What is a Flexible Spending Account?
Flexible Spending Accounts are plans used to manage an employee’s healthcare costs. It allows an individual to save up to 40% on their common healthcare expenses not covered by insurance. This includes medical supplies, prescription drugs, dental visits, contact lenses, and co-pays.
FSA is funded by setting aside money from an employee’s paycheck. This goes directly into their FSA. The funds which are transferred to an FSA are tax-exempt. Thus, employees under this plan enjoy a decrease in their taxable income and an increase in their spendable dollars.
American households can enjoy these perks at the beginning of their plan year. The funds stored in the account can be used to pay for both planned and unexpected medical expenses. However, since FSAs are limited to $2,600 per year per employer as set by IRS, you need to budget your funds throughout the entire year. This money can be used to pay for certain medical and dental expenses for you, your spouse, and your dependents.
There are different types of FSAs. Healthcare FSAs can be used for reimbursing out-of-pocket medical expenses. On the other hand, limited-purpose medical FSA can be used for a qualified high deductible health plan (HDHP) and health savings account (HSA). Limited FSA, on the other hand, allows reimbursement for vision and dental care expenses. Dependent care expenses such as daycare incurred by eligible dependents can be reimbursed through a Dependent Care FSA.
How do you use your FSA?
The available money from your FSA can be used to pay for medical and dental expenses which are not covered by your insurance.
Funds from your flex savings can be used to pay for prescription medications (products that require a prescription for eligibility) and over-the-counter medicines. It can also be used to pay for medical equipment that can be purchased without prescriptions.
Eligible medical items that can be purchased using FSA funds include inhalers and vaporizers, athletic braces and supports, first aid kits, home medical equipment, blood pressure monitors, bandages, medical-grade shears, and heating pads. Other items that can be purchased or reimbursed using your flex savings are nasal sprays, anti-fungal treatments, cough, cold, and flu medicine, topical skin treatments, and pain relievers.
An individual enrolled in the plan can use the FSA debit card in purchasing these items. Once there are sufficient funds in their account, the deduction is made automatic, and no further action is required. On the other hand, an individual can also submit receipts for reimbursement to their FSA administrator. The receipts are reviewed manually to check for eligibility
You can use your FSA at the beginning of the year plan until the end of the year or at the time that your coverage ends. For instance, if you’ve resigned from work, you lose your FSA coverage. The Internal Revenue Service (IRS) has an optional grace period of up to 2 ½ months wherein the funds can be utilized. Unused funds that go beyond this period are forfeited.
Before the year ends, it is best that one take advantage of the FSA before they lose it. It’s a good idea to stock up on supplies that you may need for the year and invest in the right quality supplies such as Surviveware first aid kits. Make the most out of your hard-earned money and use your FSA funds wisely.