FSA Accounts - What Do I Need to Know

Updated on July 26, 2013
T.H. asks from Beverly Hills, CA
10 answers

We just received an all employee email alerting us of a meeting next week to answer questions on our Flexible Spending Accounts. I have never had one before. What do I need to know? What questions should I be asking. I am going to do research more deeply on this tonite but wanted to come armed with questions. We (my husband and kids) are currently on a family health insurance plan that we pay out of pocket ourselves. I don't plan to change this. Will the FSA do me any good? I have no daycare expendetures so I won't need that either. Do I have to participate? What are the pros and cons. Just thought I'd get some advice from people who've had experience with it prior to doing my research. Thanks!

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answers from Washington DC on

An FSA - Flexible Spending Account - is a tax deduction. An FSA allows you (an employee) to set aside a portion of earnings to pay for qualified expenses (day care, medical co-pays, medication, braces, etc.). The money deducted from your paycheck and put into an FSA. Since the FSA is NOT subject to payroll taxes, you can have a substantial payroll tax savings.

Do you have elderly parents? If so - their care may be covered under the FSA plan.

Go over your medical expenses for the last year - get the total you spent on health care - co-pays, treatments, braces, etc. - once you have the total - divide it by 12 - that is the amount your employer will take from your paycheck - and put it in an account for your use on medical expenses.

If your employer is providing health insurance - is it better and cheaper than what you have now? If so - consider balancing out your plan and switch over during "open season".

Pros - you have money set aside that is a tax deduction - to pay for medical expenses.

Cons - if you don't use it - you lose it.

3 moms found this helpful


answers from Pittsburgh on

I can't think of anyone who would NOT benefit from an FSA, so yes, I think it wil save you $.

I don't know if you can use an FSA to pay health insurance premiums if you don't get insurance from your employer. This is a good question to ask tomorrow.

I do know that you can use an FSA to pay for co-pays and presecriptions, including contacts and glasses. A good place to start is to add up the cost of any daily prescriptions that anyone in your family takes, plus (if applicable) the cost of a years worth of contacts and/or a new pair of glasses for anyone in your family who wears them and use that as a baseline amount to contribute to your FSA.

The only down-side to an FSA is that if you don't use the amount you put in, then you lose it. So make your estimate realistic. And about a month before the end of your plan year, look at where you stand. If you have some $ left, figure out how to use it. For example, this year we had just a little bit left over a few weeks before the end of the year, so my husband bought a box of contacts a little earlier than he needed to, to use the $$ up so we didn't lose it.

3 moms found this helpful


answers from Jacksonville on

What sort of out of pocket expenses do you anticipate for the coming year? Got a child who'll be needing braces? Got a child who might get injured in a sport (you have a deductible with your health insurance, right?)? Does anyone in your family EVER use prescription medications? Wear eyeglasses or contacts?

All of these are typically eligible for reimbursement thru an FSA. We put the max in ours every year. This year, it dropped to a max of $2500. We will have used it all by the end of the usage period (usually end of the first quarter of the following year). Between prescriptions for inhalers, birth control, copays for allergy appts, 3 members of the family in corrective lenses, and 2 seeing the orthodontist on a regular basis... we could've used more than the max.

1 mom found this helpful


answers from Wausau on

I had an FSA for years. The tax savings is nice. The most difficult part was guessing how much you'd need for medical stuff. The first year I was too timid and saved too little. Another year I saves a little too much and lost a small amount of money. With FSAs, what money you don't use by the end of the year, you lose it. You need to consider things like deductibles, copays, routine prescriptions, etc. You can also use the money for things like eyeglasses and dental bills. You can also use funds to buy things like bandages and various medical devices, but not OTC meds like Tylenol.

Now we have an HSA, which is nice because unused money simply grows and it belongs to me for always. You need a high-deductible plan to have an HSA though. Our deductible this year is $6000, which we will not meet unless someone has a serious medical issue happen.

1 mom found this helpful


answers from Austin on

One thing to think about....

Most FSA accounts are set up as a "Use it or lose it" system... if you overestimate your expenses and don't use it, you don't get it back.

Be sure to ask ANY questions you have...... it can really help, though, even if you underestimate your expenses the first year.

Check and see if you qualify for a HSA... (Health savings account.. a different type of account that is set up through a bank, then payroll deduction. With a HSA, you have to have a high-deductible medical insurance plan, but the money you have taken out rolls over from one year to the next. Unfortunately, I do have a HD insurance program... we pay the first $2400 EACH before ANYTHING kicks in... and I am paying over $400 a month for my hubby to be covered on this plan..... but his job doesn't offer benefits.)

1 mom found this helpful


answers from Norfolk on

I don't like them.
The use or lose aspect is a real turn off for me.
If you don't put in enough you end up paying out of pocket anyway and if you put in too much you scramble to use it up by the end of the year or you lose what you didn't use.
It's a long way around to get a tiny tax break and I'm more than capable of saving my own money in my own bank account (where I earn a little interest on it) for my purposes and not have it disappear.
Where ever I have worked, participation in FSA was not mandatory.



answers from Santa Barbara on

In 18 years I have never overestimated or lost money on my FSA. I LOVE having the money taken out pre tax and the direct billing option that I have, I just use their card for everything. I plan ahead for all major things like wisdom teeth extraction, braces and laser correction surgery.



answers from Kansas City on

I am in my mid-50s, and have participated in an FSA since I was in my 20s when they were first offered. It is a WONDERFUL program. I am even the administrator of the FSA plan at our law firm.

There are many other positive comments on here that I agree with, so I won't repeat them. The great thing about a medical FSA is that even if you haven't contributed the full amount, the full amount is available to you on day one.

For example, you have only been contributing to the FSA for a couple months and your account only has, say, $100 contributed. You suddenly get a $400 bill for new eyeglasses. You can access that full $400 immediately, no waiting. For that reason, it is great for emergency and unexpected medical costs too.

As others have warned, just make sure you estimate your needs. Also, your company may offer a "grace period". That means that if you don't use your total amount, you may have a couple more months to use it up. We offer that, and it's a good safety net. BTW, I have NEVER not used all my FSA money!! You will really notice the financial benefits of it when you pay your taxes in April. I have used the FSA for medical, daycare AND adoption. It's one of the best programs our government has ever come up with. Don't hesitate to participate.



answers from Madison on

We use our flexible spending account to pay for our alternative medical care, since regular health insurance won't help. We love using the account and wish we could put even more money into it.

We use it to get back the money we pay in co-pays and deductibles, for eye glasses (both me and my daughter have glasses), and as I said, for all our alternative healthcare costs.

You do not have to participate; it is up to you if you want a Flex Spending Account. When you sign up, you need to have a rough estimate of how much you think you'll pay out of pocket that you will need to be reimbursed for, as all money that is put into the account needs to be pulled out. If, at the end of the year, you have $300 remaining in the account and you don't do anything to pull that money out, the company gets to keep that money.

The money in the Flex Spending Account is yours--so much is pulled out of each paycheck/per month and put into the account for you to use--so you'll want to make sure you can get all the money you put in, back out.

We never have an issue with this; in fact, we usually run out of money before the year is up and then have to pay all of our co-pays and such out of pocket with no reimbursement back.

I hope this makes sense. If you have more questions, PM me.



answers from Dallas on

I have a high deductible plan and use my FSA to cover my deductible. My FSA is managed by my insurance company, so they pay the bill from my FSA till the deductible is met and my insurance kicks in. It's nice knowing that the deductible won't come out of pocket. I love it, but mine is very easy to use. A lot of plans will give you a card (like a credit/debit card) to use to pay with FSA funds, that would be easy too. I would find out how reimbursements will be managed, that would make a big difference for me. My healthcare FSA requires no work from me, and my dependent care I can submit online. If I had to fill out a bunch of forms and fax them I might not use it.

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