Asked and Answered: How much should I contribute to my FSA?

If you just opened (or are about to open) an FSA during open enrollment, you know it's smart a money move, but you have no idea how much you should allocate. You've done your research and know that your employer offers flexible savings accounts, but you're not sure how to find your FSA allocation number.

In fact, you may not even be sure how much you spent on health expenses last year. Or maybe you had the perfect allocation total last year, but life has changed since then. (That tends to happen a lot in my household.)

If this sounds like you, don't panic. You've already taken the first step and decided that you want to open an FSA. The next step is simple: use an FSA calculator.

(As always, keep in mind that we're not financial professionals, nor is this website aiming to provide financial or tax advice. Be sure to speak with a qualified financial adviser before making determinations about your accounts.)

Calculate your FSA number

The best way to determine how much money you should allocate to your FSA is with an FSA calculator. The calculator asks you to input a variety of information, including your income and estimated expenses for each category. After you input your numbers, you're shown exactly how much you should allocate based on your estimates. You also learn how much you could save on taxes.

For example, if you earn $45,000 per year and allocate $2,500 to your FSA for health care expenses, your estimated tax savings from your FSA is $812.

But here's the deal—in order to use the calculator to accurately estimate your health care expenses, you need to have an idea of what those expenses will be. If you just went through a big life change or are a first-time FSA user, that might seem difficult. Luckily, it's not as hard as it seems.

Here are some expenses you might want to keep in mind.

If you're a new parent…

Congratulations! If you're a new parent, your health care expenses will likely increase thanks to an uptick in doctors appointments and health-related items for your baby. In general, new parents should expect to increase their FSA allocation.

(Plus, this might be a great time to open a dependent care FSA to pay for eligible child care expenses.)

If you're recently divorced…

If you're recently divorced and don't have children, your health care expenses might decrease because you're only responsible for your own health care expenses now. The best way to find your allocation number is to review last year's expenses and calculate your new number based only on your own expenses.

However, if you're recently divorced and have children, your FSA allocation number might stay the same or even increase, depending on your custody arrangement. Also, if you're planning on paying for daycare for your children, it might be a good idea to open a Dependent Care FSA.

If you have a recent health diagnosis…

If you've recently received a health diagnosis and are unsure what your health care expenses will look like now, it might be a good idea to increase your FSA contributions. Even if you allocate an extra $50 per month, it might make a big financial difference throughout the year. Plus, you might spend some of the money on FSA-eligible products related to your diagnosis.

If you're a first-time FSA user....

Welcome to the club! If you're a first time FSA user, it might be challenging to find the perfect allocation number, but that's okay. Even if you only put $100 per month towards you FSA, you could save hundreds of dollars in taxes.

Do your best to calculate your contribution number based on last year's health expenses, but don't worry if it's a little low or high. Next year, you'll be able to calculate more accurately.

Bottom line

It's okay if you don't find your "ideal" FSA contribution number. The most important thing is that you're starting to save money in your FSA and prepare for your health care expenses. Your bank account will thank you.

Smart, eligible buys...

Battle Creek Pain Relief Bed Heating Pad, 18" x 36"

The perfect solution for people with poor circulation or cold feet.


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.



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 Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


The 2019 FSA contribution limit is here!

They made us wait a little longer than usual, but the 2019 FSA contribution limit has finally been announced! If you're a seasoned flex spending veteran, or considering one for your healthcare planning, knowing how much you can put into your account is pivotal for your annual budget.

Each year, the IRS sets the contribution limit for those with an FSA. This limit is subject to indexing based on the increase in Consumer Price Index for All Urban Consumers (CPI-U) each year.

In 2018, the limit for FSA contributions was $2,650, but the IRS has raised the limit for 2019 to $2,700. Check the chart below for all the information you'll need to make an informed decision for the coming year.


Yearly Contribution Limit

$2,700 per FSA (note that the limit remains the same regardless of single vs. family plan participation). If both spouses have an FSA through their respective employers, they could each elect the maximum in their own account for a total of $5,400 between the two accounts.

Plan Year

Most often 1 year. In limited circumstances, there may be a short plan year.

Eligibility to Contribute

FSA plans are sponsored by employers and eligibility rules are set by each plan. If your employer offers an FSA and you meet the eligibility requirements they set, you're eligible to contribute. Self-employed individuals and owners of certain types of corporations are not eligible for an FSA.

Account Ownership

An FSA is owned and set up by the employer.

Access to Money

An employee's yearly FSA election is available in full on the first day of the plan year, regardless of contributions to date. Funds can be accessed via a card if available of through submission of claims for reimbursement.

Change Contributions?

FSA users can only change their contributions during their Open Enrollment periods. Some plans also allow changes to contributions to be made if the account holder experiences a qualifying life event, such as marriage, divorce, or birth of child.

Special Rules/
Eligibility Exceptions

Employers can choose one of two (or none) options to provide relief for FSA users who would otherwise have to forfeit leftover funds: the $500 rollover and the 2.5 month grace period. The $500 rollover allows FSA users to move up to $500 of the previous plan year's contribution into next year's allocation (without counting against the overall contribution limit) to avoid forfeiting money at year end.

The second is the FSA Grace Period, which gives users up to 2.5 months after the last day of their plan year to spend down their remaining FSA funds.

For more information about what an FSA can cover, visit our comprehensive Eligibility List.


Flex-Ed: When you over-allocate your FSA

You had the best intentions. You never meant for it to happen. But you've over-allocated your FSA savings for the year. What can you do to fix this issue?

FSAs have a contribution limit set yearly by the IRS. For 2019 that limit is $2,700 and there is a natural drive to contribute up to the yearly limit since the dollars come out of your paycheck pre-tax.

An over-allocation problem arises when you don't have enough qualified medical expenses to spend that entire amount because FSA funds (for the most part) are "use it or lose it," meaning any money left in your account at the end of year is lost, with a few deadline exceptions.

Maybe you overestimated how much you would be spending on medical expenses, or your circumstances changed and expenses you expected to have to cover are no longer relevant. Either way, the end result is the same. The end of your FSA plan year is looming, and you have unspent allocated money that came out of your paycheck in danger of being forfeited.

Relief for over-allocation

There might be a slight reprieve in your plan in that companies can offer two possible remedies – either a 2 ½ month grace period to spend the previous year's funds or allow for up to $500 to roll over to the next year, but companies can't offer both options to you and they don't have to offer either. If you are over-allocated, the first place to look for relief is to find out if your company offers either option.

A second area is to go back over your medical spending during the plan's year and find out if you've paid out of pocket for expenses that are covered by your FSA. A surprising number of products and medical services are FSA-eligible and you might have directly paid for something that is reimbursable by your FSA. Track down those receipts and apply your FSA money to those expenses.

This can also come into play for expenses incurred late in the plan year. You typically have a run out period, such as March 31 after a hard spending deadline of December 31 to submit claims. You won't be able to incur any new expenses during this time, but expenses you incurred prior to December 31 can continue to be submitted for reimbursement.

A third area of over-allocation relief is to dive into the wide variety of eligible products and services and spend the remainder of your FSA before reaching the deadline. You can replenish medicine cabinet staples such as over-the-counter items you use on an ongoing basis or other everyday health products.

Also, if you've put off dental care there's no better time than the present to get that covered, and a massage therapy might be a great way to spend some FSA dollars and get a "two-fer" personal and financial relief at same time.

[Note: You'll definitely want to check with your FSA administrator on if the massage therapy will qualify and if so, what type of documentation you'll need to get from the therapist to ensure you are paid back.]

What is important is to keep up with your FSA balance and your spending deadline to make sure you spend all of the FSA money you've allocated for the year. And, keeping track of your current spending will help you in mapping out your FSA budget for the upcoming plan year.

New FSA-eligible arrivals...


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 Learning Center.


FSA Friday: 2019 benefit contribution limits announced… except for one

October came and went in a flash, didn't it? It seems like just yesterday people were upset that summer was ending, and now we're already making holiday shopping plans. But in our little corner of the healthcare and finance world, October is usually when the IRS announces its healthcare benefit adjustments for the coming year.

They came a little later than expected, but the 2019 benefit limits are finally here. Well, all of them except one. And yeah, it's the one we want to know about most -- the 2019 FSA contribution limits.

We don't know why many other contribution numbers have been updated except for FSAs, but considering the upward trends demonstrated in other categories, there's reason to be optimistic about tax-free healthcare funds in 2019.

The IRS Announces Updated Limitations Related to Employer Plans; 401(k) Contribution Limit Increases to $19,000 for 2019 - Dickinson Wright, Lexology

Retirement planners, rejoice! The IRS is giving you a well-deserved bump for 2019! Not only are 2019 HSA limits rising, but 401(k), 403(b) and 457 plan owners will see a $500 bump to their annual elective deferral limits. Taxpayers will be allowed to contribute up to $19,000 before taxes in 2019 into these accounts.

Even though the IRS kept the catch-up contribution limit at $6,000, this $500 boost will certainly be welcome by anyone looking to maximize their retirement funds.

Traditional IRA and ROTH IRA owners will enjoy a $500 boost of their own, with $6000 as the new contribution limit in 2019.

(We probably don't need to tell you what all these numbers mean, but we will anyway -- lower tax bills and more retirement savings.)

If you're self-employed, retirement funding is about to get easier, too. Now you can save an extra $1,000 into your own retirement accounts (increasing to $56,000 in 2019). These contributions will be determined by actual income, up to a maximum of $280,000, which is a $5,000 increase over this year.

We may have exaggerated a BIT in our own headline, since we're still waiting for announcements for few other 2019 adjustments - not just FSAs. This includes important items like federal income-tax brackets and potential changes to the standard deduction. And obviously, expected increases to flexible spending account contributions, which several sources are projecting to be $2,700.

Of course, as soon as we get the news, we'll share it here and on our social media platforms.

FSA Friday is a weekly roundup of the latest topics, tips and headlines to keep you updated on all things flex spending. It appears every Friday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram, YouTube and Twitter.


Real Money: Your mid-year FSA check-in (Part 1)

Summer is here! Time to break out the swimsuits, pack for vacation ... and take a look at your flexible spending account (FSA)? No, this doesn't seem as exciting as a trip to the beach, but it's never a bad idea to take a closer look at your FSA to see how well it's holding up at the mid-year mark.

Marguerita Cheng, a certified financial planner in Gaithersburg, Maryland, advises people with FSAs "ask, not judge" how their anticipated spending is meeting their actual needs at the 2018 halfway point. No need for harsh self-criticism. Reviewing expenses can help you get back on track if needed and prepare you so there are fewer surprises when open enrollment begins in a few months.

"If you're like me and you blew through it, it's not necessarily a bad thing because I contributed the maximum," Cheng said. A one-time expense, a $750 deposit for her daughter's orthodontic work, caused her to hit the healthcare FSA ceiling of $2,650 per person per year. Although she maxed out mid-year, she's pleased to take full advantage and lowered her taxable income. Cheng added, "The good news far outweighs the bad news."

For those close to spending all the money they've put aside or already done so, it pays to examine what caused the early exhaustion to see if it's an extraordinary event or a new recurring expense that could change your calculations for next year.

Maybe your health insurance company raised a prescription copay in the last few months or you faced an unpredictable medical expense. These events are beyond your control.

People in the opposite category -- those who accumulated more funds than they've tapped thus far -- should consider looking at eligible goods and services they may not realize are covered by their FSAs. And for those who find they're about where they thought they would be by June, congratulations! You can hit the beach before the rest of us.

If you underestimated your expenses or received a new diagnosis that caused you to exhaust your funds earlier than expected, don't despair. You can take the lessons and plan to contribute more next year if you haven't already, up to that $2,650 limit.

"The more chronic the illness, the more [FSAs] are beneficial because it's something that persists and that they'll continue to be treated for, which will then keep the expense going," said Darin Shebesta, a certified financial planner in Scottsdale, Arizona.

If you're in the under-spending camp, no need to rush out and recklessly purchase items you may not need because you're afraid of the "use it or lose it" rule. But it's a good idea to take stock to see what you might be overlooking.

For example, you and your dependents may be enjoying a healthful year with few doctor visits and therefore little reason to tap your FSA. But say your child needs pricier disposable contact lenses to play sports, or you decide it's time to try acupuncture for an ongoing medical issue.

Expenses like these are typically FSA-eligible. (Acupuncture may require you receive a letter of medical necessity from your doctor. This serves as documentation of medical need, to be submitted to your FSA third-party administrator.)

What's more, many employers offer a grace period where employees can claim FSA money into the first quarter of the following year, reducing the panic that comes from feeling behind in your FSA. Make sure to find out if your employer offers an extension so you know how to pace your spending in the second half of the year.

[Check out Part 2 of this feature here.]


Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


FSA Friday - 5/18/18 - Recommended policy changes for tax-free healthcare accounts

Every FSA Friday, we discuss headlines that reinforce just how tax-free health spending accounts, like flexible spending accounts (FSAs) and health savings accounts (HSAs), are growing, helping Americans save money on health-related expenses. We also talk about how current legislation affects your accounts and your tax-free funds.

But we haven't seen many headlines focused on how policy changes can make these accounts better for both companies and their employees, so more Americans can take advantage of these savings. That's why this week's feature article from ThinkAdvisor is so newsworthy.

3 Policy Changes to Increase HSA Access - Anne Richter, ThinkAdvisor

In the article, author Anne Richter breaks down three regulatory updates currently under discussion. While we may not be very close to seeing them come to fruition, Richter makes a compelling argument for these changes, to encourage broader FSA and HSA use across the country.

Repealing the "Cadillac Tax"

The tax on high-cost employer-provided health plans (known as the "Cadillac Tax") was included in the Affordable Care Act to discourage employers from providing excessive health benefits at the taxpayers' expense. It places a 40% tax -- paid by the employer -- on the cost of health coverage that exceeds certain threshold amounts.

The Cadillac Tax has some negative consequences for HSAs and FSA holders. Having individual employee contributions factor into tax threshold calculation is a serious deterrent for employers to offer these benefits, who don't want to pay the 40% tax.

One more time, in English: the more money it costs to give employees these benefits, the less likely employers are to offer them. Repealing the Cadillac Tax would go a long way toward ensuring tax-free health spending remains on the table for workers.

Bottom Line: Your employers can only benefit from healthy, happy employees. And they probably want to offer you the best possible coverage. Repealing (or even adjusting) the Cadillac Tax will make it easier for these things to happen.

Expand how HSAs and FSAs can be used

According to a January 2017 Bankrate survey, 57% of Americans don't have enough cash to cover an unexpected $500 expense. To counter this, the Health Savings Act aims to make HSAs and FSAs more accessible by implementing policy changes around the use of these accounts, including (but not limited to):

  • Allowing spouses who are both 55 or older to make catch-up contributions to the same HSA
  • Increasing the limits on HSA contributions to match the sum of the annual deductible and out-of-pocket expenses permitted under a high-deductible health plan; and
  • Allowing HSA distributions to be used to purchase health insurance coverage.

Bottom Line: By expanding the HSA and FSA contribution limits, families can better manage their health costs, possibly decreasing the financial burden from both expected and unexpected expenses.

Enhance FSA limits

HSA-qualified health insurance may not be available to all Americans, making FSAs a more reasonable alternative. Because the entire annual FSA contribution amount is available to employees on the first day of the plan year, account holders have an immediate safety net against out-of-pocket healthcare expenses. This is a huge win for families with limited disposable income.

Bottom Line: If passed, the Responsible Additions and Increases to Sustain Employee Health Benefits Act of 2017 would make FSA benefits more accessible to American families by increasing the annual limit on employee salary reduction contributions to $5,000. This would give users much more flexibility -- and breathing room -- with their health needs each year.

FSA Friday is a weekly roundup of the latest topics, tips and headlines to keep you updated on all things flex spending. It appears every Friday, exclusively on the exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


2016 FSA Mailbag recap: Y​​our top Learning Center questions answered!

2017 is finally here, and whether you're a new flexible spending account (FSA) user or a seasoned veteran of these accounts, if you ever have an issue with your benefit, you can submit a question to the Learning Center! This area of our site outlines the most frequently asked questions about FSAs, and you can even submit a question to our experts who will reply to your query as quickly as possible!

We received plenty of great questions over the course of 2016, and we wanted to share a few of the most common and relevant submissions as we kick off the new year:

  1. Can I cancel my FSA contributions at any time?

Unfortunately, FSA contributions cannot be canceled at any time during the plan year and account holders are required to finish out their plan year in accordance to the payroll deductions they signed up for during the Open Enrollment period. However, there are a few special exceptions that would allow an FSA user to change their contributions, which are called Qualifying Life Events (QLEs). QLEs include a change in marital status (marriage, divorce, death of spouse), a change in the number of dependents, a change in employment status of account holder, spouse or dependent, an event that causes the dependent to satisfy or cease to satisfy an eligibility requirement for a particular benefit or a change in residence of the employee, spouse or dependent.

  1. Is there a cap on spending for eyeglasses?

There is no cap on spending for eyeglasses if they are purchased for you, your spouse or a qualified dependent. However, the IRS does not allow for the "stockpiling" of one particular item with FSA funds, so as long as account holders are not buying excessive amounts of a specific item, they should have no issues with reimbursement.

  1. I am going to finance the $5K cost of hearing aids over a 48 month period. I will then pay monthly installments totaling +/- $1,400/year. I know hearing aids are eligible expenses, but are they covered via financing? Including the finance charges?

FSAs may only provide reimbursement for services received within the current plan year. So for the year in which you actually incur the expense (you are provided with the hearing aids), you would be able to submit for reimbursement from your FSA. However, finance charges are not eligible with an FSA, and any payments you make in subsequent years would not be eligible because they would not correspond with the year in which the services (or in this case, product) were received. Keep in mind that you don't actually have to pay the expense for it to qualify for reimbursement. In the year in which you are provided with the hearing aids for example, you could potentially elect the full $2,550 FSA limit and be provided with up to $2,550 in reimbursement for your $5,000 hearing aids, whether or not you have actually paid that much to date.

  1. Can I have an FSA and HSA?

Yes, you can have what's known as a Limited FSA as that's often paired with an HSA. But to be eligible for both an HSA and FSA, the Limited FSA will only be able to cover specific items that are not covered under the HSA. For example, these limited expenses could include dental, vision or over-the-counter dental and vision products. If you have more questions about eligibility, it's best to ask your HSA/FSA administrator.

  1. What's the max allowed for 2017 medical FSA that each my husband and I can take through our individual employers?

The IRS announced in October that the 2017 FSA maximum will be $2,600, up $50 from 2016. Because the FSA max is applicable on an account by account basis, if an individual and their spouse both have access to their own FSA through their own employers (and those employers are not affiliated), they can each elect the maximum for 2017. If they did, they would have a combined household contribution of $5,200.