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Flex-Ed: What happens if your FSA claim is denied?
It's embarrassing when your credit card is declined because it feels like everyone—the people in line and the cashier—is looking at you. The good news is that you typically know how to handle it: call the bank, try a different card, or check your balance.
But what happens if your FSA claim is declined? It often feels similar, but the next steps can be confusing. Here's everything you need to know if your FSA card is denied.
Don't panic
Regardless of why your card was denied, there's no need to be embarrassed. It doesn't mean you've done anything wrong and there's a good chance it's not even your fault. There are a lot of reasons your FSA claim might be denied and most have an easy fix. The first step is to figure out whether or not your card has been activated.
Forgetting to activate your card is a common oversight with a simple solution: call your card administrator or explore your company's benefits website to learn how to activate your card.
Double check your funds
Let's be honest: sometimes it's hard to keep track of everything and that includes your FSA card balance. If your FSA claim is denied, it might be because you had insufficient funds in your account or that the price of the item you tried to purchase is higher than your balance. Be sure to check your balance before you use your card again.
Make sure you're using an approved merchant
FSA cards come with a lot of specific rules and one of the primary rules is that you can only use your account to buy FSA-eligible items. Various restrictions are put on the card to ensure that you use the funds correctly, including limitations based on merchant type, limitations based on merchant systems and limitations based on merchant inventory, to name a few.
The easiest way to ensure that your items are eligible is by shopping at a store that exclusively sells FSA-eligible items. It takes the guesswork out of shopping and decreases the chances that your FSA card will be declined.
But, for the most part, your FSA card should work where it makes sense; at locations such as local pharmacies and drug stores, vision centers, doctor and dental offices, etc. But if you try to use your card at an ice cream parlor or an auto parts store, even if that ice cream parlor happens to sell FSA-eligible bandages, chances are your card won't work.
If you have questions about whether or not a specific merchant will allow your FSA card, you can contact your FSA administrator to find out.
Confirm with your employer that the item is eligible
Here's the deal: the IRS determines which items are FSA-eligible. However, employers can set their own eligibility rules as long as they are adhering to the IRS guidelines. In other words, it's important to check in with your FSA administrator and confirm that the item you tried to buy is FSA-eligible.
If your FSA card was declined but you decided to buy the item with a different card, then it's still a good idea to try and get reimbursed through your FSA. If you bought the item through FSAStore.com and the item was allowed under your plan guidelines, we guarantee that the item is FSA-eligible, so be sure to save your receipt and submit for reimbursement.
But remember: items with a red check mark are always FSA-eligible, while products marked with a BLUE "Rx" require a prescription from your doctor in order to be eligible.
Save with bundles
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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.
Flex-Ed: Your "not just another new year, new you" FSA checklist
Hello, 2020! (Well, by this coming Wednesday, anyway.) As you look back at 2019, no matter how hard you tried, you went off budget and off your health plans. So how can you stay on track in 2020? Resolutions are nice, but the most-effective way to have your best year yet is to make an FSA checklist.
Here are some important budget tips you need for the new year.
Budget for health expenses
The fact that the full amount of your FSA annual allocation is available at the beginning of year is one of the best parts of having an FSA, but it can also be one of the most stressful. It's great to have access to the entire amount if you're hit with an unexpected medical bill or need an emergency procedure.
But if you're trying to determine how to allocate your FSA for an entire year, it's difficult to strike a balance between spending too much and not spending enough throughout the year. If you struggled with budgeting last year, try these tips for a more productive (and financially secure) new year.
Review last year's health expenses
The first step to creating the best health and budget year yet is to sit down and look at last year's health expenses. It might not sound glamorous, but it's incredibly important because it will allow you to prepare for the year ahead. At this point, you've probably already allocated your FSA funds for the year ahead and have likely looked at your total spending for last year.
Now it's time to see how you spent your FSA funds last year. Did you spend most of your funds in January? Did you have a lot of funds left over at the end of the year? Now is the time to dig through your spending and create a month-by-month breakdown of last year's FSA expenses.
To do: Make a document that outlines your monthly FSA spending from last year and the items or services you purchased. For example, in January you spent $15 for prescription medicine and in February you spent $350 for an emergency appendectomy.
Estimate your monthly spend
Now that you've outlined your FSA spending from last year, it's time to estimate your monthly spending. Model your monthly estimate on last year's spending. In addition, you need to account for new or upcoming medical expenses.
For example, if you know you'll need to pay for braces for your kids this year or if your new year's resolution is to quit smoking, be sure to estimate how much that will cost. Of course, unexpected expenses might arise throughout the year, so don't panic if you have FSA money leftover in your estimate.
To do: Create your monthly estimate for the new year. The estimate should include all medical visits, health-related items, prescriptions and services you plan to pay for with FSA funds.
Plan for what's left over
The final budgeting step is to plan for what to do with your leftover FSA expenses. Even though unexpected expenses may arise throughout the year and you might have less money "leftover" than you expect, it's still a good idea to have a plan for your remaining funds. Because here's the deal—it's stressful to scramble to find FSA-eligible items at the end of the year.
The best way to plan for remaining funds is to create an FSA wish list. Your wish list can include FSA-eligible items and services that would help your health and overall well-being. It might also be a good idea to include items like glasses, that will be replaced or updated in the near future.
To do: Create your FSA wish list and keep it updated throughout the year. This will help you avoid scrambling for last-minute items at the end of the year. Plus, you'll be able to spread out your FSA spending more evenly throughout the year.
Set a goal of buying at least one FSA-eligible item with unbudgeted FSA funds each month. It's the perfect way to take care of yourself, and your family, throughout the entire year.
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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.
Asked and Answered: What happens to lost FSA money?
As you probably know from looking around our site, the 12/31 deadline is just about here. It's an exciting time for us, of course. But it's also an exciting time for FSA owners who have the chance to make the most of their tax-free funds, rather than forfeiting them due to the "use it or lose it" rule.
Whether we're reminding FSA holders of upcoming deadlines, or just sharing some information about these tax-free accounts, "use it or lose it" has become a tagline for our entire team. And, because we offer a growing selection of 4,000+ FSA-eligible products, people usually don't have any trouble using their FSA funds.
Still, with the deadline here, we thought it would be a good idea to revisit the most common questions about FSA funds -- what happens to the money that does get lost? No one likes losing money, no matter the amount. So we thought it was a good idea to remind people of what happens if they end up on the wrong side of the "use it or lose it" rule.
Let's cut to the chase…
You may not like this answer, but your unused FSA money returns to your employer. These funds can be used in a variety of ways, which we'll get to in a bit. Now, before you and your coworkers march down the hall with flaming torches, realize they're not the "bad guys" in this scenario. In fact, they're on your side, and are even taking some risks to make FSAs available to employees.
See it from your company's perspective
It's true -- your employer assumes a good amount of financial risk when you sign up for an FSA. That's because even though you get to contribute to your account little by little, through regular paycheck deductions, you actually have access to the entire year's allocation, right from the beginning of the plan year.
Who's fronting that money? You guessed it, the employers. And they're on the hook for any losses if you leave the company before making a full year's contribution.
In other words, if your plan year begins on January 1, and you opt for an expensive FSA-eligible procedure that week, you can use the entire year's allocation to pay for it tax-free. But if you quit a month later, your company is forced to eat that balance.
So, lost FSA funds from other employees can be used to offset these losses. It's not what your employers want to do. But it's certainly better for them than having to absorb the entire loss.
So where does it go from there?
While we certainly can't fault companies for wanting to protect themselves from potential financial losses, some choose to reinvest this "found" money into its people. No, they can't just refund you the exact amount you lost. But there are several ways they can share the wealth and ease the sting of lost funds.
1. Pooling
Though it's rare, companies could choose to give the money back to its employees directly. It's not as simple as refunding the exact amount lost to each person with an FSA, but employers might opt to pool the collective losses and distribute back to plan participants in a fair, uniform way.
(To be clear, any money returned to participants must be distributed to ALL participants -- not just those who lost funds that year.)
2. Administrative fees
Companies may choose to save these excess funds and use them as a way to offset the costs and fees involved in providing FSAs. By doing so, they can make it easier to offer these accounts to employees.
In this "worst case" scenario, your money ends up used in a way we outlined above. There is good news though -- your employer may offer a few options to help extend your funds and avoid losing them altogether.
1. Grace period
Many employers offer an FSA grace period -- something we've discussed quite a bit in our Learning Centers -- which gives you an extra 2.5 months to use their funds from the previous plan year. For example, if your plan year ends on December 31, you have until March 15 of the following year to use those funds before risking a loss.
2. Rollover
Another common FSA feature is the rollover option, which allows you to carry up to $500 of your FSA dollars to the following year, eliminating any last-minute rushes or lost funds.
Like we said at the beginning of the article, no one likes losing money, which is why we encourage users to create a budget and spend accordingly to meet your family's health care needs. But on the off chance you miss your FSA deadline, know that the money is safe, and might even find its way back to you before long.
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From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
Flex-Ed: Getting to know enrollment periods, cutoff dates and qualifying life events
When you decide to contribute to a FSA, whatever you select as your contribution amount stays the same throughout the year. That means if you change your mind, there really is no going back. In other words, it's crucial that you budget carefully so that you'll be able to use up the amount you put into your FSA or else you'll risk forfeiting the cash.
But there are exceptions to the rule. If you experience what's known as a qualifying life event, your employer may let make changes to your FSA. This includes changes in marital status, employment and the birth of a child.
What if these qualifying life events happen after you make your FSA elections? The short answer is that you should be able to make changes during what's known as a special enrollment period.
What is a special enrollment period?
A special enrollment period is a set amount of time outside of the open enrollment period (which is typically around November 1 to December 15) where you can make changes to your health plan, including your FSA contributions.
You can only take advantage of a special enrollment period if you have a qualifying event or experience a complex issue and if your plan allows for the change. If eligible, you'll typically have 30 to 60 days from the date of the special circumstance or qualifying life event to make changes to your FSA. It's best to check with your FSA provider for the specifics.
How do I know what my cutoff date is?
Let's say you've been contributing about $150 a month towards your FSA for you and your spouse's medical expenses. Unfortunately, you both decide to break things off and begin the paperwork in November of this year and your divorce won't be finalized until January 12, 2019. This counts as a qualifying life event, so you qualify for the special enrollment 60 day from the date you finalized the divorce.
Another common qualifying event is if you become a parent or gain a new dependent. You adopted a child and the adoption date as defined by the course is February 12, 2019. You may be able to increase your FSA contributions and \make changes 30-60 days from that date. Or, your child turns 27 halfway through next year and you want to decrease your FSA contributions, you have 30-60 days from your child's 27th birthday.
There may be some exceptions to the cutoff date, such as when it comes to the dependent care FSA (DCFSA). For example, the DCFSA is only for certain expenses for dependents 12 and under. If your child turns 13 halfway through 2019, you may be able to make changes 30 days from their 13th birthday.
Significant changes in dependent care could also qualify for the special enrollment period. If you switch daycare providers, there was a significant price change or both parents aren't employed (or a student) anymore, you may be able to increase, decrease or stop your DCFSA contributions (consistent with the qualifying event).
As mentioned earlier, your FSA provider may not allow you to make changes outside of the enrollment period or their cutoff dates differ than what we've indicated. Your best bet is to contact your provider and explain your specific situation to find out what your options are.
Everyday needs
What are these "complex issues" you speak of?
Healthcare.gov mentions there are a few special cases in which you may be able to change your FSA plan. If you went through a natural disaster or serious medical condition that prevented you from enrolling - like an earthquake or unexpected major surgery - you may be able to petition to make changes.
When my husband and I signed up for a DCFSA when he switched jobs, the system had a major glitch and had it so that $1,650 would be deducted from each paycheck instead of $300. When we saw the paperwork, we were able to change it even though we were well past the open enrollment period.
Of course, all of the above are hypothetical scenarios and may not apply to you. It's always a good idea to call your FSA administrator before or as soon as any any qualifying event or special circumstances so that you can make any necessary changes within the cutoff date.
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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.
Flex-Ed: Staying ahead of your year-end FSA deadlines
You had the best intentions when you put money into your flexible spending account (FSA). But as the calendar winds down (and don't be afraid, but November is already here!) the holidays can disrupt your to-do list, and that money could easily go to waste. Luckily, there's still plenty of time to make smart year-end FSA spending decisions. We'll cover how to make the most of your money — while avoiding IRS scrutiny.
Know these key dates
When it comes to maximizing your FSA, knowledge is power. Start by asking your plan administrator for details about your key FSA deadlines (and know the difference between them!). These may include:
- Rollover - If your company offers a rollover, you'll have an opportunity to keep $500 in your account from the previous year.
- Grace period - Some employers offer up to 2½ extra months after the annual deadline to use your FSA money. If the annual deadline is December 31, a grace period extends your deadline to March 15.
- Run-out period - This is your deadline to submit receipts from the previous year. Most companies offer a 90-day run-off period after the deadline. If your plan's deadline is December 31, you'll have until March 31 to be reimbursed.
Before crafting your FSA spending plan, it's critical to know these deadlines. Your company could offer a rollover, grace period, or hard deadline on December 31. Once you know your plan's deadlines, set more than one reminder to avoid surprises.
Where can you spend your FSA money?
If you're taxing your brain, it may be worth revisiting what you purchased over the past year. Now is the perfect time to reimburse yourself for an FSA-eligible expense you may have missed.
Taking inventory of the past couple years of spending may also jog your memory. Are you overdue for an eye exam? Have you been putting off a specialist visit? Did you skip your annual trip to the dermatologist? Time slips away faster than you may expect. You may be able to use your extra FSA money on basic necessities.
If you're still feeling nervous, our foolproof list of FSA-eligible products and services has you covered.
Resist the urge to stockpile
We've said it before, but it's worth mentioning again - try not to "stockpile" FSA-eligible products. There's no hard and fast rule about this, but being too frivolous with these funds can trigger some unwanted IRS attention.
Look, we get it. Things happen — the holidays creep in and before you know it, you're up against the FSA spending deadline. While it may be tempting to splurge on a lifetime supply of gauze, experts urge against it.
If you're trying to follow the rules — and you should be — FSA purchases should cover your current needs. This means things you need through the end of the year. Does that mean your administrator will show up to inspect your bottle of nasal spray? Probably not.
But buying three bottles in December could trigger a red flag. If that happens, it's possible your administrator won't reimburse you. Then you're stuck with too much nasal spray and you spent money unnecessarily.
If your plan offers a rollover or grace period, it may be easier to avoid the temptation to stockpile. Plus, you'll have extra time to plan for the medical expenses you actually need.
Be smart with year-end FSA spending
One of the best things about your FSA is spending pre-tax money on medical necessities. But if you're not careful, you may have to surrender the unused funds. Unless you're flush with cash, returning FSA money to your employer at the end of the year is less than ideal.
The good news is you can use this year's missteps to plan for next year's FSA spending. Planning ahead may help you avoid the same trouble next December.
Start here!
MedAngel ONE Wireless Thermometer
MedAngel ONE is the perfect companion for your medications. The Bluetooth thermometer is easy-to-use, compact, and connects to your smartphone.
Caring Millâ„¢ Essential First Aid Kit 160pc
This is a great every day first-aid kit that offers a variety of bandages and medical supplies to cover the most common medical situations.
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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.
Flex-Ed: Mistakes during open enrollment - can you change elections?
Mistakes happen -- and it happens more than it probably should when people are choosing health insurance. Between having multiple options, confusing plan descriptions, debating voluntary benefits and a tight open enrollment deadlines, it's pretty easy to see how things might get confused.
You could have misread a question, be forced to rush through the process, or even miscalculated how much money would be coming out of your paycheck every week. Whatever the case, if you made a mistake during open enrollment, you're probably wondering if there's a way to make changes to your elections later on in the year.
Sorry to be the bearer of bad news but no, once you make your open enrollment elections, you don't have the option to change them later in the year unless you experience a qualifying life event. (Or in the event of very rare circumstances, such as a legitimate error in which your administrator may or may not be able to allow you to fix)
Your employer is not legally obligated to allow you to make changes to your elections after the open enrollment period has ended. In fact, there's a good chance that the terms of your employer's benefit plan don't allow any exceptions or changes for employees who make mistakes or miss the open enrollment period altogether.
Qualifying life events change that answer...
After open enrollment ends, you can only make changes to your elections if you've experienced a qualifying life event. The IRS and FSA administrators understand that life changes and that you may need to make adjustments to your elections to accommodate for those changes.
Common qualifying life events include:
- Changes in marital status - Getting married, divorced, separated, or if your spouse passes away.
- Changes in number of dependents - if you have a child, adopt a child, or if a child passes away.
- Changes in dependent status - children can age out of dependent status or become eligible for dependent status during the year.
- Changes in employment - this can mean starting a new job, quitting, or a transition from part-time to full-time work status.
- COBRA - If you lose your job and elect to continue receiving benefits from your employer.
- Relocation - Moving won't always affect your eligibility, but sometimes moving to a new home address or a new work site can, especially if it's in a new state with different regulations.
Not all plans allow for mid-year changes, but you'll find that most do. If you experience one of these life events, you'll want to get in touch with your FSA administrator within 30 days of the event to find out if you are eligible to make changes to your plan.
What else can I do?
When it comes to your open enrollment elections, the best thing you can do is take your time and be thorough to minimize the chance of making mistakes. Don't leave your elections for the last minute as that can make you rush the process and leave you more susceptible to mistakes.
If you're married, discuss your elections with your spouse to ensure that the whole family is on the same page for the upcoming benefit year.
And if you have any questions or are uncertain about anything in the process, contact your HR department - they'll help you navigate the open enrollment steps and clarify anything you don't understand. Many employers even offer benefits education during open enrollment to help employees understand their options and make informed decisions.
Eligible everyday necessities
Caring Mill Assorted Variety Bandages, 280 ea
This is a great bandage set that offers a variety of sizes to cover the most common medical situations.
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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.
Flex-Ed: How to fix mistakes with FSA funding and reimbursements
Mistakes are common. But when you make a mistake with your FSA reimbursements or funding, you need to be able to fix them ASAP, so you're not caught paying for them later. As in, you want to be sure that you're using your FSA correctly so that you're not required to pay your reimbursements back or stuck with money you can't use.
Sure, you can have the best-laid plans, but stuff happens. Instead, take a look at the following scenarios in case you made one of those mistakes, and what you can do about it.
Your receipts weren't clear
Just because you know what you spent your money on, doesn't mean your FSA administrator is clear on it. Yes, you have receipts backing up your purchase but that doesn't mean it automatically counts as solid proof.
Let's say you purchased got a prescription for a bunch of antibiotics at the pharmacy. You decided to submit the credit card receipt to your FSA provider. Unfortunately, that's not enough proof because the IRS requires you have an itemized receipt.
If your FSA administrator comes back to you and says your original receipt isn't acceptable proof, you should be able to resubmit. Now's the time to find that itemized receipt — whether it's your prescription with the price on it, or go back to the pharmacy if you need to and see if they'll print another one for you.
Otherwise, you can submit what's called an Explanation of Benefits (EOBs) that you'll receive in the mail from your health insurance provider -- basically, a fancy way of explaining a part of your transaction. What it needs to include is your name, date of purchase, the provider/retailer's name, price of the item, and the name of the item or service. Don't worry though - this is standard information to be included on all EOBs.
Even if you made the initial mistake, you can still fix it as long as you provide ample proof as quickly as possible.
You overallocated your FSA
Maybe you overestimated how much you'll need and you contributed a bunch of extra money to your FSA. Now you realize, you may not have enough qualified medical expenses to spend it all. The good news is that it's still your money. The bad news is that you're at risk of losing it of you don't take action.
Before assuming you don't have enough qualified medical expenses, make a list of things you may need. Perhaps it's time to replace your broken pair of glasses, or you're eyeing that foot circulator but were scared to make the purchase. Be strategic about what you want to purchase and make sure it's something you need, and you're not spending money just to spend it.
Something else to consider is looking into your FSA plan to see if there's a rollover option — typically up to $500 per year — or you may be able to take advantage of a Grace Period, if you have one, giving you extra time to spend down your funds. This way, you can still keep your cash longer without feeling like you have to buy things you don't need (which you shouldn't do, anyway).
Keep in mind that you won't have both the rollover and Grace Period option, and plans are not required to offer either so map out your purchases depending on what your plan offers.
You submitted an incorrect claim form or have no matching receipts
Don't freak out. If you submitted the wrong form, contact your FSA provider right away and see if you can resubmit. It's as simple as that. However, if you make a purchase and don't have a matching receipt, you may be able to substitute one from another qualified transaction.
Let's say you purchased prenatal vitamins and sunscreen and realized you don't have the receipt. Instead, you may be able to find another receipt for a qualified purchase to offset your original purchase. Maybe you buy additional sunscreen or more prenatal vitamins at a different store and submit that receipt, instead. Note that not all administrators will allow this, so you'll want to contact them to find out about your options.
In some cases you may not even need to submit a receipt, although we always advise that you keep them just in case. For example if you used your FSA debit card to make a payment and at a qualified merchant with the proper system in place, your expense may even be automatically approved without the need for documentation.
Mistakes happen to the best of us. The important thing is to recognize them when they happen, correct course and try not to let it happen again.
Buy with your FSA card!
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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.
Flex-Ed: Speaking to millennials at open enrollment
Raise your hand if this sounds familiar. You spend hours preparing for a company meeting on employee benefits. But when it's time to share information, some employees are visibly less interested. By the end of the meeting, eyes have glazed over, and attention has disappeared.
Fast forward to open enrollment. Maybe it's a little early to tackle this, but this same group of employees is pretty disengaged. And they are less likely to understand what your company offers. So it's better to start now and avoid confusion later.
Millennials may be first to say, "I've got this." But the truth is, open enrollment can be confusing and stressful. Key details may be glossed over. And as a result, they may be less likely to opt in. Here are some tips on how to spark interest before the onslaught of paperwork begins.
Communication matters
If you're offering the types of benefits millennials value most — great. But do they actually understand what you offer? Communication is critical. Try going beyond in-person meetings, letters, or emails. Share the message in bite-sized pieces through texts, blog posts, or videos. Repeating what matters may be the key to boosting millennial engagement.
Highlight ways to save
Millennials may have a reputation for frivolous spending. But that's not the case with healthcare. Research has revealed nearly half of millennials have skipped or delayed care to save money. Become a trusted resource and advocate by making benefits easier to understand. Break healthcare benefits down into manageable chunks.
Oh, be sure to ditch the industry jargon. These might be common terms to some, but it always helps to decipher things like coinsurance, copayment, or out-of-pocket maximum, providing real-world examples of how each of these will impact their wallets.
Flexible spending accounts (FSAs) are another way to save on taxes. Money shifts into a special account before being paid. Explain the "use it or lose it" rules and why it requires some extra planning. There's no "magic number" that works for all employees. Everyone's needs are different. Ask these questions to guide them through the decision process:
- How much money did you spend last year? Sifting through old receipts can be a snooze, but it's helpful to have a baseline for planning purposes.
- Do you have any major health expenses planned? Time to stop putting off that root canal? Or is your family expecting a baby? You're likely to use 100% of the year's FSA money — and more. But if you're expecting routine check-ups, contributing the full amount may not make sense.
- Does your company offer a high-deductible health plan? A recent survey found most millennials don't understand how they work. To make matters worse, 70% waste up to $750 because of mistakes at open enrollment. Maybe a health savings account (HSA) is a viable alternative.
Grab attention before open enrollment
No one wants to read a stack of papers. Try delivering the information other ways. Consider which benefits are most valuable to millennials and highlight them — more than once. Helping your employees make the most of their benefits could save them a lot of money. Best of all, they may want to stick around longer.
New FSA-eligible arrivals...
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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.
Flex-Ed: It's never too early to map out your open enrollment
Sitting down and looking through mounds of paperwork and websites, and reading confusing jargon isn't the most exciting thing in the world. But you shouldn't let open enrollment wait until it's too late to make a smart decision. Start by considering how your health plan affects you and your family.
We know it's only mid-August. But that doesn't change the fact that you shouldn't wait until the last minute to map out your open enrollment benefits. There are lots of benefits to do doing so -- the biggest one being your health. And you may save some money as well. Just think about when you have a medical emergency and have to take out a loan to pay down your bills. Or when you've had opportunities to enroll in FSAs in the past, and chose not to.
Don't make the same mistakes by putting these decisions off until "later." Instead, get a head start and have your ducks in a row, so when it comes time to choose a plan, you can make the best choice for your needs.
Learn from past open enrollment mistakes
We're not recommending you beat yourself up. We're just saying this is a great time to assess what worked -- and what didn't -- with your past health care spending decisions. Think about how you came to decide past health plans and see what you could have done differently.
First, go back and think about why you picked a certain plan. Is it because it was the least expensive? Were tax-free spending or savings options on your list of priorities?
Once you have those answers, then think back and figure out whether you looked at all the features available and what would happen if you had to pay out of pocket. You can also think about how you're currently taking advantage of the plan. Have you been maximizing your benefits? Do you regret not opening a FSA?
Once you have this locked down, you can make a list of what you're looking for in a health plan -- the things that might fall under that "regret" umbrella. If you end up choosing the same one you currently have, then at least you have a good idea of what to expect in the coming year. If not, you'll know exactly what to look for when upgrading to a new one.
Pretend you're applying for a new health plan each year
Even if your employer allows you to passively continue your health plan selection every year, don't. Be more proactive, even if you're content with what's offered. In other words, you want to pretend you're applying for a new plan each year, for the exact reasons mentioned above.
Doing so will also give you a chance to see if there are any perks or benefits that you missed, and helps with better communication between you and the HR department. That's because you'll remember to update relevant information and ensure you're asking the right questions to reassess your choice.
Don't be afraid to be "confused"
Pretending you're confused is a mindset shift you can take in order to make sure you're clear on what it is you're getting into. The premise is simple: read the entirety of your health plan and assume you know nothing. Look at every piece of jargon and prepare a list of questions to ask the open enrollment representative.
For example, one of the best questions you can ask is ones relate to cost benefit trade-offs. Is there a way you can have a representative answer your questions about your specific situation and predict a cost calculation? What if you want to an FSA? Or does it make more sense to choose a qualified high-deductible health plan with an HSA?
No, you're not going to annoy anyone in your HR department (at least it shouldn't). After all it is your health and your wallet. Treat open enrollment as a year-long planning event and you'll reap the benefits in the year to come.
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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.
Flex-Ed: What's a "cafeteria plan" (and what can I put on my tray)?
Many Americans look at their pay stubs and see that they've paid some money to a "cafeteria plan." And nearly as many wonder what it is, and why they're paying for this on top of their health insurance.
A cafeteria plan provides a way for you to set aside tax-free dollars for qualified types of benefits coverage. It can be used for a variety of benefits, kind of like how cafeterias let you grab a tray, choose from a bunch of different options down the line, and… yeah, I think you've got the idea.
If this all sounds familiar, it's because if your employer offers health insurance, you likely have a cafeteria plan from your own company. When cafeteria plans are offered, you can pay for your health insurance premiums pre-tax and you can add a lot of tax-free extras, like retirement contributions, disability and life insurance, child adoption assistance, and of course, flexible spending accounts (FSAs).
So, how are cafeteria plans different?
To be considered a cafeteria plan, there are three main requirements the plan has to follow, according to IRS Section 125:
- Tax-free benefits. Employees can pay health premiums and retirement deposits, among other benefits, with tax-free money.
- A minimum of one taxable benefit option. This means that the government views it as part of the employee's salary, and employees must be offered a choice between taxable and non-taxable benefits (taxable benefit being cash).
- There must be a written Plan Document. This will outline the rules surrounding the plan, like who'll be eligible to participate and any restrictions on elections.
Of course, what you choose is your call, meaning you only elect what you wish to contribute so you're not paying for benefits you don't need, or access to services you don't want.
Your health benefits, your choice
There are plenty of benefits available with a cafeteria plan, but for anyone wondering about flex spending possibilities, here are three standout options available with a section 125 plan:
- Premium Only Plan (POP)
With a POP, you can set aside tax-free dollars from your salary to pay for your health insurance premium contribution. With this plan, companies allow what would be a post-tax employee contribution to their group insurance to be pre-tax contributions. As a result, both the employee and employer see tax savings, as long as the company files the proper paperwork to make it happen.
- Flexible Spending Account (FSA)
If you're reading this, then you're probably already familiar with these (and why we recommend them for so many people). By going with the FSA, you put aside a certain amount of funds each paycheck towards a total annual contribution amount, and have access to your full annual election of funds on day one for any FSA-eligible expenses, tax-free.
- Dependent Care Flexible Spending Account (DCFSA)
DCFSAs are for those with dependent children up to age 13, or adult parents who meet the requirements of these plans (check with your administrator about when a parent may qualify). With a DCFSA you can set aside up to $5,000 to be spent on qualified childcare expenses. Services like daycare, a nanny and even summer camps are included.
(There's a lot more to say on DCFSAs -- luckily, we've already broken it down for you.)
Are there any negatives to cafeteria plans?
Again, if you're familiar with FSAs, you understand that you need to use any funds within a plan year, or you risk losing them. And, barring a life changing event, like getting married or welcoming new members into your household, most employees have to wait until the end of the plan year before making changes to their contributions.
Good news all around
Bottom line? Money savings for everyone. A properly administered cafeteria plan can result in savings of 25-40% percent of every dollar an employee contributes to their plan. And the employer also sees savings on FICA withholding tax for each participating employee, which usually works out to roughly $160 per year.
Knowledge of your benefits is power (and money). So spend some time thinking about how all these benefit choices can help boost your bottom line. The more you elect, the more tax-deferred dollars you save long term. Food for thought, no?
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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.
Flex-Ed: Getting new graduates off to a good financial start
Graduation season has come and gone, and while we're still celebrating our accomplished kids, the real work starts now. Parents can get a bit emotional sending our children off into the world. After all, there are a lot of responsibilities that come with being an adult, such as learning to deal with finances.
Your child may already know how to budget, and might understand the basics, but there are a lot more considerations to think about than ever before, especially if they've been under your health care plan.
If you can drop a little financial wisdom before they leave the homestead, it can pay huge dividends later in life. Here are a few suggestions on what to teach them.
Budgeting for health insurance
Your child may have been lucky enough to latch onto your health plan until now, or you may even continue to cover them if you wish under most plans until they're 26. If not, this new expense can cost more than what some new graduates may think, and they may be caught off guard if you don't help to prepare them..
If their employer provides health care insurance, have your graduate go through all the options available to see how much they could save. If they choose a more traditional health plan and have the option to select a flexible spending account (FSA), then that's another good tip to pass along.
Saving a few bucks on sales tax might not seem that important to a generation who dumps millions of dollars on Fortnite, but once they see monthly and yearly savings, the importance will become alarmingly clear.
Understanding the consequences of high-interest debt
Ideally your child didn't graduate with any debt. But this isn't always an "ideal" world. If they do have debts to pay down, then it's important to sit them down and discuss what it means to pay it back on time.
The Department of Education's StudentLoans.gov website is a great resource for calculators and other educational material. It is also a good place to see if there are any incentives from the Federal government to help limit a graduate's monthly loan payments.
Of course, it's important to prioritize. As in, they'll first need money to cover their living expenses (e.g. rent, food and transportation) and then the rest to pay down loans. It's best to help them figure out a few calculations to see if paying the minimum payments or slightly more will help them become debt-free faster based on what they can feasibly afford.
Saving for retirement
Maybe this isn't a topic we cover much on the FSAstore.com Learning Center, but we do spend a lot of time discussing retirement on our sister site, HSAstore.com. And it's important for graduates to understand, regardless of which tax-free health care accounts they choose. Because it doesn't matter if retirement seems like a faraway destination, it's never too early to start setting aside money for it.
Even a small amount of money compounded over time in an investment account will reap big rewards in 15 to 20 years.
There are accounts like employer sponsored plans (which financial experts recommend participating in as you'll get free money from your employer) and other traditional retirement accounts like an IRA. But, if your child is healthy and putting money in something like an HSA, he or she can invest that cash once the account reaches a certain threshold. In this case, they're saving on taxes, health care costs and investing in their retirement.
We'd love to help our children get off on the right foot as they set out into the world. Teaching them financial lessons and how it applies to their lives is no doubt invaluable. Then you can rest better knowing your graduate is entering the world a little more financially savvy.
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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. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
Flex-Ed: What you need to know about FSAs and job changes
Leaving a job—whether it's on good or bad terms—can be overwhelming. There are projects to finish, a final paycheck to collect, and health insurance coverage to change. That's why it's important to remember that your flexible spending account (FSA) can help you through the transition..
FSAs are employer-sponsored spending accounts that allow employees to contribute tax-free money toward a wide variety of health-related expenses. But the "employer-sponsored" part is key, since your FSA requires you to have a job to maintain the account.
Your FSA job change checklist
There's a lot to remember when it comes to your FSA during a job change. Here's what an easy to remember everything you'll want to keep in mind:
- Check your FSA balance.
- Spend any remaining money prior to your last day at the company.
- Submit all reimbursement claims to Human Resources prior to your last day at the company.
Now, the fine print
It's rarely fun to read the details, but when it comes to your FSA, you might be in for a pleasant surprise. Here's how it works—during open enrollment (or when you get hired) you can choose to contribute money to your FSA. This is completely optional, but there are a couple unique rules to note:
- The maximum you can contribute is $2,700 for 2019. Remember that an equal amount will be taken out every paycheck depending on your contribution!
- Even though you contribute to the account throughout the year, the full amount is available to use at the beginning of the year!
A reminder about "use it or lose it"
If you've visited our Learning Center, you know your FSA money is "use it or lose it." In other words, if you don't spend the money in the account by the end of your deadline, you forfeit the cash (though some account holders have deadline extensions, and the possible $500 rollover -- more on that later.). This is crucial to remember if you're switching jobs, because unlike retirement accounts, you cannot roll the money into a new account.
However, you can elect to start a new account with your new employer, even if it's within the same year. Note that your maximum contribution resets when you start a new job.
There are a few exceptions to the "use it or lose it" rule, but for job changes, the rule applies. If you do not use the money in your FSA, you'll lose it. Because of this, it's important to spend the money and file reimbursement claims prior to changing jobs.
(In other words, it's time to shop for FSA-eligible items!)
Uniform coverage rule
It might seem like the "use it or lose it" rule benefits employers, and in a sense it does. If the money in your FSA isn't spent by the end of the year, employers get to keep it (although it can only be used in specified ways, such as towards the cost of administering the FSA program). But there's a lesser known rule that benefits employees: the uniform coverage rule.
The uniform coverage rule does not allow employers to charge employees reimbursement if they spend more money from the FSA than they contributed.
For example, if an employee chooses to contribute a total of $1,000 to his or her FSA, the full amount ($1,000) will be available for the employee to spend at the beginning of the year. However, the employee will only have $83.33 deducted from his or her monthly paycheck.
So, if an employee leaves a job in February, when she or he contributed $83.33 to the account, the employee can technically still spend the full $1,000 without penalty or being forced to provide reimbursement to the employer. Having said that, the employee would still need to file claims for the purchases before leaving the job.
Now, we're certainly not recommending employees take advantage of their employers' contributions to a company FSA program through the uniform coverage rule. However, this rule stands as a potential benefit for those who are forced to change jobs due to an unexpected life change, or layoffs.
This can offer relief for pressing health concerns—new glasses, appointments, prescriptions—that don't go away because of employment changes.
Enjoy your final day at your job (be sure to submit reimbursement claims before you leave the office though!) and feel good knowing that you didn't leave any of your hard-earned money behind.
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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. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
Flex-Ed: How to live and save like a superhero
At the time this piece is being published, The Avengers just finished dominating the box office, the X-Men are about to start, Shazam made a brief impact, and approximately 129 other superhero films will hit the streets before the holidays.
So, with all the recent grads about to start their adult lives (and with superheroes on everyone's brains) we figured it might be good to share some scrimping and saving tips to help everyone live and save like a financial superhero.
Remember, we're not financial pros -- you should speak with one before making any decisions about your own planning. But the following tips helped us get ahead, because if you live and save like a superhero, you'll be ready to rise to the occasion and have a better endgame.
(Yeah, we know what we did there…)
Enemy #1: Debt
Debt is a sneaky villain. When you first meet debt, it seems charming, funny and even kind. It's a villain in disguise. No matter how many times debt tries to tempt you, it's important to resist because financial superheroes have to stay lean and ready for action. Even though debt might seem harmless, it actually causes superheroes to become slow and sluggish.
How to conquer debt: If you've attended college, bought a car or experienced a period of unemployment, you've probably had firsthand experience with debt. When I graduated from college, I had nearly $14,000 of student loans. Even though that's less than the national average of nearly $30,000, it felt like a huge amount, especially because up until that point, I had never earned that much money in a single year.
I used all of my human skills to pay it off as fast as possible. I lived with roommates, rode my bike to work, worked an extra job and tried to avoid lifestyle inflation as much as possible to pay off my loans. Within two years of graduating, I was debt-free. Whether you have a goal to become debt-free or to make payments on time, the most important thing is that you have a plan.
Enemy #2: Laziness
If you're anything like me, battling the villain of laziness usually looks a lot like battling myself. The lazy villain is the one that tries to convince you that financial decisions are too complicated to deal with and you're better off just ignoring them altogether. If that sounds familiar, you're not alone. Most of us have come face to face with this villain before.
How to put a stop to laziness: If you feel like you're being financially lazy, then that probably means that you left free money on the table. Depending on your employer, "free money" might mean a 401(k) match that you're not earning or tax savings that you're missing out on because you don't have a tax-free health spending account.
Overcoming laziness (and fear) around money is tough. In fact, I had to miss out on thousands of dollars in savings before I finally opened a FSA this year. But now that I'm (finally) paying for my health care costs through my FSA, I've been able to free up money for new running shoes and I'm halfway to my savings goal for a new phone.
Sometimes you have to learn from mistakes in order to change. But when it comes to overcoming laziness, I've found that the best solution is action. Sometimes a tiny first step is all the momentum you need to get going.
Enemy #3: Short-sightedness
The short-sightedness villain is the one that convinces you that life is tough and it's okay to just focus on the present. After all, the future isn't guaranteed, right? The problem with this mindset is that it's hard to resist. After all, it's tempting to live in the present, focus on your current needs and ignore the future.
How to thwart short-sightedness: Short-sightedness can look different for everyone, but for a lot of us it involves willfully ignoring our future selves. More specifically, it usually means that we aren't saving for retirement. It's hard to prioritize your future self when your current self is struggling to pay the bills, but saving for retirement is one of the ways to break the cycle of financial stress.
It might sound counterintuitive, but the earlier you can start saving for retirement (whether that's in your 20s, 30s or 40s) the easier it will be to actually retire one day, and that's something worth fighting for.
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New to FSAs? Need a refresher course in all things flex spending? Our Flex-Ed column gives you a 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.
Flex-Ed: 4 common FSA misconceptions
We get it. FSAs can be confusing. Between the eligibility lists, the potential to roll over some of your unused funds, even contribution limits, your FSA may be more stressful than anything else. (Though there are some FSA-eligible items that can help combat that.)
We compiled a list of four common FSA misconceptions, from where your unused FSA funds end up to the real rules about stockpiling. The more you know, the farther your FSA can go.
Misconception #1: It's your employer's decision to reclaim your unused FSA funds if you miss the deadline.
This rule comes from powers greater than the occupants of the corner offices. According to IRS rules, any FSA funds that aren't spent before your plan deadline (or after a grace period, if your plan has one) goes back to your employer. This money can also roll over to the following year's account, giving users even more flexibility with their flex spending
Did you know that more than $400 million in FSA funds are lost by FSA account owners each year? If you remember nothing else about your FSA, remember this: use it or lose it.
Misconception #2: Your company can spend your unused FSA funds however they want.
Your company uses reclaimed, unused FSA monies to help offset the cost of administering the FSA plan or to pay off any deficits. They can also return the money to employees via what's called pooling. But the latter is rare, so don't count on it. (Sorry.)
Sure, it can be frustrating that your company gets first dibs on your unused FSA funds. But keep in mind that they may take a loss by offering an FSA plan to employees. For example, if you use all your FSA funds in the early part of the year then leave the company, your employer has to shoulder that balance.
Misconception #3: I can wait until the end of the year, then blow my FSA funds on the eligible items I'll need the next year right before the deadline.
While not expressly forbidden by the IRS, this is definitely frowned upon. Here's why: Your FSA was made available to purchase the products you need for the specific timeframe, like the copay for your annual physical, your monthly supply of contact solution, or the sunscreen you'll need for your beach trip this summer.
FSAs are meant to alleviate the day to day financial burden of health-related items and services, like picking up a prescription, grabbing cotton balls, buying your allergy medication. They're not intended to be a means for buying a year's supply of nasal spray in one fell swoop. Plus, that stuff expires, anyway.
Misconception #4: As long as my purchase is similar to an FSA-eligible item, I should be covered.
While this misconception is understandable, the rules about what is FSA-eligible – and what isn't – are pretty cut and dry, and there isn't much ambiguity. For example, prenatal vitamins are covered because they're considered medically necessary for healthy pregnancies. But traditional vitamins aren't, because they're not directly connected with diagnosing, preventing or managing a specific medical condition.
Diapers are also confused, since standard diapers don't qualify, but training pants (like Pull-Ups) do, because they're used to prevent bedwetting and incontinence.
These are just a few examples. Check out our eligibility list if you're unsure, because it's better to be FS-safe than sorry.
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New to FSAs? Need a refresher course in all things flex spending? Our Flex-Ed column gives you a 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.
