What's an FSA?
What is an FSA, and how do you use it? This savings account option can help you save money on certain medical expenses.
Understanding the details of a flexible spending account helps you decide if you need one.
A flexible spending account is a special savings account designed to cover qualified medical and dental expenses. They're offered by employers as a benefit and are funded using pre-tax payroll deductions. Your employer can also make contributions to your FSA. The account has a maximum yearly contribution of $2,850, but your spouse can contribute the same amount if their employer also offers an FSA. You must use the funds during that year or lose them. However, many FSAs offer a grace period of up to 2.5 months into the next calendar year, or they may allow a rollover of up to $570 to the next year.
An FSA is an employer-sponsored account that you can only get if your employer offers one. You sign up through your human resources department as you do for other benefits. Your employer handles the payroll deductions based on how much you want to contribute to your FSA.
Your flexible spending account funds can only be used for qualified items related to your health and dental care. You can't use the money for insurance premiums, but you can use it for deductibles, copays and coinsurance for medical services you receive as well as prescription medications. There are many other FSA-eligible items you can use the funds for if they relate to health. Some examples include:
- Over-the-counter medications
- Feminine care products
- First-aid supplies
- Reading glasses, eyeglasses and contact lenses
- Medical equipment, such as crutches and wheelchairs
- Home health care
Some employers also offer FSAs for dependent care, which allow employees to contribute up to $5,000 per year pre-tax to cover qualified dependent care expenses. This includes in-home care, care centers, before-school and after-school care, summer day camps and fees you pay to get qualified care. The money can go toward expenses for dependents under age 13, spouses who can't care for themselves or other adult dependents you claim on your taxes who can't care for themselves.
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