Introduction
Ever gotten hit with a huge medical bill? Healthcare costs are quite a burden, no? An FSA can relieve this burden a little. It allows you to set aside pre-tax dollars from your paycheck to pay for medical costs. It could save you money? Forget the stereotype that only the affluent have FSAs. If you have regular medical expenses, this could be for you.
Flexible Spending Accounts (FSAs), Explained
An FSA is a special account to save on healthcare expenses. The employer offers FSAs. So let’s see what it is, how does it differ, and who can utilize it.
What Is a Flexible Spending Account (FSA)?
An FSA is an employee welfare benefit plan established by an employer that permits employees to set aside amounts of their gross income for cash reimbursement of certain medical expenses they incur during the plan year. The cash reimbursement is tax-free when paid out; hence, the pre-tax contributions protect tax dollars. Therefore, such an account would help you in lowering medical expenses considerably.
FSA vs. HSA vs. HRA: Significant Differences
FSAs, HSAs, and HRAs all help with healthcare costs but operate differently.
- FSA: These could be set up only by the employer. Use-it-or-lose-it rules apply, with contribution limits. There is no portability.
- HSA: You need a suitably high-deductible health plan. Money belongs to you and can follow you around, even if you change jobs. It can even be invested.
- HRA: Funded entirely by the employer; in effect, the employer sets the rules and contribution limits. Not portable.
Who is Eligible for an FSA?
If there is an FSA offered through your employer, you are probably eligible. There are exceptions. If you do have an HSA, you are generally disqualified from having an FSA at the same time. Check with your benefits administrator for confirmation of your eligibility.
Maximizing Your FSA Contributions
It is important to set an FSA contribution that reflects an exact balance: not too much or too little. This section offers some helpful suggestions.
Estimate Your Healthcare Costs
Look at what you’ve spent on healthcare for the past year. What appointments or procedures do you expect this year? Don’t forget to add in everything for your entire family. With this information, you can make a better decision on how much money to set aside.
Contributions Limits and Deadlines
The IRS sets FSA annual contribution limits. There are no catch-up contributions. Be aware of the enrollment deadlines. Also, note the deadline to use the money in your FSA.
Use-It-Or-Lose-It Rules and Grace Periods
FSAs generally have the “use-it-or-lose-it” rule meaning that any money in your account after the date limit will not be refunded to you. Some employers allow grace periods that let you use your funds during a window after the set deadline. Others may permit small rollovers into the next year. Spend wisely so that your funds will not go unutilized.
Eligible Expenses Under an FSA
Do you know FSA assignment expenses? Many of them are eligible. It’s important to know what.
Medical Expenses
The qualified medical expenses include specialists’ visits, medications prescribed by the doctor, and some medical equipment. OTC meds typically require a prescribed type.
Dental and Vision Expenses
Dental and vision care cannot be left out! Exams, cleanings, fillings, and braces are all included in the FSA benefit. Glasses, contacts, and even LASIK can be paid for too!
Over-the-Counter Medications and Products
FSAs cover many over-the-counter items. Some OTC meds do require prescriptions. Approved items would include first aid supplies and feminine hygiene products.
Managing Your FSA and Submitting Claims
Managing your FSA really is very simple. Here are some thoughts.
Setting Up and Accessing Your FSA Account
Your employer is in charge of instructing you on setting up your individual FSA account. The usual procedure is web access or on a mobile device. Make good use of these things!
Submitting Claims and Documentation
Claims can be submitted through either the online process or via traditional mail. Keep all receipts and Explanation of Benefits (EOB) statements; these will help in validating your expense to your FSA provider.
Tracking Expenses and Monitoring Your Balance
Keep track of what you spent on your FSA. Know your balance regularly to avoid surprises. There are many FSA providers that assist with all of that.
Common FSA Mistakes to Avoid
People, at times, make mistakes with their FSAs. Learn how to avoid such pitfalls.
Overestimating or Underestimating Expenses
Guessing wrong could cost you dearly. Overestimating means you’ve lost that fund. Underestimation means the loss of savings. However, try estimating your expenses as carefully as possible.
Forgetting Eligible Expenses
Some people forget about the eligible expenses. Remember sunscreen and first-aid kits. Go through the eligible expense list to maximize savings.
Missing Deadlines and Documentation
This is the most common mistake: failing to meet deadlines. Keep track of enrollment, claim submission, and spending deadlines. Always practice good record-keeping and documentation.
Conclusion
FSAs can save big on medical expenses. Planning is the important element to consider for maximum utility with this tool. Investigate FSA options and start saving today. Consider money-saving opportunities with these accounts.