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If your employer offers an FSA, it means you can put pre-tax money away to pay for many things health-related: doctor’s visits, over-the-counter meds, band-aids, you name it. What’s the big deal, you ask? I’ll tell you. Let’s say you spend $1,000 a year on co-pays and health expenses. Let’s also say that you’re in the 25% income tax bracket. If you put $1,000 in an FSA and use it to cover medical costs, you’ve essentially saved the amount you would’ve paid in taxes—or $250. Why do I bring this up now? Because it’s open enrollment season. My husband and I just decided how much money we’re putting into our FSA next year, so it’s on my mind. It’s a great savings tool, and I don’t think enough people take advantage of it. The only caveats: Most employers limit you to $5,000 of contributions per year, and FSA money is a use-it-or-lose-it thing. If you don’t use all that money by the end of the calendar year (or in some cases the end of March of the following year), you lose it entirely. So if you find yourself with a balance at the end of the year, stock up on ibuprofen and diaper cream. Or other things you’re already buying, like eyeglasses, flu shots and antacids. See this list for ideas. You can find calculators to help you estimate next year's expenses here and here. Do you contribute to an FSA? Take our poll. (And then tell us why or why not.)
Posted by: Julie| Friday, November 06, 2009 at 10:02 AM Julie, at my old company, I was just required to send in receipts with a form whenever I incurred expenses. Sounds like your system was much more convoluted. Sorry it was such a hassle! We have been using an FSA for 15 years. We are not allowed to submit over-the-counter meds receipts to our plan. They say it is not allowed by IRS. Sherry, the IRS doesn't allow you to submit over-the-counter medications as a medical expense for purposes of taking a tax deduction, but FSAs are intended as a complement to IRS allowances, not a mirror image. Many FSAs allow reimbursement for tons of common drugstore items. Looks like your FSA is less flexible, and that's a shame. Search for "FSA eligible expenses" online and you'll find dozens of examples of plans that allow it. Perhaps you could send a sampling to your FSA administrator? I am on my husband's insurance and thought he had signed up for vision last November-not. I knew I was due to have my eyes checked and that I would be needing a new prescription. I was shocked the last time I bought lenses, (unfortunately needed progressives for the first time) and it is a huge investment. So when my company's HR rep mentioned the FSA, I decided to put a little money aside each paycheck to help defray the cost of new glasses at the end of this year. Amazingly enough, I just returned from putting in my order and should have the glasses in 5 weeks or so. I'll just submit the receipt to the HR-progressives were $500+. Never used this before with this company and hope it works out. Looks like I should have the money I need to cover the expense after my last December paycheck-great way to budget for this with pre-tax dollars.... I have been contributing to an FSA plan every year for several years now. It is my medical savings account. I pay my medical bills each month anyway and I know I am going to have "X" amount of bills to begin with. It is SO convenient to be able to pay for bills BEFORE I have even earned the money. I send my bills in all through the year but I have a friend at work who actually uses her FSA to buy her family's Christmas presents at the end of the year. She just turns in all her receipts at one time. I also love the fact that we have 15 months total to use the money. |
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Several years ago I tried using my company-provided FSA and found it to be a huge headache. It was supposed to be easy, just use the little FSA debit card to pay for health expenses. But in reality, they were constantly sending me forms to fill out and requiring receipts and calling me and suspending my card if I didn't send the forms back fast enough, etc etc. So from then on I elected not to participate. The relatively small amount of savings wasn't worth the aggravation.