What’s (?!) In an FSA

“Some infinities are bigger than other infinities.”  Hazel was sixteen years old, had a wry wit, and always pulled a oxygen canister behind her.  She met August at a support group.  It was a group for children with cancer. But that story isn’t a story about cancer, or hospitals, or medicine, even though that is where much of the tale is set.  John Green’s The Fault in Our Stars is a beautiful story about love.  “As he read, I fell in love the way you fall asleep: slowly, and then all at once.”  And it’s about making the most of the time you have.  “You gave me a forever within the numbered days, and I’m grateful.”

Flexible Spending Accounts (FSAs) aren’t really about medicine or hospitals either, although that’s what you use an FSA to buy.  FSAs are about making the most with the money you have so you can spend your time with the people that matter.  Here’s why I think everyone (who can) should get one.

FSAs are awesome employee benefit programs and you should check and see if your employer has one.   Most large companies (and government employers) provide them, but I didn’t know much about them until I finally opened one up last year. There are really two main great things about and FSA.  First, it allows you to pay for medical expenses (up to $2650) with pre-tax dollars, saving you money.  Second, it gives you a big chunk of change every January to pay for any large medical expenses–LASIK, for example–so that you don’t have to spend time saving up for it.  In this way, it’s like a loan that does not charge you any interest.  Not every FSA will be the same with every employer, so make sure to do your homework.  What each FSA covers and the specific rules varies by employer.  Here I’m going to walk you through my FSA and all its sweet perks to give you an idea of what is out there.

Basically how it works is this:

I opened up an FSA with the FSA provider my employer contracts with during open season (November for me).  Sort of like choosing health insurance, except there was just one option.

I then elected how much money I wanted in my FSA for the next year.  I had to keep in mind two things.

  1. One, I had choose this amount up front and can only spend it on medical expenses (although these definitions are often broad, including things like sunscreen).
  2. Two: I can only roll over up to $500 to the next year, so if I elected to take too much, I might lose some of it.  Some employers might not allow you to roll over $500.  It might be less, or it could be none at all.  My employer allows $500.  As this was my first year, I played it safe and only elected $500 (I wish I had elected more, to be perfectly honest, as I knew I would spend at least a little! Duh!).

The first week of the new year, my FSA was funded the amount I chose.  If had been $2650, I would now have $2,650 sitting in an account ready to be used.

My FSA provider then deducts however much from each period is required to pay back that total within the next year.  In other words, if you get 52 pay checks (weekly) a year, and you put $520 in your FSA, the deduction would be $10 a pay-period.  The cool thing to remember is, this isn’t after-tax dollars.  It’s pretax! So you won’t actually see the money you pocket from each pay check go down by $10 each time, it should be less! So what does savings this look like in practice?  I put $500 in my FSA this year.  Assuming my tax rate is 25% (I’m not saying it is, noses out!), and also assuming I actually spend this $500 this year, my FSA calculates my savings on that $500 of medical expenses for the year will be $125.  (This is a huge oversimplification, but you get the idea.)

Lastly, every time I spend money on healthcare, I submit a claim to my FSA, and my FSA will reimburses me with pre-tax dollars.  I can do this a couple of ways:

  1. I can link my health insurance plans to my FSA, and my FSA will automatically pays any approved expenses.
  2. I can submit a claim manually, usually with a receipt, and I get a check back!

FSAs are a pretty great option, whether you have a big medical expense coming up that you know about (maybe it’s time to get rid of those pesky tonsils) or know you spend a certain amount of money on medical-care related things.  Before you sign up you can always look up what your FSA covers. Here is a quick, fun, and hopefully useful, list of things my FSA covers and does not cover (and this is just the tip of the ice-berg, the list actually goes on for over fifteen pages):

COVERED: Band Aids; Birth Control (With a Prescription); Christian Science Practitioner (Without a Prescription); Condoms (Apparently condoms are not “birth control”); Doctor Visit Co-Pays; Hand Sanitizers; Shots; Incontinence Medication (For Adults, Not Children); Invasilign; Lasik.

NOT COVERED: Marriage Counseling (sorry Dr. Phil); CPR Classes; Diapers; Feminne Hygiene Products; Funeral Expenses; Gluten Free Products; Hair Removal/Growth Products; Toothpaste.

Having said that, I have some serious questions about things that are covered and things that are left out.  Apparently we are prioritizing prayer over women’s menstrual cycles. But I guess that’s nothing new?  Still, my FSA is pretty useful, and yours probably is too!

 

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