Understanding Your FSA Health Care Plan: A Beginner’s Guide
If you’re a novice to an FSA (flexible spending account) health care plan, you may have a lot of questions and may be unsure how to navigate it successfully. But don’t worry, we’ve got you covered! This guide will help you understand what an FSA is, how it works, and how you can make the most out of your benefits.
What is an FSA health care plan?
A flexible spending account (FSA) is an employer-sponsored health savings account that allows employees to put pre-tax dollars aside for eligible health care expenses. Contributions towards an FSA are tax-deductible and provide a tax-efficient means to pay for medical expenses that insurance may not cover.
How does an FSA work?
FSAs work slightly differently from health saving accounts (HSAs). While HSAs have an annual cap on contributions and allow unused funds to roll over to the next year, FSAs are not as flexible. FSAs have a “use-it-or-lose-it” policy, which means that funds that aren’t used by the end of the year are forfeited. However, the IRS has recently passed a rule that allows employers to offer employees a grace period to use their FSA balance up to two and a half months after the end of the plan year or to carry over up to $550 to the next plan year.
What expenses are allowable with an FSA?
An FSA can only be used to pay for eligible medical expenses, including co-pays, deductible, prescriptions, and other medical costs. You can use your FSA to pay for everything from over-the-counter medication to eyeglasses and LASIK surgery. However, be aware that procedures like cosmetic surgeries and procedures cannot be paid for with FSA funds.
How to maximize your FSA benefits?
One of the most effective ways to maximize your FSA benefits is to plan ahead for eligible expenses. Make a list of anticipated medical expenses for the upcoming year and plan to spend your entire FSA contribution. This includes everything from medications and over-the-counter items to doctor’s visits and procedures. Consider scheduling appointments toward the end of the year to take advantage of your “use-it-or-lose-it” policy. Another useful tool is to enroll in an HSA or be aware of other insurance options that might be available to you.
Conclusion
FSAs can be a great way to save money on healthcare expenses and get the medical care you need. Understanding your FSA plan is essential to accessing its full range of benefits. With the above information, you now have a clear understanding of the basics of your FSA health care plan. Remember to plan ahead and make the most of your benefits by staying up-to-date on any changing policies or updates by the IRS. Happy savings!
