Do Fighter Pilots Need Healthcare FSAs?

Now that the civilian population has tested FSAs for decades to prove them safe, DoD is jumping into the 21^stcentury and offering a Healthcare Flexible Spending account to military members. Unless you like leaving a tip for the taxman, you might want to opt in.

FSA 101

Flexible Spending Accounts (FSAs) come in multiple flavors: Healthcare, Dependent Care, and Limited Use. We’ll focus on Healthcare only here. An FSA is an employer benefit program that allows you to use pre-tax dollars on eligible out-of-pocket medical expenses.  You save your tax rate, plus Medicare and potentially Social Security taxes on the money you set aside—so about 20%-30% for lower-earning families, and typically at least 24% for higher-earning families.

The list of eligible expenses is long and distinguished and includes co-pays, prescriptions, over-the-counter medicines and supplies, charningiropractic care, glasses, dental costs, orthodontics, and even many fitness tools like Whoop Straps, Oura Rings, and Continuous Glucose Monitors (CGMs).

The mechanics of FSAs can differ, but they usually look like:

1. Opt in during Open Season in the late fall.
2. Elect a monthly set-aside amount up to the annual limit ($3,300 in 2024), e.g., $200/month.
3. Receive a debit card and start spending in January of the next year.
4. Submit receipts (if required) to validate spending.
5. Avoid the use/lose problem by spending everything prior to 31 December.
6. Carryover (if allowed) no more than $640 (2024) and deplete that amount before March 15.
7. Lather, rinse, repeat.

The DoD FSA

Government civilians have had access to a Healthcare FSA for years, but 2025 will be the first year for military families. DoD rolled out a Dependent Care FSA for 2024 and announced its Healthcare FSA in early 2024, but couldn’t get the program launched for the fall 2024 Open Season.

Currently March 2025 is the target for a special Open Season to allow military members to opt in for the first time. Other programmatic details are scarce, but there’s only so much room for creativity in these plans, so the mechanics above will probably cover the program.

FSA TTPs

FSAs aren’t rocket surgery, but you can max-perform your HAS usage with this checklist:

1. Do you even need an FSA? If your out-of-pocket costs are minimal, you may have a juice vs. squeeze violation.
2. How much do you spend on eligible items? Got any bends in the curve coming up? Twins with braces? Estimate your worst-case usage.
3. Start small. Some families lose money because they put the FSA card in a drawer and forget to use it. It’s probably better to pay $100 in taxes than lose $900 because you couldn’t spend the dollars.
4. Increase your deferral in future years as you calibrate your usage.
5. Periodically evaluate what you’re not buying (e.g., fitness products or chiropractor?) and consider whether the discount of your tax rate will incentivize the purchase.

Notes, Warnings, and Cautions

Healthcare FSAs don’t show up on your tax return as a special form. You’ll just be reporting less wage income.  You’re technically not supposed to gorge on Band-Aids every December to avoid a use/lose bust, but you may have noticed that one weird aunt that always gifts medical supplies… Finally, don’t let this go on autopilot. The amount and usage need some bump-steering throughout the year.

Cleared to Rejoin

A Healthcare FSA won’t make you rich, but skipping it could be leaving the IRS a tip. Keep your scope open this fall and in early 2025 as DoD rolls out the details so you can target on the timeline.  If you don’t need a Healthcare FSA this year, keep your raster scan going each Fall Open Season so you don’t pay the IRS more than you must!

Fight’s On!

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