A flexible spending account (FSA) helps consumers pay for eligible out-of-pocket medical expenses. Learn about how it works, the FSA rollover, and more.
A flexible spending account (FSA) is a great way to set aside pre-tax money for eligible out-of-pocket medical expenses that your insurance doesn’t cover. It’s an employer-sponsored benefit that can help you save money on healthcare costs throughout the year.
You can enroll in an FSA through your employer and decide how much money to contribute for the year, up to a limit set by the government. These funds are available to you right away — usually through a benefits debit card — so you can pay for eligible healthcare expenses as needed. Then, the amount you choose is deducted from your paycheck over time, using pre-tax dollars. Your employer may even contribute to your account, giving you an extra boost.
One important thing to keep in mind is that while some FSA funds may roll over to the next year (if your employer allows it), anything beyond the allowed rollover amount will be forfeited. If you leave your job, you’ll also lose any unused FSA funds, so it’s important to plan ahead.
With healthcare costs continuing to rise, an FSA can be a valuable tool to help you save money. Since you’re using pre-tax dollars, you can save up to 30% on out-of-pocket medical expenses. That means more money in your pocket for the care you need.
Your FSA funds can be used for a wide range of medical expenses that aren’t covered by insurance. You’ll typically receive a benefits debit card to make purchases easier. Some eligible expenses include:
You can even shop online at sites like shopwealthcare.com to purchase FSA-eligible products.
Every year, the IRS sets a rollover amount that lets you carry over some unused FSA funds into the next year — if your employer includes this option in their plan.
Another option your employer may offer is a grace period, which gives you a little extra time (typically two-and-a-half months) to use your previous year’s FSA funds. This means you could have until March 15 of the following year to spend what’s left in your account.
General Rules:
Rules That May Change Each Year:
An FSA is a smart way to save on healthcare costs while using tax-free dollars. Just make sure you plan your contributions wisely so you can take full advantage of your funds before they expire.