Flexible Spending Accounts (FSA): How can you save?
What is a Flexible Spending Account (FSA)? This is not to be confused with a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA). A Flexible Spending Account is unique in the sense that the amount elected annually, by the employee, is available, in full, upon the effective date. The employee would, however, make contributions per pay check. Think, credit card. The funds can be used towards qualifying medical, dental, or vision expenses, as defined by The IRS . It is also important to note that this benefit is a use it or lose it. In other words, any funds remaining in the account upon termination of employment or at the end of the plan year, are forfeited.
So how much can you save? Since the amounts contributed to the FSA come out of each paycheck pre-taxed, a person can experience big savings. A person can experience anywhere from 20% to 40% savings on eligible expenses, with the average being about 30%. The reason being, an FSA reduces the amount an employee contributes towards Federal Income and FICA taxes. Check out how much you may be able to save using the calculator on The FSA Store.
So how much should you set aside so as not to lose any remaining funds? It is always best to under estimate the amount you may need for that year. The FSA contribution limit in 2018 is $2,650, which is about $221 per month. While some things are unpredictable, try to account for the definite. For example, If you are on a maintenance prescription, add the monthly cost to the annual estimate. If you see a doctor regularly, add those copays. Need dental work done? Add it in the total. Hopefully this will help gauge the annual amount you will require. Once you have calculated your expenses for the year, you may want to add in some wiggle room for the unknown or an emergency. According to The Kaiser Family Foundation, The average health insurance deductible was $1,505 for an individual in 2017. What should you do with any extra funds, before the end of the year? Consider visiting The FSA Store link (above), for items eligible for purchase.
As you can see, and FSA is truly an advantageous plan and major bonus to employees. If your employer offers this benefit, you should take advantage. You will be one step closer to becoming a savvy healthcare consumer