By the time you read this, I’ll be recovering from a minor oral surgery.
It seems like a good time to chat about the Flexible Spending Account (FSA). If your employer offers a benefits package, they might offer an FSA.
Here’s how they work: you elect a contribution amount during open enrollment and pre-tax amounts are taken out of your paycheck throughout the year. When you get billed for healthcare, you can have the FSA pay the provider or pay you back if you fronted the money out of pocket. This money is never taxed, but YOU HAVE TO USE IT BY THE END OF THE YEAR OR YOU LOSE IT.
Eligible expenses for a health care FSA are pretty varied. There are also FSAs that cover dependent and child care.
And then there’s the Limited Expense FSA. This is what I have. Keep in mind, I’m a federal employee, so plans may vary. Do your homework.
I only qualify for this Limited Expense FSA because I utilize a Health Savings Account (HSA) (like it’s my job) with my high deductible health plan (HDHP). This type of FSA really only covers dental and vision…. the eligible expense list is vastly shorter than the standard health care FSA.
2020 was the first time I’d signed onto the FSA program. If you only qualify for the Limited Expense FSA (like me), then consider it might be best to sign up when you’ve got plans. For instance, last year, we used it for my husband’s braces. Before that, I was sweating a little bit, trying to spend it all by the end of the year. For 2021, I’m having some minor oral surgery. Maybe next year, I’ll get LASIK.
You can elect any amount up to the yearly contribution limit, but again, make sure you have plans if it’s a large amount. I can always elect a smaller amount to cover my contact lenses, glasses, etc.
So that’s the Limited Expense FSA.
TLDR: FSAs let you elect a yearly amount that’s gradually taken from each paycheck tax-free that you can use on eligible expenses. The trick is to make sure you have plans to spend it all– if you don’t use it, you lose it!
-K