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A flexible spending account (FSA) is a benefit typically offered by your employer to supplement your health insurance plan. An FSA allows you to put away pre-tax dollars for qualified medical expenses—but the money you don’t use will be forfeited at the end of the year.
During annual enrollment, you select an amount to contribute to your FSA for the following year (up to the plan limit for that year). The full amount you select is available for use starting January 1, even though your contributions are taken out via payroll deductions throughout the year. The funds can be used toward eligible healthcare products or services for yourself, your spouse, your children or any other qualifying dependent.
Eligible expenses include those expenses not covered by your medical plan such as your deductible and co-pays, dental and vision care expenses, eyeglasses and hearing aids. Remember, if you have a high deductible health plan, you can only contribute to a limited purpose FSA—limited to reimbursement for vision or dental care expenses or limited to reimbursements only after the deductible has been reached.
FSAs adhere to a use-it-or-lose-it rule. This means that you need to spend all the money in your account before the end of the year or you lose it for good.
Note: Your employer may offer a rollover feature of up to $550 or a grace period until March 15 of the next year. If you have access to Ayco, connect with a coach to understand your options.
There are two ways to use your FSA: pay directly from your account or take a reimbursement.
When you enroll in an FSA, you generally receive a debit card from the plan’s administrator. You may also request additional debit cards for qualifying dependents. Each charge on your family’s FSA cards will impact your account balance, so be sure to keep track of what everyone is spending.
If you don’t use a debit card, make sure to keep your receipts and file for a reimbursement. If you have access to Ayco, connect with a coach to get more information on this process.
With the new year right around the corner, make sure to take advantage of the funds in your FSA. Don’t risk losing the money—use it for any of the items mentioned above, or if you have receipts for eligible expenses previously paid, make sure you submit a claim for reimbursement before the plan’s deadline.
For more information, contact your plan administrator.
If you have Ayco as a company benefit, register or log in to learn more about this and other financial wellness topics. If you’re not sure whether your company offers Ayco Financial Counseling, contact your human resources representative.
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Updated for tax year 2020