Flexible spending and taxes


Q. I am a federal employee already on Medicare Part A. My tax preparer recently told me that persons signed up for Medicare are not eligible for flexible spending accounts which allow for the payment of health-care expenses with untaxed earnings. Is this true? I think he might have gotten mixed up with health savings accounts, which I don’t have. Also, please clarify whether the amount withheld from my paycheck (i.e. $3,000 yearly) to fund the flexible spending account is deducted from basic pay in calculating high-3 pay for a FERS annuity. How is this done?

A: Under current law, flexible spending acounts are only available to employees, not retirees. Your high-3 was based on your basic pay before any deductions, including those for a flexible spending account, were taken out.


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