Three Benefits of a Flexible Spending Account
Flexible Spending Accounts (FSAs) are among the most popular employee benefits offered by companies and organizations today, as they provide a degree of security and tax savings that can offer huge savings if managed properly. If you’ve recently started a new job or your company has begun to offer these benefits, you should jump at the opportunity to enroll!
An FSA allows employees to set aside money throughout the year with regular payroll deductions to allocate tax-free funds to an account that you can use on medical expenses like co-payments, prescription drugs and over-the-counter products. This extra layer of security will allow you to respond quickly when medical expenditures pop up, but FSAs hold a number of unique benefits and untapped potential you may not have realized.
Here are a few of the major perks of your new FSA:
Leftover Money May Rollover
In the past, your remaining FSA dollars would disappear after the end of your plan year thanks to the FSA ”Use it or Lose it” rule. With new IRS regulations in place, employers may now allow your FSA to carryover up to $500 at year-end if they choose. Alternatively, your employer may offer an extended 2 and half month grace period in which you can continue to spend down your funds after year-end.
Pay less in taxes
An FSA may take a certain portion of your take home pay each month, but you will realize major cost savings over the course of a calendar year. Because this money goes into your FSA on a pre-tax basis, less of your income will be taxed during each paycheck and can dramatically improve your bottom line over time, reported Bank Rate. With less money going toward federal, state and FICA taxes, total yearly pay will increase and your FSA will be a safety net that will be extremely helpful when medical expenses arise.
Spend when you need to
FSAs save money and cut down the amount of money you give to Uncle Sam each month, but when it comes time to actually use these funds, you’ll be amazed at how many options are available to you. FSAs can pay for prescription drugs and medications, vaccinations, healthcare products, eye exams, glasses, acupuncture and so much more. FSAs even cover over-the-counter medications like Advil and Tylenol, but a prescription is required by a doctor to be fully reimbursed for these items. For a better sense of your options, visit FSAstore.com’s Eligibility List to explore the many items that your FSA can cover.
Employees from every business have discovered just how beneficial FSAs can be to their bottom lines. With a combination of financial planning, smart spending on FSA eligible products and effective reimbursement and rollover of these funds, you can make the most of your new benefit and gain the peace of mind in knowing that you have another steady source of income to handle many of life’s big challenges.