How Much Money Can I Spend Out of an FSA?
Using a Flexible Spending Account
Flexible Spending Accounts (FSAs) are a great way to save on healthcare costs using pre-tax money. These employee benefit add-ons not only save you money, but also allow you to pay for health care expenses not covered by your regular insurance plan and even buy medical supplies like breast pumps, shoe insoles and hot/cold packs.
You can spend as much as you’ve elected to contribute to your FSA for the year. For instance, if you opt to contribute $500, then that’s $500 in pre-tax funds toward qualified medical expenses. Even better, the $500 is available on the first day of your FSA plan year, while you contribute the money evenly through pre-tax payroll deductions throughout the year. Learn more about FSA eligible expenses.
As of January 2013, Health Care Reform imposes that the maximum anyone can contribute to an FSA is $2,500 a year. Some employers have limits that are less than that, and some employers also contribute to their employees’ FSA. Traditionally, an FSA is set up so that the money contributed to the account must be used by a specific annual deadline. You typically have one year to use the benefits of an FSA, and for many FSAs, there is a December 31 deadline to use the funds (unless the plan has a grace period). If you need to spend down your FSA by December 31 of this year, our blog post offers tips on 5 Surprising Products that are covered by your FSA.
FSA "Use it or Lose it" Changes
Recently, the U.S. Treasury Department and IRS made changes to the “Use it or Lose it” rule that many FSA plans have. The changes will allow employers the option of allowing a rollover of up to $500 at the end of the plan year to the next year. Other employers allow for a grace period – a two and a half month extension to use FSA funds. If you want to know if your FSA qualifies for either of these options, it’s best to contact your FSA administrator with any questions. FSA administrators typically offer online access to your FSA information as well.