A flexible spending account is a great way to set aside money tax-free for future medical expenses. It is a cafeteria plan offered by employers to help their workers cover out-of-pocket healthcare expenses. However, any money left unspent by the end of the year will be forfeited, which is vital to remember. The funds can be used for multiple things including insurance deductibles, medications, and various medical services. Moreover, there are items and health services that are eligible for FSA coverage which many are unaware of such as fertility trackers, ear plugs, yoga classes, and sunscreen. With the year coming to an end, it’s time to spend that FSA money wisely.
Flex spending accounts, also known as flexible spending arrangements, are employer-sponsored plans that allow employees to use tax-free money from their paychecks for specific costs. There are different types of FSAs, but health FSAs are the most common, used for medical and dental costs not covered by insurance. Participants need to decide the amount they want to contribute at the start of the year, and this amount is deducted from each paycheck. The maximum contributions for 2023 are $3,050, and $3,200 for 2024. Participants file claims to be reimbursed for eligible expenses, and some companies even offer debit cards with FSAs for direct purchasing. The default rule for FSAs is “use it or lose it,” but with the recent changes in 2021, companies can offer up to a 2.5-month grace period or carry over a limited amount to the following year, so listen to your company’s rules and restrictions.
The list of FSA-eligible products and services is extensive. OTC medications are recently added as eligible expenses, as well as Covid-19 related products. Dental and vision items and services are also eligible, along with various medical treatments and tests. Pregnancy, sexual health, and mental health services are FSA reimbursable, and there are many more things that you can do with your FSA funds. However, it’s always good to confirm with your HR department about the specifics of your plan and coverage.
It is surprising to see that so many health services and products can be covered by a flexible spending account. This is especially helpful in covering the cost of much-needed items such as eyeglasses, contact lenses, and other prescription items. The expansions to the plans are helpful for those needing treatment but worrying about costs.
It is absolutely necessary to weigh your options before the year closes and plan your FSA spending accordingly. The flexibility in using the FSA funds and the recent expansions to FSA coverage make it an even more reassuring healthcare option, especially as individuals and families work toward a healthful and secure end to the year.
