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.
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...
The perfect solution for people with poor circulation or cold feet.
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 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.
Figuring out how much to contribute to your FSA is a bit like deciding how much food to bring on a backpacking trip. Once you get out in the wilderness, you're stuck with the rations you've brought - if you packed too much, you may have to toss it along the way. If you packed too little, you'll have to end the trip early.
Because you can't change FSA contributions mid-year unless you have a qualifying event, like changes in marital or work status, it pays to contribute the right amount. Contribute too little and you may end up with some hefty out-of-pocket expenses.
Contribute too much and you'll be faced with a dilemma - roll over up to $500 to the next year or try to spend the remaining balance in the first two and a half months. Everyone has a magic number for how much they should contribute to their FSA. Here's one way to find yours.
Go through last year's expenses
The best way to decide how much to save for health care expenses is to look at how much you spent the previous year. Log on to your insurance account and see if you can find the total amount you paid, not including monthly premiums.
Include how much you spent for all medical expenses, such as glasses and contacts, prescriptions, counseling and therapy visits, medical devices, dental visits and more. Then, examine those expenses and determine how common they were. If your only visits to the doctor were because of ordinary problems like the flu or sinus infection, you can probably estimate this next year will be the same.
If you ran into a major health problem, you should evaluate if next year will be similar. Some issues, like diabetes or asthma, require more-frequent doctors' visits. Others, like appendicitis, happen once a lifetime.
If you had a costly medical emergency, consider the likelihood that it will occur again and whether or not to include that figure in your estimate.
Compare health insurance plans
Even if you're signing up for a similar health insurance policy, the deductibles, copays and coinsurance rates might change from year to year. Compare the figures to see if you'll be paying more and adjust your FSA contribution accordingly.
For example, if your health insurance copay is increasing from $40 a visit to $60, add up how many visits you made last year and multiply them by $20.
Think ahead about major procedures
Sometimes you know about major operations and procedures ahead of time, so you can plan ahead. If you know this is the year when you're going to get LASIK surgery or finally get your knees replaced, call the insurance company to get an estimate of those costs.
Most of the time you can get an accurate idea of the expenses you're facing. If the insurance company can only guess what your costs might be, go with the higher end of the estimate. This way, you'll be covered in case you end up paying more.
What if you picked the wrong number?
If you end up saving more than you needed, ask your HR rep about the company's rollover policy. Most will either let you roll over $500 or give you a grace period of 2.5 months to spend the remainder. If you saved too little, try upping your contributions next year to maximize your tax-free benefits.
Finding your FSA magic number is essentially, a guessing game. Don't be surprised if you estimate too much or too little the first time you do it. It's all about taking charge of your finances and making the most educated guess possible.
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, YouTube and Twitter.
Unexpected changes are part of life. No matter how hard you might try, it's impossible to plan for every eventuality. Some changes—marriage, birth, a new job—are joyous, while other changes— unexpected death, job loss, divorce—can be devastating. But, regardless of whether a life change is positive or negative, it's important to remember how these events can affect your FSA.
Here's some good news: qualifying life events typically entitle you to make changes to your FSA without penalties or fees. However, not all employers allow mid-year changes to your account, so it's a good idea to notify your account administrator within 30 days of the event in order to confirm whether or not you're allowed to make a change.
The IRS determines what counts as a "qualifying event," but your employer ultimately decides whether or not midyear changes are allowed. While we outline the below as qualifying events that will allow you change your FSA election, you'll want to check with your Summary Plan Description or with your FSA administrator on what specific qualifying events are allowed to be sure. Here's the basics you need to know about FSA qualifying events.
Change in marital status
Marriage and divorce are both typically considered qualifying events. If you need to adjust your FSA contributions, you'll need to have proof of the event (marriage certificate or divorce documents) to show your account administrator.
It's also important to note that the changes you make to your FSA must be consistent with the life event. For example, if you've gotten married, your FSA contributions wouldn't usually decrease. Instead, they would increase to accommodate coverage of your new spouse.
Change in dependent coverage
Whether you're welcoming a new addition to your family by birth or adoption or you're losing a dependent because he or she turned 27 and is no longer eligible for coverage on your health insurance plan, change in dependent coverage is a qualifying event.
Here's what's included: birth, adoption, death, new step-children, and dependents who have aged out of coverage. Once again, the changes you make to your FSA account must be consistent with the life event. For example, if you've recently given birth, you can't request to lower your contributions. You can only request to increase your contributions to account for the new baby.
Change in employment
Regardless of why your employment is changing—if you're quitting your job to pursue something new or have been unexpectedly laid off—changes in employment often count as qualifying events, but are different than other changes. FSA money is "use it or lose it", so if you leave your job (for any reason), you'll forfeit the cash in your account.
If you know you're leaving your job and will have unused money in your account, then it might be time for an FSA-eligible shopping spree. But even if you were fired or unexpectedly laid off, there's still good news. You can open a new FSA at your next job and benefit from the tax advantages, even if it's within the same year.
Open enrollment is your BFF
Let's be real: not all life changes are "qualified events," and even if they are, your employer might not allow for midyear changes to your FSA. Luckily, open enrollment happens once per year and during that time you can make changes to FSA—no "qualified events" required.
From FSA basics to the most specific account details, in our Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears on Wednesdays, 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.
A flexible spending account (FSA) is a great tool to help you save money on health-related expenses. But, for all their benefits, FSAs also have a set of sometimes confusing rules and deadlines. Below, we've identified several of the most-common FSA missteps, and offer a few ideas on how to avoid them.
1. Missing a deadline
The purpose of an FSA is to use your tax-free dollars to offset medical costs throughout the year. But an FSA only saves you money if you use your available funds prior to your FSA deadline.
Many FSAs have an end-of-year deadline, with an FSA grace period of 2.5 months immediately following to spend rollover funds. There's also a run-out period, an option that may be offered by your employer to submit claims from the previous year.
If your deadlines coming, don't panic. There's still hope for you, last-minute FSA shoppers. First, check your FSA balance. Then, take an inventory of your home's medical supplies, so you know what you need to replenish before your deadline hits. Also, be sure to organize and submit receipts from any doctor's appointments or visits to a specialist.
(To make things easier, you could always just shop for 100% guaranteed FSA-eligible products at a certain site we know about..)
2. Not using all your funds
If you don't use your FSA by the end of your plan year, that money is typically returned to your employer. In some cases, you may be eligible to roll over up to $500 of your FSA funds into the next plan year. Or you may even have a deadline extension to allow you to continue using those funds before they're lost, if your plan offers it.
Currently, about 40% of employers allow this rollover. This provision helps offset the typical concerns regarding an FSA: that you'll set aside too much money throughout the year, only to end up forfeiting those funds.
3. Finding the magic number
Another potential challenge of an FSA? Deciding how much to contribute. Deciding how much to contribute to your FSA can feel like a guessing game.
Contribute too little and lose out on the tax benefits. Overfund the account and you could find yourself scrambling to spend it before the grace period deadline of March 15 (unless you have the rollover we mentioned earlier). Or, you could lose that money altogether, depending on your plan.
While this can feel like a guessing game, try this strategy to find your magic number:
- Total last year's medical expenses, so you have an idea of what you spend on an annual basis.
- Keep in mind any copays and deductibles and whether these will increase the next calendar year.
- Plan for potential life changes that could be an FSA-buster: like, a pre-scheduled surgery or the birth of a child.
4. Not establishing a budget
Not setting a budget for your FSA is pretty common. But establishing a budget for those tax-free dollars can be as simple as looking at your previous year's healthcare spending.
First, determine which FSA-eligible products you spent the most on, those you were short on, any surprise expenses, and if you ended up using out-of-pocket dollars on any FSA-eligible products. This will give you a clearer snapshot of how to spend your money in the months and years to come.
Then, include any recurring annual expenses, such as medication for a ongoing conditions, allergy medicines, even contact solution. It's also a good idea to factor some extra money from your FSA for unexpected expenditures.
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.
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.
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.
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.
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.
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.
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 FSAstore.com Learning Center.
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.
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 FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram, YouTube and Twitter.
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.
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 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.
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 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.
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 FSAstore.com 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:
- 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.
- 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.
- 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.
- 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.
- 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.
Flexible Spending Account Contributions Going Up
Late last week, the IRS announced some good news for Flexible Spending Account (FSA) participants: the maximum FSA contribution will increase by $50.00 (as of January 1) for a 2015 pre-tax contribution limit of $2,550.
When the Affordable Care Act enacted the $2,500 max contribution for FSA plan years beginning after December 31, 2012, guidance specified that the maximum would be indexed for inflation beginning in 2014.
However, when Revenue Procedure 2013-35 was issued in late 2013, the FSA limit remained
published in August by Buck Consultants anticipated that the change was coming, stating that as of July the Consumer Price Index had risen to $2,583 and when rounded down to the nearest $50, the 2015 limit should increase to $2,550.
A couple of notes regarding the $2,550 2015 FSA maximum:
- The limit applies to employee salary reduction FSA contributions only. Employers may choose to contribute to an FSA in excess of the maximum.
- The limit applies to the FSA plan year vs. calendar year.
- The limit is on a “per account" basis. If a husband and wife both have access to an FSA through their respective employers, they could each contribute $2,550 in 2015, resulting in a household FSAcontribution of $5,100.
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That’s the average yearly contribution Americans made to a Flexible Spending Account, as found by a 2012 Mercer National Survey of Employer-Sponsored Health Plans. The $1,427 amount accounts for survey results from large employers offering a Flexible Spending Account (FSA).
Out of the 2,809 employers who participated in the annual Mercer survey, 86% of large employers offer a health care FSA. These large employers reported a 20% average FSA employee participation rate. Another important statistic shows that on average only 3% of contribution dollars were forfeited.
Calculating your Contribution
While the Patient Protection and Affordable Care Act (PPACA) limits FSA contributions to $2,500 a year, you can rest easy. Most Americans don’t seem to get anywhere near that limit (as that Mercer survey revealed). And, the good news is that if your spouse has an FSA, you could both contribute to FSAs for up to $5,000 in your household. Check in with your employer to see how much you can put into your FSA. Contribution limits vary per employer.
Tip: If open enrollment is happening soon for you, just use our FSA Calculator to estimate your expenses!
If you want to maximize your FSA, be sure to regularly check your FSA account balance and use it for expenses throughout the year. Think of your FSA when you visit a health care provider and cover a co-pay, or when you need to update your medicine cabinet, or even when you’re having a baby and looking for a breast pump!
FSA funds expire at end of plan year, so use your funds to avoid losing them! Some employers provide an additional 2 ½ month grace period to use your funds, but it’s best to check in about your plan. Don’t know if you have an upcoming deadline? Contact your FSA Administrator or HR department to find out!
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Yes. You and your spouse can separately opt into a Flexible Spending Account if your employers offer an FSA.
However, you cannot apply both flex spending accounts to the same expenses.
Important Limit Change
For plans years starting after December 31, 2012, contributions to an FSA are limited to $2,500 per person.
Married couples can therefore put away $5,000 maximum. After December 31, 2013, the $2,500 limit will be adjusted for inflation.
Sometimes after you sign up for a Flexible Spending Account (FSA), your life circumstances change. Maybe you got married, or welcomed a new addition to your family. Now you’re wondering if you can change your FSA contributions.
Normally, you can only elect contributions into your FSA during a yearly open enrollment period, but there are exceptions.
Qualifying event: Mid-year changes
A qualifying event affects your eligibility for coverage under your specific FSA plan. When a qualifying event occurs, many employers allow you to make a mid-year change in elections.
Qualifying events are divided into main categories:
A change in marital status
Marriage, divorce, annulment, death of a spouse, and legal separation.
A change in the number of [tax] dependents
Birth, adoption, placement for adoption, and death.
Starting a new job, quitting a job, changing from full-time to part-time, etc.
A few things to keep in mind:
Job changes also affect dependents and their coverage.
Not all benefit elections can be changed with a job change – unless, for example, someone would be paying a higher premium due to a job change.
If someone changes from a full-time job to a part-time position, that impacts eligibility as well. Read more about how other employment changes affect your FSA.
Dependents: newly satisfying or no longer meeting dependent eligibility requirements.
- Under President Barack Obama’s Health Care Reform, non-dependent children under the age of 27 are eligible for coverage.
- A change in status (no longer being a student, or a child reaching the age limit) would also end eligibility.
- This is only an allowed change if the coverage eligibility is affected in some way. For example, you can’t change coverage only because you move, unless the move directly impacts your coverage.
- COBRA Qualifying events, Judgments, Decrees or Orders, Entitlement to Medicare and FMLA (Family Medical Leave Act).
Steps After a Qualifying Event:
You can only make changes that are “consistent” with the qualifying event (i.e. coverage eligibility must somehow be affected). You should always check in with your FSA provider about qualifying events. Your Summary Plan Description should list which qualifying events allow you to make changes under your plan.
Note: Not all employers let employees make mid-year changes. If a qualifying event occurs and you want to make a change in your election, you should notify your FSAadministrator within 30 days of the event. Find contact information for many FSA administrators here.