Flexible Spending Account – Making the Most of It

Your employer may have offered you the option of setting up a flexible spending account for your health care needs, and we here at PaydayLoansCashAdvance can help you make the most of it. Whether you’ve turned down the option in the past because you weren’t sure what it meant or you set up a flexible spending account but are not sure how to most effectively use it, the information we’ve collected can help you reap the rewards such an account can bring.

Flexible Spending Account Defined
A flexible spending account, or FSA, consists of money you set aside from your wages to pay for health related items. The account can save you money for several reasons. For starters, the money you set aside comes out of your wages prior to being taxed, which means you can purchase eligible health-related items with tax-free money.

Secondly, although government regulations can be pretty strict on how to go about being reimbursed, many items are still eligible for FSA funds. The most common type of FSA is generally the health care FSA, also called the HCFSA, which allows you to be reimbursed for a number of health care related items as long as you use the money set aside by the end of the year.

FSA funds cannot rollover into the next year and you end up losing any funds that remain at the end of the calendar year. Some employers may offer a 75 day grace period where you can still file for reimbursements after the deadline has passed, but you will not be reimbursed for any new purchases or costs during that grace period.

This means one of the most common-sense ways to get the most out of your FSA is to make sure you don’t invest too much money into it. Do an approximate calculation of what you may expect to pay for health care over the coming year and only put in as much money as you would expect to use by December 31.

Pay for Medications and Drugs
Prescription medication and drugs are eligible for FSA money, as are over-the-counter medication and drugs for which your doctor gave you a prescription. While the term over-the-counter denotes you can buy the item without a prescription, if you are buying a particular OTC medication as per doctor’s orders, just get him or her to write up an official prescription for the item and you can get reimbursed.

The reimbursement change for OTC drugs went into effect Jan. 1, 2011, and it does not apply to insulin. Insulin remains covered under FSA eligibility regulations with neither any changes nor any need for a prescription.

Pay for Health Care Equipment and Accessories
Equipment and supplies you buy to treat a specific health condition or issue are typically covered under FSA. Examples may include bandages and gauze for wound care or sprains, crutches and braces for injuries or support and blood sugar test kits and other similar medical diagnostic tools. A doctor’s prescription for such items is optional, as reimbursement applies for such items whether you have a prescription for them or not.

Take Care of Co-Pays and Deductibles
Another way to get the most out of your FSA is to make sure to use the funds for your co-pays and deductibles. Co-payments for office visits to your primary care physician and specialists can fall under this category, as can co-payments for medical procedures you receive under doctor’s orders. Any deductibles you pay before your health insurance kicks in are also eligible for reimbursement through your flexible spending account.

Other Types of FSA
Employers may offer two other types of flexible spending accounts other than the regular FSA. One is the limited expensive health care account, or LEX HCFSA, and the other is the dependent care FSA, or DCFSA.

The limited expense health care account takes place of the regular health care FSA if you happen to have a health plan with a high deductible that offers a health savings account. A health savings account, or HSA, is similar to an FSA although it lets you retain the funds going forward instead of use them or lose them by the end of the year.

A LEX HCFSA also lets you retain the funds if you change jobs or retire. LEX HCFSA funds are yours to keep. FSA funds are yours to use by the end of the calendar year provided you stay with the same employer and use them by the deadline.

A dependent care FSA reimburses you for dependent care costs. The money you set aside is once again done before taxes and dependents can be children up to age 13 or adults who is unable to care for themselves due to mental or physical issues. The person must be listed as a dependent on your tax return. Money from the DCFSA would reimburse you for the cost of the eligible person’s care provided you were working full time or looking for work while they received that care.

Calculating How Much to Set Aside
Reviewing past medical expenses can help determine an average amount you spend on out-of-pocket health-related visits and items per year to get an idea of how much to invest in your FSA. You can also take any current health issues into account to determine if your costs may increase.

Unexpected health care expenses can always arise, although you’d want to weigh the benefit of having a cushion of pre-tax money in your FSA to cover unexpected expenses against the risk of losing unused funds. Review your account a few months before the deadline and use excess funds on eligible items, such as bandages, that may be useful to have on hand.

Our tips can help you get the most out of your flexible spending account, but only if you pay attention. Pay attention to what items are eligible, file all reimbursement forms according to specific instructions and definitely pay attention to the end-of-the-year deadline.

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