as much as $813.45.
The HCFSA is Easy Money
This might not be super satisfying during the process, but the net effect is pretty significant. If you take the time to figure out what gas station has the lowest prices on fuel or which credit card yields the most points, you have enough time to check the qualifying expenses for the HCFSA.
HCFSA Qualifying Expenses
The HCFSA is meant for out-of-pocket medical expenses. However, that can mean a lot of different things. Fortunately, the FSAFEDS website has a great breakdown of what’s covered. It’s searchable too. I highly recommend changing the results per page to 100 so you can scroll more easily.
Between contacts for my wife, Band-Aids, and trips to the chiropractor, it can add up quickly. Make sure to check for any expenses that require additional documentation before you purchase them.
Signing Up for the Healthcare FSA
Overall, the process was really easy and took about 20 minutes. I needed the following information to sign up:
- A Login.gov account
- I think you can use your CAC to sign in as well, but I was using my personal computer.
- Bank Account Information
- Amount you wanted to contribute
Quick Note on Authenticator Apps
I had a little trouble getting my Login.Gov account authenticated because I had no idea which authenticator app I used to sign up. Apparently, I have five different authenticator apps on my phone. I use Google Authenticator for just about everything, but this needed the Microsoft Authenticator. Yours might be different.
Amount per Month
One thing I learned is that the total amount you select is prorated over each pay period (one pay period = one month). Since I was signing up during the special enrollment period, the amount I was contributing was spread out over 9 months (April through December). So, if you wanted to put $100 per month in, you would need to add $900 into the HCFSA.
Once you enter the amount, it automatically shows you how much per month. You can change this and update the amount during the signup process. My understanding is that you can adjust the amount throughout the year as well. I’ll be trying this at some point to verify.
Effective Enrollment Date
One thing to note, the enrollment is effective 01 April for the open enrollment period. In normal circumstances, you’re eligibility would be effective on the first of the year if you signed up during the federal benefits open season or the date of a qualifying life event (QLE).
The Rest of the Healthcare Flexible Spending Account (HCFSA) Process
The rest of the signup process was pretty straightforward. I followed the four basic steps from the FINRED website. After entering my date of the QLE (special enrollment period), I answered some basic questions about my eligibility, entered my bank account information, and I was done.
The only other slightly confusing part was the option to select other insurance I had so it would automatically pay certain expenses. I checked the box for our dental insurance but opted to review any expenses. I have very little faith in the accuracy of such a setup.
If you want to watch and learn along with me on signing up, here’s a video of me going through this.
An Overall Easy Process to Sign Up for the HCFSA
I found it to be pretty intimidating to get started signing up for the HCFSA because I have a general lack of trust in anything the military does anymore. However, once I got started, it was really easy and straightforward.
Keep in Touch and Share Your Experiences Too
My plan is to continue to update this article as I continue to use the Healthcare Flexible Spending Account. I feel it’s a great program and will be another way to save money. Each little bit helps.
I would greatly appreciate it if you would send me questions you have and share your own experiences in using the HCFSA. I can’t promise to share them all, but I’m learning about this myself along the way.