EMPLOYED? CHECK TO SEE IF YOU HAVE A FLEXIBLE SPENDING ACCOUNT!
While many employers offer flexible spending accounts to their employees, many people don’t even know they have one! A Flexible Spending Account — also known as an FSA or a flexible spending arrangement, is a special account you put pre-tax money into that you use to pay for certain out-of-pocket health care costs. This money may be automatically deducted from your paycheck.
A few examples of healthcare costs you may pay for with an FSA include deductibles, eye exams not covered by insurance, copayments, eyeglasses and contact lenses. Some employers issue cards that you use like a debit card to pay for these and other health-related costs.
You don’t pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside. Employers may make contributions to your FSA, but aren’t required to. So you should definitely check with your Human Resources Department to see if you have an FSA. It’s especially important to know this because there requirements as to when you must use these funds:
FSA limits, grace periods, and carry-overs
- You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options (but are not required to do either):
- It can provide a “grace period” of up to 2 ½ extra months to use the money in your FSA.
- It can allow you to carry over up to $500 per year to use in the following year.
- At the end of the year or grace period, you lose any money left over in your FSA. So it’s important to plan carefully and not put more money in your FSA than you think you’ll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.
For more information on FSAs, visit www.healthcare.gov.