It’s open enrollment time! Time to add up your health care expenses and try to guess how much money you should put in your flexible spending account!
Let’s take a look at some of the questions I get around flexible spending account (FSA) plans and ease the process of enrolling in your plan this year.
Once you learn about FSA plans, they aren’t too complicated to use to save money on your taxes.
Flexible Spending Account Basics
If you haven’t enrolled in a flexible spending account before, here are the basics of the plan to get you started:
- What is an FSA? Flex spending accounts allow you to pay health care expenses using pre-tax income. Or a simpler version: you don’t have to pay tax on the money you put in an FSA.
- What can FSAs be used for? The flex spending account rules allow you to contribute money to the FSA for costs not covered by insurance: deductibles, copays, and coinsurance. In addition, you can use your FSA to pay for health care costs that health insurance doesn’t cover.
- Who is covered by FSA plans? The FSA plan is for you, your spouse, and your dependents. You should read the specifics of your employer’s plan because certain state laws may limit the specific coverages of your dependents.
- What are the 2012 FSA limits? 2012 is the last year that there are no fsa limits mandated by law. In 2013 the FSA limit will be $2,500. Employers currently set their own FSA limit. For example, my husband’s employer has a $7,500 maximum FSA contribution.
Flexible Spending Account Coverage Questions
Because employers use various companies to administer flex spending accounts, some of the processes for reimbursement vary by employer. However, the flexible spending items should remain constant between workplaces:
- Do FSAs cover over the counter medicine? No. As of 2011, FSAs no longer cover OTC drugs, unless you have a prescription from your doctor.
- Is lasik covered under FSA plans? Lasik and other types of laser eye surgery costs are covered by flex spending. It will continue to be covered in 2013, but will be subject to the lower FSA limit.
- Are orthodontics covered by flex spending plans? Yes. Orthodontia and other dental care is still covered under flex spending.
- Are reader eyeglasses covered by FSAs? Over the counter reading glasses are covered by FSAs as long as you have a prescription from your doctor.
- Does insulin require a prescription for FSA? No. Insulin is the only over the counter medicine which will not require a prescription for flex spending reimbursement.
- What items are not covered by FSA plans? Some of the most common excluded FSA items are health club memberships, vitamins, cosmetic procedures, and funeral expenses.
Flexible Spending Account Finances
Now, onto my favorite part, let’s talk money. Your employer offers an FSA plan as an employee benefit. What’s the benefit? You get to save money on your taxes:
- How much do flex spending plans save? The amount of savings you get from an FSA plan depends on your tax bracket. If you put $5,000 in an FSA in the 15% tax bracket, you’ll see a federal tax savings of $750.
- What happens to money I don’t use in my FSA? Flex plans are “use it or lose it” plans. Any money you leave in your flexible spending account at the end of the year (which often extends to March 15 of the following year using the IRS grace period), will be gone and no longer available for you to use.
- How is a dependent care account different? A dependent care account is similar to a flex spending account, except that it is used to pay for day care costs on a pre-tax basis. The dependent care limits are separate from the flex spending limits and you can contribute to both.
Now that you know everything you need to know about FSA plans, it’s time to fill out your enrollment papers for next year! I’m off to calculate how much to put in our FSA right now…
More Helpful Open Enrollment Topics
- Flexible Spending Account Changes
- How Much Should I Put in My Flexible Spending Account?
- 12 Ways to Use Up All of Your Flex Spending Account
- Health Savings Account
- High Deductible Health Plans
What other questions do you have about FSA plans?