Flex-Ed: Understanding your new FSA
Welcome to all the new FSA holders who may have just enrolled! (And welcome back to anyone who just wants a little FSA refresher lesson.) As you probably know, signing up for an FSA is an excellent way to save money on qualified healthcare expenses by contributing pre-tax dollars to your account. But there's a lot to learn when it comes to understanding exactly how your FSA works.
Where to start?
First thing's first; if you want to make the most of your new FSA, take a little time up front to familiarize yourself with the basics. Your FSA administrator is your new best friend. Take time to figure out who that is (your HR department can point you in the right direction) and read through your plan documents.
You should have available to you something called a Summary Plan Description, where you'll find important information about how you can use your FSA, who you can use it for and any important deadlines you should be aware of.
Knowing exactly what you can use your FSA on will save you time and effort in the long run. While there are resources to help you understand exactly what's covered, these commonly covered expenses will ultimately depend on what your plan will allow. Knowing your FSA allowances up front will avoid any issues with you trying to use your account for expenses which may not be qualified.
How can you access your FSA money?
Once you've taken time to familiarize yourself with those plan documents we talked about and learn about your qualified expenses, you're ready to start using your FSA. If you have an FSA card, you should be able to use it for any copays at the doctor or dentist as well as for any out of pocket medical expenses you may incur.
Be sure to keep any receipts when you use your card; your FSA administrator may require that you submit a copy of your receipt along with any other required supporting documentation to show that you used your account correctly (a rule enforced by the IRS).
What if you don't have an FSA card?
If a card isn't part of your FSA plan, you'll need to submit claims to get the money out of your FSA. Most FSA administrators have ways for you to do this easily online, so check in with them about the options that you have available.
While the claims process may seem a bit overwhelming to start, there should be clearly laid out forms to help you through it. Claim forms will typically request information about the types of medical services or items that you received or purchased, the dates in which the expenses incurred, who your medical provider was, etc.
Make sure to include copies of your receipts or other appropriate documentation with your claim, such as an explanation of benefits that shows how your expense was applied to your insurance. Doing this up front will help to ensure that your claim gets approved and you get your money quicker.
Do you really have to rush to spend your money?
One of the best parts about an FSA is that every dollar you elect to set aside is available to you on the first day of your plan year, but that doesn't mean you need to rush to spend it. In fact, FSAs can be a useful tool in managing your year-round spending, there when you need it to cover those common out of pocket costs like co-pays, deductibles, prescriptions, glasses, dentists visits and so much more. You can even use it throughout the year for everyday medical expenses like sunscreen, band-aids and contact lens solution.
If you're worried about your end of year deadline already, one of the most common misconceptions about FSA accounts is that you'll end up with a bunch of unspent money at the end of the year that you'll lose after the deadline.
While it's true that your FSA funds may be subject to a "use it or lose it" policy, planning ahead will help you prevent this situation all together. Armed with the information on exactly what you can use your FSA for, you should be able to find thousands of ways to use your FSA all year long.
Learning more about your FSA
If you still need more information, it's important to utilize all the tools available to make the most of your FSA funds. Some examples of helpful resources include:
- An eligibility list, which will show you exactly what's eligible and any conditions that need to be met.
- An FSA calculator can help you determine how much money you'll save with your FSA account. It's an indispensable tool when it comes to estimating your medical expenses for the upcoming year and how much money from each paycheck should be contributed in order for you to see the biggest benefit. All you need to do is enter a few basic questions to get started.
- Other tools and resources, like articles and more, can help you keep track of the latest FSA developments.
If you've made it this far, you're off to a good start. We know just how great an FSA can be for the millions of Americans who take advantage of them and we're certain that with this information in hand, you'll see just how great they are too.
New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the FSAstore.com Learning Center.