When open season starts on November 12 for Federal Employees, will you be participating in the Flexible Spending Account (FSA) program?
The FSA gives federal employees the opportunity to save pre-tax dollars into an account used for the sole purpose of paying for qualified medical expenses. Money is withdrawn bi-weekly on a pre-tax basis from your regular income and deposited into an account in your name.
When signing up for the program, you can designate how much you’d like to deposit into the account for the year. That amount is then divided by the number of paychecks you’ll receive for the year and the appropriate amount is transferred to your FSA account. The money can be used to pay for such expenses as doctor’s visits, contact lenses, first aid kits, immunizations, pregnancy tests, reading glasses, hand sanitizers and more. A complete list of qualified items can be obtained here.
If you know of any upcoming, out of pocket expenses in the following year where qualified FSA dollars can be used, be sure to deposit at least that much into the account. Someone with a $1000 medical expense in a 25% tax bracket would have to essentially pay $1,250 to receive the necessary care due to taxes on the $1,000. That $1,000 transferred to a FSA would only amount to $1,000 in costs for the same medical care. A savings of $250 for medical expenses is hard to come by, so plan ahead and take advantage of the program.
Keep in mind that any money left in a FSA at the end of a year does not roll over to the next year. All money deposited into the account must be used by March 15 in the year following the year of FSA coverage. If you sign up now for the 2013 FSA period, you have until March 15, 2014 to use the money in the account. Be sure to keep good records of how much money you’ve spent throughout the year and deplete the account before it vanishes.
Unlike a healthcare plan, FSA enrollment will not carry over from year to year. You must enroll in the account every year you want to participate in the program.
Keep the FSA in mind this open season when planning for next years expenses. For more information on Flexible Spending Accounts, click here.