How Does A Flexible Spending Account Work?
Maybe you just started working full-time or your company just offered Flexible Spending Accounts, but the FSA is the key to saving a lot on your medical bills. At the start of your plan year, you decide how much money you intend to contribute to your FSA for the next year. Each month, one-twelve of that amount is deducted from your paycheck pre-tax. When you payout an eligible medical expense, you submit a form and receipt to be reimbursed from your FSA. It’s essentially a discount on the expense equal to your tax bracket since you pay with pre-taxed funds.
Why is this so great? Well for starters, some employers make your life very easy by providing debit cards. You pay with the debit card and the funds are automatically withdrawn from your FSA without the need for paperwork.
Another reason it’s great is that you can use it for dependent care - day care for your children is a legitimate expense for FSAs. Elective medical procedures (lasik) are also covered as well as all your health, dental, and vision plan co-pays. Finally, even over-the-counter drugs like Advil and Claritin are covered too. Sometimes, you can get things that aren’t covered to be reimbursed simply because the plan provider isn’t paying attention. I threw left an ACE bandage on a receipt in my reimbursement documents and was reimbursed.
The only pitfall to the plan is putting in more money than you’re going to spend. At the end of the year, regardless of how much you have left, the balance is reset to whatever you newly elected your FSA contribution to be. As long as you spend before the reset date, you can typically submit receipts for another month or two (check with your provider).
Finally, you can spend the money before you’ve actually contributed it. For example, if you elect to contribute $120 to your FSA, you can spend all $120 of it in the first month despite only contributing $10 that month. If you leave the company at anytime that month, you aren’t required to pay back the amount you’ve already spent and your employer foots the bill. Rest easy though because if you don’t spend it all, your employer reaps the rewards anyway, so it all balances out.
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5 responses to “How Does A Flexible Spending Account Work?”
fivecentnickel.com responds:
Posted: August 10th, 2005 at 1:54 pm
Unsolicited eBay Advice
I recently spent an afternoon listing a bunch of items for sale on eBay, and thought I’d pass on a few tips. These are a combination of things that I’ve found to be useful as an occassional seller of random stuff, as well as what I look fo…
Understand COBRA » Flexible Spending Accounts Under COBRAs responds:
Posted: October 21st, 2006 at 7:22 pm
[...] If your employer offered a flexible spending account then under COBRA you would be allowed to continue the FSA until the end of its period. So, if let’s say your FSA accounts ran from January to December and you left your job in March, a COBRA would allow you to continue requesting reimbursements until December of this year. You would not be able to elect FSA coverage after December though, so next year you’d be without a FSA. [...]
HOWTO: Flexible Spending Accounts (FSA) Deconstructed : SavingWithMe.com responds:
Posted: August 20th, 2007 at 10:19 am
[...] How Does a Flexible Spending Account Work? [...]
marlaine gaylor responds:
Posted: January 2nd, 2008 at 3:05 pm
Our company is working with MBI, a horrible managed company, however, I elected benefits, left the company. Came back as a new hire, and reinstated my flex benefit card, and after using it, they want receipts from January which I don’t have. Used my card at Walgreens, so they temporarily suspended my card, so for the whole year, I could not use my card. Now this is 2008 and they still have my card suspended. this happen to anyone?
Mad in Kansas City responds:
Posted: May 3rd, 2008 at 5:38 am
Looking at the flex spending on this site and have a question. I have left my job with a + money on my flex spending at the time I left. Now I did have a lot taken out but I was under the understanding that when I leave the funding would stop at that date. I found this want the case and my employer withdrew ALL the funds for the whole year. I could see if I spent x amount and was in the hole for the money to withhold the money. Have you ever heard of anything like this?