Flexible Spending Accounts, often called FSAs, are a helpful financial tool that many people can use to get a better handle on their healthcare costs. FSAs are like savings accounts for healthcare, and they come with tax benefits. They are usually offered by employers and let employees set aside money from their paychecks before taxes to pay for medical, dental, and vision expenses.
What's Covered?
Here are some things that FSAs can help you pay for:
- Breast Pumps and Supplies
- Chiropractor visits
- Contacts/eyeglasses
- Crutches
- Eye exams
- Hearing aids
- Medicines
- Pregnancy test kits
You can find a complete list of what's covered and more details on the FSA Store website.
Benefits of FSAs
- Tax Savings: One of the biggest benefits of FSAs is tax savings. Contributing to your FSA with pre-tax dollars lowers your taxable income, saving you money!
- Planning Ahead: FSAs let you plan and budget for healthcare expenses for you, your spouse, or your dependents. You decide how much to contribute each year so you can help avoid unexpected financial stress.
- Less Out-of-Pocket Costs: You can use your FSA money to pay for qualified expenses before you pay income tax. It's like getting a discount on those costs. Some employers even contribute to your FSA, saving you even more!
- With FSAs, there are no requirements to be on a specific kind of health plan.
- Convenience: Many FSAs give you a debit card, so you can easily use your funds when you need them.
- Year-End Rollover or Grace Period: Although most FSAs have a "use it or lose it" rule, some plans let you carry over up to $610* to the next year or offer a grace period of up to a two-and-a-half-month to spend remaining funds. This feature can help you maximize your savings.
Important Things to Know
While FSAs have many benefits, there are a few things to keep in mind:
- Understand what expenses are covered under your FSA plan, as not all medical expenses may be eligible.
- Be aware of the "use it or lose it" rule. Most FSAs have a rule that says any unused money goes away at the end of the year.
- You can only put up to $3,050* in your FSA each year per employer.
- Plan your expenses carefully and accurately, as you can't change your FSA contribution amount mid-year without a qualifying life event.
In conclusion, FSAs are great for managing healthcare expenses while saving on taxes. Employers offering FSAs can reduce their tax burden and improve employee morale by enhancing their benefit offerings. There isn’t a one-size-fits-all solution for FSAs, so employers and employees should decide what works best for their situations. For employees interested in enrolling in an FSA, talk to your HR team. For employers looking for more information on FSA administration, contact us at sales@medcombenefits.com.
*Limits are subject to change based on annual inflation adjustments.
