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.
If you recently enrolled in your 2019 employer-sponsored healthcare plan, there's a good chance you've already received your FSA card.
No flexible spending account (FSA) development has done more to save American families time and money than the FSA card! Prior to the card, each purchase with your flex dollars required gathering receipts, filing paper claims for your benefits administrator, and then waiting for approval and payment. Nobody wants to deal with that.
But with the introduction of the FSA card, which functions in the same way as a standard credit card, you can avoid the entire claims process by completing it at the point of sale.
How can I get an FSA card?
When you set up an FSA through your employer, most plan participants will be issued an FSA card that operates just like a standard debit card, allowing you to spend money for the coming year. These cards are provided by the benefits administrator, and you can typically manage all aspects of your FSA with them, or through an online employee portal.
Once your plan is set up, your entire year's FSA funds are available from the first day of your coverage, so you can start making FSA-eligible purchases right away.
Where can I use my FSA card?
While you can't use your FSA card everywhere, more and more places -- from online pharmacies to brick and mortar stores -- are accepting them each day.
(Of course, we're partial to one particular site that accepts FSA cards, and has 100% guaranteed FSA-eligible products.)
Best of all, many benefits administrators will allow FSA cards to be used at doctor's offices or hospitals to cover the cost of care. So everything from routine checkups to an ER visits can be covered by your flex dollars.
This is more of a friendly reminder -- make sure you track all receipts and invoices for your FSA-eligible purchases. I know we hinted that this process was a thing of the past thanks to the FSA card, but it's still a card, not a magic wand.
In nearly every situation, the card will be accepted and processed without worry. But there's no better way to fight off "unpleasant surprises" than by keeping good records. You should always keep paperwork for charges, not just in the event of a denied charge. Depending on where you use the card, you may need to submit a receipt or documentation even if it was approved.
Why? Because if your benefits administrator denies an FSA card charge, having this paperwork handy to verify eligibility will save you time and hassle down the line.
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.
For most Americans, healthcare comes through their employer, and prices for expenses -- like copays and doctor visits -- are largely determined by the available plans, before you even sign up.
But with the rising cost of healthcare in the U.S., skipping treatments or postponing doctors' appointments has become an unfortunate -- and unnecessary -- reality for some Americans.
Don't let these price increases affect your health when there are many ways to cut the costs of medical care! For this week's FSA Friday, we're going to explore some easy, money-saving tips to boost your finances.
1. Check prescription drug prices
We covered this in last week's column, but you may be spending more than you should for prescription drugs by not paying with cash. Pharmacy benefit managers (PBMs) may sometimes negotiate higher prices for co-pays than the actual cost of the drug, so you should always ask your pharmacist first if there's a difference between cash and insurance-covered prices.
2. Use free preventive care options
The Affordable Care Act mandated that insurance plans must offer a minimum standard of preventative services that are free of charge to the participant, as long as they stay within their insurance networks. Healthcare.gov has a full listing of these services, which includes vital screenings like colonoscopies, vaccinations, blood pressure testing, and more.
3. Enroll in an FSA/HSA
Maybe we're partial, but if you're offered an FSA or HSA option through your employer, this is one of the easiest ways to cut costs by reducing your taxable income. The money contributed to your account is exempt, so every purchase you make, whether it's sunscreen, co-pays or OTC medicines, is covered by tax-free money. That's way better than paying out of pocket!
4. Consider generic drug options
When you purchase name-brand medications, you're usually paying a premium for the name on the bottle. Over-the-counter (OTC) medications like pain relievers and antihistamines have identical generic versions that can offer real cost savings.
Another note -- be wary of pricey combo drugs. Instead of buying a less-effective combination cold and allergy medicine, check ingredient lists. It's often far cheaper (and effective) to buy a standard decongestant and a separate allergy medication. Of course, check with your doctor if you're unsure of how much you need of each active ingredient.
5. Track your health spending
This sounds like a no-brainer, but tracking spending is a major consideration if you have a deductible.
Let's say you anticipate having a medical procedure sometime over the next year. You can use this opportunity to make a huge dent in your deductible so that insurance can cover unexpected expenses later in the year.
Another option is to hold off on the procedure until later in the year, after you've met your deductible, when your insurance might possibly cover the whole cost. Both options make sense, as long as you track your costs so you can time your healthcare costs to match your insurance coverage.
Prescription drugs can be expensive. But your insurance provider is getting you the best prices, right? Well, maybe. According to a recent study by the University of Southern California (USC), this might not be the case, as up to 23% of Americans are paying more for insurance co-pays than they should.
The controversial co-pay "clawback"
In short, this prescription overpayment ("clawback") is the practice of charging more for a co-payment than the total cost of the actual drug. It stems from the "middle men" -- the pharmacy benefit managers (PBMs) that handle drug claims for insurance companies -- trying to grab back these funds from the pharmacy.
So, despite what your insurance provider says, in some cases, it's cheaper to pay for prescriptions with cash rather than through insurance.
According to The Balance, these PBMs are intermediaries between insurance companies and other arms of the healthcare industry. They can negotiate with both pharmacies and drug companies to get the best rates. ExpressScripts and CVS Caremark are two examples of these organizations.
Here's how it works: If you pay for a prescription through your insurance and owe a $10 co-pay, you probably assume that covers your end, and the insurance covers the rest. But what most people don't realize is that the drug could cost just $7 out of pocket. The PBM then "claws back" an extra $3 -- in other words, if you paid with cash, the drug would actually be cheaper.
According to Kaiser Health News, the USC study revealed that prescription drug overpayment is a much larger issue than we realize. It analyzed prices of 9.5 million prescriptions in the first half of 2013 and incredibly, found that overpayments were nearly $135 million during that six-month period.
How FSA users can avoid clawbacks
If you're using flex dollars to cover prescription drug co-pays, you could be subject to these same clawbacks as those filing through traditional insurance payments. Your best defense is to speak up! In most states, you can ask your pharmacist for the pricing difference between insurance co-payments and paying out-of-pocket.
Shockingly, some insurance plans have gag clauses that prevent pharmacists from telling patients the pricing difference. The National Conference of State Legislatures has additional information on these orders, so be sure to see where your state lands on this issue.
But these gag orders shouldn't stop you from asking questions! If you can't find a pricing difference between co-payments and cash, opt for cash payment and then file for FSA reimbursement later. If it's the same price, use the convenience of your FSA card.
With the right information on your side, you may just end up saving hundreds of dollars each year -- money you didn't even know you were overspending in the first place!
Happy December, everyone! It's a busy time here at FSAstore.com. The year is ending, which means many of you have FSA deadlines rapidly approaching!
Of course, year-end deadlines mean year-end headlines. The three articles we selected this week highlight just how different our understanding of health savings and flexible spending accounts is across the country.
More importantly, even though FSAstore.com and HSAstore.com have the best Learning Centers on the web, these links illustrate how many more people we need to help understand their accounts.
In these links - all of which were published this week, by the way - we see how studies can turn up very different results. One claims HDHP members are smarter shoppers. Another claims these people aren't using their options the right way. Which is right? That depends on your situation.
Luckily, our Learning Center and calculators, along with 24/7 customer service, and a 100% eligibility-guarantee can help clear up this confusion, and help everyone benefit more from their benefits.
HDHPs decline as sole benefit plan option - Employee Benefit News
Just 28% of U.S. employers are considering offering HDHPs as their sole benefit option to their employees in the next three years. This is a reduction from a high of 44% in 2014, according to PwC's Health Research Institute study.
Even when consumers have health plans that require them to pay a high amount out-of-pocket for care, they often don't talk to doctors about the price of treatments or shop around to get the best deal, a U.S. study suggests.
Most Americans with high-deductible health plans don't shop or save - Insurance Journal
A new study suggests that despite the rise in these high-deductible health plans (HDHPs), most Americans who have them aren't saving, shopping around for better prices, talking to their doctors about costs, or making other consumer-type moves.
The renewed healthcare debate in Washington over possible replacements to the Affordable Care Act (ACA) has left many Americans scrambling to learn more about possible changes to their health coverage. However, as pivotal as these plans are to individuals and families' long-term health and financial stability, recent surveys have shown that Americans lack a critical understanding of some of the most common terms related to health insurance plans.
A recent survey conducted by PolicyGenius of 2,000 American health insurance consumers found that less than half understand how their health plan works. The survey found a 25% gap between consumers' perceived and actual knowledge of these key health insurance terms: “deductible", “co-pay", “coinsurance" and “out-of-pocket maximum."
At FSAstore.com, we are committed to educating our customers about healthcare benefits and the potential of consumer-directed healthcare accounts like FSAs and HSAs, and we don't want to leave you flat-footed when it's time to choose a health plan! Here are the terms you must know to make an educated decision with your healthcare benefits.
An insurance plan's deductible is the amount that a plan holder has to pay out-of-pocket before the insurance company will begin to cover the costs of qualifying medical services. For instance, if you are enrolled in a plan with a $1,500 deductible, you will have to cover the cost in full of most medical expenses until you meet the $1,500 threshold, at which point the health insurance plan will begin coverage for qualifying expenses. Note that some expenses, such as prescriptions, often fall outside of the plan deductible requirements.
Many health plans will offer a type of co-payment or co-insurance arrangement where the plan holder will pay a portion of the overall cost of the healthcare service. In the case of co-payments, these are fixed amounts that are paid for a health care service, which can vary for different services within the same plan, such as prescription medicines, doctor's office visits and consultations with medical specialists. In most cases, plans with lower monthly premiums have higher co-payments, deductibles or co-insurance, while higher monthly premium plans will have lower co-payments.
Co-insurance is a different type of cost-sharing arrangement than a co-payment in which the plan holder will split the costs of a health plan service, often after a deductible has been met. For instance, if an individual's insurance plan offers a 70/30 split for medical expenses after the deductible is met, an expenditure of $100 would mean that the insurance company would pay $70, while the account holder pays $30. Depending on the structure of the healthcare plan, co-insurance splits may also vary if a patient goes outside of his/her physician network, at which point a larger cost-sharing split may be required for these services.
- Out-of-Pocket Maximum
With all of the previous terms in mind, the out-of-pocket maximum is an important number to keep in mind when choosing a health plan. The out-of-pocket maximum is the most a person will pay over the course of a year in deductibles, co-payments or co-insurance, after which point the insurance company will pay 100 percent of all covered health expenses for the rest of the year. So if a plan has a $6,000 out-of-pocket maximum, the plan user would have to incur $6,000 worth of deductible, co-payment or co-insurance payments out-of-pocket before the insurance company began covering expenditures in full.
For everything you need to keep your family healthy year-round, rely on FSAstore.com! We have the web's largest selection of FSA-eligible products to help you maximize the potential of your healthcare benefits.
Learning more about health care coverage
As you may know, a big deadline for health insurance coverage was approaching. Under the Patient Protection and Affordable Care Act (PPACA), also popularly known as Obamacare, March 31 was supposed to be the end of the open enrollment period for the uninsured to sign up for health coverage through the public exchange. This week also marks four years since the PPACA was signed into law by President Barack Obama.
Those consumers who started the enrollment process, but won't be able to finish it by Monday, will now have the chance to get an extension until mid-April, according to Federal officials. People will be able to check off a blue box on the official HealthCare.gov site to show they tried to enroll before the official March 31 deadline. While up until now the March 31 was emphasized, this provides an extended enrollment period for anyone still trying to get coverage.
Note: A Flexible Spending Account (FSA) is separate from health insurance. Learn more in this blog post about how a Flexible Spending Account is separate from health insurance.
Fines for Not Enrolling
Many who miss this enrollment opportunity would have to wait until fall to get coverage for January 2015. Not only that, but if those that are uninsured don't enroll by this date, they could face a fine. According to the Department of Health and Human Services (HHS), the penalty is calculated each year (and increases per year) and for 2014 is either 1% of yearly household income, or $95 per person per year ($47.50 per child under 18). If you have what is considered 'minimum essential coverage,' then you can avoid paying the penalty. Minimum essential coverage (which means you get covered) includes a Marketplace plan, COBRA, Medicare and Medicaid, among a few other available options.
Reuters reported that the Obama administration will still allow some people to enroll after March 31, but only depending on special circumstances. Americans can enroll under the federal insurance marketplace site, HealthCare.gov.
Despite early glitches with the HealthCare.gov site, Reuters added that more than 5 million Americans signed up to get covered through the federal site and also through 14 state-run marketplaces.
The Department of Health and Human Services (HHS) released new data in March 11, 2014 press release about enrollment in the Health Insurance Marketplace. Statistics showed that 31% of those who enrolled were age 34 and under, and 25% are between the ages of 18 and 34.
Flexible Spending Accounts (FSAs) are different than and separate from your health insurance. An FSA is an employer provided benefit that helps you save on health care expenses by allowing you to put aside money on a pre-tax basis, so it’s worth looking into it for additional savings.
You cannot use your insurance toward most of the over-the-counter products sold at FSAstore.com. However, you can use your FSA to buy these FSA eligible products online. An FSA can be used to cover out-of-pocket expenses that your health insurance does not pay for including co-pays, deductibles ,coinsurance, over-the-counter items and more (though insurance premiums are not covered). It’s best to reach out to your FSA administrator to find out about FSA eligible expenses for your individual plan.
Browse the Learning Center to get more information about an FSA.
How is a Flexible Spending Account Different?
Yes. A Flexible Spending Account (FSA) is an employer-sponsored benefit add-on that lets you contribute tax-free income to cover qualified health care expenses such as those not paid for by your insurance plan. Your health insurance plan is completely separate from your FSA, and you do not necessarily have to be enrolled in a health insurance plan to have an FSA (although due to Health Care Reform, you may want to).
Let's break down some rules about FSAs and health insurance:
- You cannot cover costs paid by your insurance plan with an FSA as well.
- You cannot use more than one FSA for the same medical bill.
- Expenses paid for with an FSA cannot be claimed on an annual income tax return.
- You cannot use an FSA for insurance premiums. Contact your FSA administrator about FSA eligible expenses for your plan.
You can use an FSA to pay for out-of-pocket expenses not paid for by your health insurance including:
"I was fired before the end of my FSA plan year. What happens to remaining FSA funds? Is an FSA a COBRA eligible plan?"
Whether you are fired, laid off or leave a job for another reason, the question of what happens to your flexible spending account (FSA) funds is a big one, and it's something that all employers may handle differently. If you are enrolled in an FSA, developing a strategy for a future job transition should always be something you have in the back of your mind so you can avoid forfeiting any funds.
Even if you are fired before the end of your FSA plan year, some employers give you the chance to use the remaining funds in a specific time period. You will not be able to incur new expenses during this period unless you are eligible for and elect COBRA. COBRA (or the Consolidated Omnibus Budget Reconciliation Act) lets you continue group health coverage for a limited time.
COBRA FSA rules can be complicated, as you can only elect COBRA under certain conditions. Let's dive into the FSA COBRA question so you can quickly develop a plan during a job transition:
If your employer is subject to COBRA (your company has 20 or more employees)
If your FSA is "underspent." What this means is that you've spent less than you've contributed to your FSA to date. If you spent more than you've contributed to date ("overspent"), then you wouldn't be entitled to COBRA.
How does it work?
Once you've elected COBRA coverage, you'll continue to make contributions to your FSA on a taxable basis and your entire FSA balance will be available for you to use on FSA eligible expenses. Your employer may charge up to 102% of the cost to administer the FSA, so you may pay your salary contribution on a taxable basis, plus the FSA admin fee and an additional 2% COBRA admin fee.
Joe elects $2,400 to his FSA, and then terminates employment on June 30. He had contributed $1,200 ($200 per month) when terminated and hadn't used any of his balance. If Joe is entitled to and elects COBRA, he would continue paying $200 per month, plus if applicable, the FSA admin fee and an additional 2% COBRA admin fee, which would be his total COBRA premium. Joe would have access to the full $2,400 while on COBRA and could terminate COBRA coverage at any time.
To avoid forfeiting funds, easily spend down by shopping for FSA-eligible products at FSAstore.com.
As the U.S. prepares for open enrollment in the Health Insurance Marketplace, consumer health advocates worry about costs and access to care. In this recent New York Times article, consumer health advocates fear that the new Marketplace would limit the number of eligible providers and specialists accessible to participants. House Republicans have voiced concerns and threatened to defund Obamacare.
Even so, the point of the Patient Protection and Affordable Care Act (PPACA or ACA) is to make coverage both affordable and available. According to the ACA official text, information would be made readily available to consumers through an "Internet portal" helping them compare affordable coverage options. Individuals will be able to enroll in the Health Insurance Marketplace as of October 1 (more information can be found via https://healthcare.gov). Open enrollment for small businesses is delayed until November 1. Read more in our blog about the delay in online enrollment for many small businesses.
A Census Bureau report revealed that the number of Americans not covered by health insurance decreased in 2012, but there are still 48 million Americans who remain uninsured.
When is coverage affordable?
In order for coverage to be deemed affordable (as outlined on healthcare.gov), "as it relates to the Advanced Premium Tax Credit (APTC), the employee's share of the annual premium for self-only coverage [must not be] greater than 9.5% of annual household income."
Additionally, a health plan must meet a minimum value - it "meets this standard if it's designed to pay at least 60% of the total cost of medical services for a standard population."
Does my Flexible Spending Account help?
A Flexible Spending Account opens doors to eligible services not covered by your regular insurance plan. An FSA lets you pay for out-of-pocket expenses (deductibles, coinsurance and copays) when you visit health care providers such as dentists, chiropractors, acupuncturists, ophthalmologists and more. Find local FSA eligible services via FSAstore.com!
Starting in 2014, the Health Insurance Marketplace plans must also cover what are known as essential benefits. Theseessential benefitsinclude "ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care."
The benefits of an FSA extend beyond coverage for eligible medical services as these accounts are pre-tax. You're saving up to 30% on medical expenses with an FSA.
Stay updated on all health reform and FSA news right here on the blog. Or, find FSA eligible products on FSAstore.com!
It’s a source of anxiety for a lot of Americans: health insurance costs. According to a Rasmussen poll, 53% of Americans have an “unfavorable” position on the Patient Protection Affordable Care Act (PPACA), thinking that the new health reform law will increase costs.
“Whether directly from their wallets or through insurance policies, Americans pay more for almost every interaction with the medical system. They are typically prescribed more expensive procedures and tests than people in other countries, no matter if those nations operate a private or national health system.” (New York Times, June 2013)
The quote above is substantiated by an “International Federation of Health Plans 2012 Comparative Price” report. That report examines medical and hospital costs for different countries. One scary trend shows Americans are overpaying across mostly every category.
Be sure to regularly check in for health reform updates on our FSAstore.com blog. And, we'll keep you posted on all things FSA!
What about my Flexible Spending Account (FSA)?
If you have an FSA, you might be concerned about how health care reform could affect your plan. Below is a small timeline of coverage changes that have occured so far to keep you in the loop.
Health Reform & FSA Timeline
Since January 1, 2011, over-the-counter medications have required a prescription to be eligible for reimbursement under a Flexible Spending Account, Health Savings Account or Health Reimbursement Account. Insulin is an exception to this prescription rule.
January 1, 2013:
- FSA contributions are limited to $2,500 per plan year. However, if you and your spouse have an FSA that means you could potentially contribute up to $5,000 per household! The contribution limit will be adjusted for inflation starting in 2014.
- According to a Mercer National Survey of Employer-Sponsored Health Plans, the average employee contribution to an FSA was $1,424 in 2009 – which shows that the contribution cap should not affect many participants. It’s still advisable to budget your FSA throughout the year and use an FSA towards eligible services and products as necessary (eligibility of products and services is outlined in your individual plan document).
Important to Know
- If your FSA plan has a grace period, any unused funds remaining for the grace period do not count towards the $2,500 limit for the new plan year.
- The $2,500 contribution cap is only applicable to the Health Care FSA. Dependent Care FSAs, Health Savings Accounts and Health Reimbursement Accounts are not affected (although most have their own applicable limits).
Employers can find details about compliance with the new limit via IRS Bulletin 2012-40.
The U.S. Department of Health and Human Services shows how health reform affects your state (in terms of insurance options) here.