Use It Before You Lose It: How Flexible Spending Accounts Work
Tue, 06/03/2014 - 1:18pm | by Guest Author
Use it or lose it. You've probably heard that phrase before, but did you know that it applies to your health savings account? Flexible spending accounts and health savings account are an amazing way to save on your taxes and your medical expenses if you do the intelligent thing and shop around for care. But, every December, many individuals find themselves with leftover funds. In an HSA, this isn't a problem. But, in a flexible spending account (FSA), this is a big deal.
What Is Eligible?
Companies like HSAForAmerica.com have been singing the praises of HSA for a while now, but FSAs are also really great options, though they're less common. The IRS has a helpful publication that outlines exactly which expenses are eligible under these plans. In general, you can use flex money to pay for things that would qualify as a deductible medical expense.
For example, let's say you go to the doctor's office. You need some routine lab work done. Check - these items are covered. You end up in the hospital - check. This is covered. You go to the dentist for a chipped tooth - check. This is also covered. Eye exams and glasses are another little-known covered item, as are prescription drugs.
Some forms of acupuncture and chiropractic care can even be included in allowable FSAs. However, you need to sync up with your provider and make sure that this is possible - not all services would be covered.
What's Not Eligible?
For everything that falls outside of the usual medical expense, it's worth checking into whether or not it's covered. So, for example, things like nutritional supplements or gym memberships aren't going to be covered even though they can be part of a healthy lifestyle.
Weight loss programs, even if they are necessary for your health, are generally not covered. Cosmetic surgery is another medical expense that won't be picked up under the FSA. Hair transplants might make you feel better, but they won't make your pocket book heavier - they're not covered.
What about vet care? That's legit medical care, isn't it? Well, yes and no. According to the law, pets are considered personal property. Pet insurance plans will cover them, but your flex account won't.
It used to be that you could use the FSA for non-prescription drugs, but recent changes to the law are going to keep you from doing that. You'll need a doctor's prescription to be reimbursed for any non-prescription drug other than insulin.
Why is any of this important? Because, if you have this type of account, you'll want to use the money in there. If you don't, your employer takes it away for good. That's right. You have to spend it on medical expenses, or you lose the money permanently. It does not accumulate like an HSA does
This permissive-based account is often confused with HSAs, which aren't restricted in this manner, so contact your employer. Find out what you have. And, most importantly, make sure you use all of the money you're entitled to.
Susan Thomson has a passion for money management. She often blogs about the finance industry to help people understand their options and responsibilities.