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Ask Jesse: Should I set up a Flexible Spending Account?

I wanted more info on opening a flexible spending account for medical expenses. I dont know much about them except that I should have one. How does it work? I would love to get one up and running for 2011! How much do you budget per person? -Mary

I have received numerous emails regarding setting up a IRS-approved savings account for medical expenses after my post a couple of weeks ago on HSAs. Right now, my understanding is there are several options: the Flexible Savings Account (FSA), the Medical Savings Account (MSA) and the Health Savings Account (HSA) (See IRS Pub 969)

I do not know much about the FSA, as I have personally never had one. My understanding is that you set aside a certain amount each month for qualified health expenses and that, if you do not use all the money you have set aside by the end of the year, you lose whatever you have left because it does not roll over and accumulate into the next calendar year.

Because I didn’t want the hassle of trying to guess what expenses we would have over a year’s period of time and I didn’t like the idea of losing money we do not use, I didn’t even look into the possibility of opening an FSA. Instead, we elected to open up an HSA, which would allow us to keep the money we put in over the course of a year (up to $6150, married filing jointly for 2010) that would then be tax deductible on our 2010 return.

The MSA is similar to the HSA, but created for the self-employed or employees of small businesses. To open the HSA, I called a local broker who sold a variety of health insurance products from a number of different companies so I could get a good match for us that qualified under the IRS’s guidelines for a High Deductible Health Plan.

Once we got the health insurance side squared away, I contacted a local bank that had a Health Savings Account product, into which I put our annual contributions. The money in this account, if unused for medical expenses, rolls over annually and continues to build and grow interest.

I take what we would probably pay for regular PPO coverage, subtract what we currently pay for our HDHP coverage and put the rough balance in our HSA. At this stage, the annual contribution allowance covers the high deductible we have on our health plan, so we would technically not be out of pocket anything if we had a major medical condition that wiped out our deductible because our plan covers 100% above our family deductible. (Some HSAs are 80/20 instead of 100, but I wanted to stay away from something that would leave us exposed to liability in the event we maxed the deductible.)

As of now, I have been very pleased with it and it is amazing how much more aware we have become with our medical needs when we are on the hook for most expenses.

Jesse Paine is a licensed attorney who owns his own law firm. He’s married to Crystal and is the numbers nerd of the MoneySavingMom.com team! If you have a question you’d like him to answer in a future column, you can submit it here.

The content of this column intended for informational use only and is not to be construed as providing legal, investing, accounting, or other professional advice. Your situation is factually specific and you should accordingly seek qualified professional counsel concerning your specific legal, investing or accounting needs.

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106 Comments

  • Grace says:

    HSA’s are great, and so are Flex accounts. People worry too much about ‘leaving money on the table’ at the end of the year. For one thing, it’s pre-tax dollars so it comes off the top of your income (which reduces your taxes at the end of the year, whether you spent the money or ‘lost’ some small part of it.) Secondly, if you have money left over, you can run out and buy things like prescription sunglasses, blood pressure monitors, cases of band-aids, etc. to use the money up. Also Flex can be used (provided your employer sets it up that way) for daycare expenses and for parking/public transit expenses.

    • Erin says:

      The Flexible speding account option to buy over the counter products such as Band-Aids ended in December 2010.

      My employer as separate flexible spending account for dependent care expenses.

      • Andrea Q says:

        Band aids are still covered!

        From Cigna’s website:

        “Items that will continue to be eligible without a doctor’s prescription after January 1, 2011 include, but are not limited to band aids, bandages and wraps, braces and supports, catheters, contact lens solutions and supplies, contraceptives and family planning items, denture adhesives, insulin and diabetic supplies, diagnostic tests and monitors, and first aid supplies, peroxide and rubbing alcohol. “

        • Erin says:

          Thank you for the clarification, that is helpful information.

        • Sarah says:

          Yes, a lot of things still are fine without an Rx, but it was a fairly big change (in just my opinion) to need one for Tylenol or Zyrtec. Or am I mistaken about those drugs? I haven’t used the FSA since the new rule went into effect, so please do clarify if I’m mistaken 🙂 🙂 🙂

          If a lot of OTC items have been affected by the change, perhaps it might change how much a person budgets if they don’t want to get yet another prescription, depending on how easy it is to obtain one from their particular physician?

          • Sarah says:

            Andrea, saw your response below – thanks!!

          • Andrea Q says:

            I agree that it is a huge change, but wanted to clarify that not all OTC items need an Rx. Tylenol and Zyrtec require prescriptions. And I’m sure that for many, it won’t be worth paying a co-pay to get the prescriptions.

            The FSA rules are supposed to change again in 2013, limiting annual contributions to $2,500. I find that much more frustrating than the OTC change. Perhaps the new healthcare law will be repealed and things will go back to the way they were!

          • For OTC products all you need is a “prescription” from your doctor to be reimbursed. At your annual physical ask your doc to write a prescription for products that you will need. Like aspirin, pepto, cold meds, etc.

      • Amanda says:

        We LOVE our FSA! The money is taken out pre-tax. We decide how much to take out based on last year’s expenditures and if we’re expecting new costs. You can use it to pay for glasses and contacts, prescriptions, copays, medical bills not otherwise covered under insurace, over-the-counter medicines that your doctor has prescribed, and durable medical equipment (glucose monitiors/strips, etc). We have never ended the year with a balance left, but our company gives you until March to use it all.

        I highly recommend the FSA to anyone who has any kind of out-of-pocket medical expenses. Since the money is deducted pre-tax, you save money. FSAs are easier now than they ever were, since most companies provide members with debit cards to use, instead of having to be reimbursed. So simple!

      • Roshni says:

        Also, why not just elect for the minimum amount the first year and then figure out the next year, whether you wish to increase the amount or not!
        This is if you are not in regularly the habit of examining your annual medical expenses!
        As, Erin points out, these are pre-tax dollars, which would be greater savings than HSAs, if those are just tax-deductible.

    • Michelle says:

      As of this year, you can NO LONGER use it fir over the counters or first aid supplies without a dr. Prescription! Federal laws changed on this allowance. Unless you already know about a major surgery or have a very good estimate on how much you are going to be spending, such as regularly scheduled appointments or renewable prescriptions, it would be wise to only do a small amount. We had a FSA for 4 years and put in the amount of our individual deductibles for 3 people plus what we estimated for prescriptions and a few dr. Copays. Last year we still had over $800 left mid december ( we had no emergency visits or major tests run). We were lucky
      to be able to use it to stock up on over the counters we knew we would need. However, this year that changed. We opted to not do one since it is next to impossible to cone up with a good estimate, even $500 may not be used up if we never got sick, and since we can’t use it for OTC anymore, we would lose that money. Instead we decided it was worth losing the tax break vs a large chunk of money to a corporation aka the FSA company.

      • Andrea Q says:

        You definitely can use it for first aid supplies such as band aids, diabetic supplies, sunscreen with SPF greater than 30, peroxide, alcohol and incontinence products (to name a few). The rules did change, but they did not eliminate all OTC products!

    • Michelle says:

      Also, dependent care FSA and medical FSA s are not interchangeable. You must alot an amount for them individually. You can not use leftover medical for childcare.

  • Allison says:

    HSA’s are great if you have a high deductible plan! If you have other options, you might want to explore them. For example, the family plan from my work is really expensive (not high deductible), but the individual coverage is not expensive, so I am on my own insurance, and the rest of my family is on my husband’s insurance through his work, which is a high deductible plan (but still less than the premium alone for the family plan at my work). So we have the HSA through his work, and to top it off, his employer puts $1000 into it every year! It’s my understanding that the money can be used to cover my expenses too (this would not be true if my husband was also covered under the family plan at my work, I believe) and anything unused at a certain age (65 maybe?) can be used for retirement with some sort of tax-advantage…but I can’t remember the details on that.

    Bottom line: If you have a high deductible health insurance plan you should definitely have an HSA. It allows you to save more taxes than taking a deduction for medical expenses when tax time comes around because there is no floor, the tax savings start from the first medical penny you spend.

    • Michelle says:

      Most doctors are not writing prescriptions for OTC you “might” need. Because so many people no are no longer able to carry health care (job loss, or it’s just too expensive), doctors are seeing less and less patients on a daily basis. They now want you to cone in for everything! Even if it’s just a runny nose!

    • Erin says:

      We just moved to an high deductible health ins. plan at my work and we had many question and answer sessions and they made it very clear that if a member of our family was not covered by a high deductible health plan that they cannot use the HSA to pay for their medical expenses. Just an FYI you might want to clarify, you don’t want to get stuck being audited by the IRS.

      • Shannon says:

        Erin, That isn’t correct. You are able to use HSA funds to pay medical expenses for a spouse or children not covered under an HDHP. You just are not able to have both an HSA and an FSA health account for the family. The IRS website has the information under Publication 969.

  • Erin says:

    My husband and I have utilized a FSA in the past, when he was planning to get his wisdom teeth taken out. It is good to provide a tax shelter to money that you will spend on prescriptions, doctors visits, hospital visits, surgeries, etc. Especially if you plan to have a surgery or other high cost medical event (like having a child). Some of them give you a debit card or you may have to turn in receipts. Turning in the receipts is a hassle and you must be very disciplined. Jesse is right that you will need to spend all the money by the end of the year so you should estimate conservatively. It is a safe bet though if you always spend $30 per month on prescriptions that you could elect to put $360 in the account. I think some accounts give you a slight grace period of January as well. Each is different so you must read the fine print.

  • Allison says:

    Hm, I just noticed that the original question was “How does it work?” Here’s how it works for us:

    An amount is automatically deducted from each of my husband’s paychecks and goes to the account. This amount is not taxed.

    We have a debit card that we take to the doctor or pharmacy to use to pay for expenses, and it comes straight out of the account.

    Medical expenses are paid for with money he earned, but did not have to pay taxes on.

    • Rachel says:

      That is how my FSA works also.

      In addition, you can have an FSA if you have a traditional health care plan. So I can use the money for my co-pays, prescription co-pays, eyeglasses and allergy drops (I have a prescription for the OTC).

      Although you have to use if before the end of the year, I was able to estimate my minimum expenses and had that amount elected to be withdrawn. So it saves me a little on my taxes.

      Not sure if everyone’s plan is the same, but I had to determine the amount to withdraw each month BEFORE starting for the year and I am not able to change the amount withdrawn unless a “major” change happens (marriage, divorce, baby or job loss).

  • Janna says:

    I LOVE the flexible spending account! There is a little preparation, but it is so worth it. Each year I look up the copays for what I know we need (dental, doctor checkups, eye exam, surgery etc…) and then I make some educated guesses on extra stuff like cost of eye glasses (i allow about 300). I have never had too much, as a matter of fact I usually run out of money before the end of the year! I like it because it sets aside money for my family’s health expenses, so we know that money is there no matter what our paychecks are doing. It really helps spread out the cost too 🙂
    Hope this helps.
    Janna

  • Andrea Q says:

    My husband’s employer offers a FSA in addition to our health insurance plan. The money is taken out pre-tax each month, which means less income tax paid and the ability to purchase healthcare with pre-tax dollars. Before the end of the year, we submit reimbursement forms with receipts/documentation. If you employer administers the plan, it’s quite easy.

    If you’re keeping track of your medical expenses from year to year as part of your budget, it is fairly easy to look back to see how much you’re spending. When deciding how much to put in our FSA, we consider things like eye glasses, dental appointments, copays and medication (vitamins are not covered) that we will likely need over the course of the year.

    • Rachel A. says:

      Prenatal vitamins are actually covered.

      • Andrea Q says:

        True, Rachel! I should have been more clear in my post.

        Regular daily vitamins and supplements are not covered. Prenatal vitamins are typically prescribed, so they are covered. I am currently taking prescription strength vitamin D because I was deficient, so that is covered as well.

  • Jennifer says:

    We just opened a HSA after looking at all our health insurance options. I took care of my grandparents finances after a one of them had cancer. They had “great” insurance that was 80/20 and it left them owing thousands of dollars. Taught me an important lesson. We opted for a plan that paid 100% after our high deductible. One lesson I learned is to look at the RX plan before signing up. Does it have a cap? I believe chemo and other treatments may come under the RX portion of a insurance plan. Thanks for sharing! I think HSA’s are awesome.

    • Melissa says:

      Thanks Jennifer! These tips are really helpful. We signed up with an HSA for the first time this year and I just ran to our plan documents to double check our RX coverage. Thankfully, it is 100% after the deductible like the rest of the plan. Whew. We will definitely check this first in the future!

      • Jennifer says:

        Your welcome. Checking the RX cap was not something I thought of until I realized my grandparents chemo treatment had been considered a RX on their insurance.

    • Shannon says:

      Just a note for anyone considering a HDHP/HSA combination. Even the HDHPs that have a 50/50 or 80/20 split after the deductible still have an annual out of pocket maximum, so you are not paying 50% or 20% forever. As an example, our deductible is $3500 for our family. After that, we pay 20% of everything up to another $1500. Our total out of pocket maximum is $5000 per year. By having the additional coinsurance %, you are able to lower your monthly premium. So, there is a maximum – you just have to weigh the additional out of pocket of % against the savings you get with the lower premium.

  • Jamala Thomas says:

    I love my FSA I have a medical and dependent care account through my employer but AFLAC is my carrier. I have my child care expenses deducted out of my paycheck pre tax and I submit my claims the same week. AFLAC is good. I love them. I have my money back basically less than a week after submitting my claim. With both my husband and I working it helps to lower our taxable income.

  • Tracy says:

    We use a FSA offered thru my husbands employer. What I like about it ? The company contributes! It seems this company over the last few years is making changes to encourage preventative health and rewarding it. Basically, just for going in to the Dr for an annual check up, which is covered 100% by my insurance (or I have the choice of attending a health screening they have at his place of employment for free) I then answer a few questions online , basic stuff, weight, height, blood pressure etc. Usually takes less than 10 minutes to complete the questionnaire and I receive $250 into my FSA, my husband can also do this for $250.

    The way my insurance works, well visits and shots are covered 100% however, sick visits are only covered after I meet the deductible. We have plans to choose from and we chose a plan with a $500 deductible – since we are getting $500 from his employer for doing health evaluations we are not spending anything out of pocket to meet our deductible. After we meet our deductibles, we only pay a percentage.

    With 4 children, 3 under 6 years old and college student in counseling we have met our deductible the last several years. As the kids get older we will reevaluate but for now it is worth the time to have the health screens and have the money available in a FSA to cover the deductible when we need it.

    WE have also planned ahead in the years we had major expenses – birth of a child, knee surgery. The money contributed from your paycheck for FSA is not subject to all taxes and therefore is a bit of a savings inself if you do contribute.

    I guess all I want to say is don’t rule out a FSA since you could loose money not used but investigate since it may not be money out of your pocket you are loosing.

    I too hate the thought of loosing money, but this isn’t really loosing money to me if it was never my money to begin with but free money from his employer.

  • Jeerah says:

    We have had FSA for several years because my husband has routine medication that he has to take so that expenses have to come out either from the paycheck or the wallet. FSA deduct directly from the paycheck before tax so the end of year you pay less tax. We know how much the expenses would be for each months so we calculate how much should we put aside, you can pay the copayment with FSA card so for us it’s the best because we have to pay for it anyway.

    • Andrea Q says:

      We do this also. If you’re keeping track of your healthcare expenditures in your budget, it is fairly easy to look back and determine how much allocate to the FSA. It’s also great for larger expenses like wisdom teeth, braces, eye glasses, etc, assuming you can plan ahead for these things.

  • Sarah says:

    We did a Flex Spending Account for health expenses last year. What a mistake! I don’t know if all plan administrators are as bad as ours was, but no way did the savings make up for the copies of receipts, stamps, forms, and headaches that the plan cost us. We were encouraged to use the Plan Debit Card which would supposedly cut down on paperwork and having to submit claims/receipts. No matter where we used the debit card, whether at our PCP office (a regular medical doctor), eye doctor, dentist … the plan would deny the claim until we sent in a substantiation form and copy of a receipt. So for every doctor visit, eye exam, & dental visit we had to still send in a form and a receipt and then wait for reimbursement. We weren’t using the card for anything unusual or at alternative health places. It was just for regular copays.

    At the end of the year we had a dental claim. Despite sending in the required documents, we still have not been reimbursed and may lose the last of our contribution.

    The only time the debit card worked was if we bought OTC medication at a local drugstore. That was fine but now a prescription is required (by the govt., not the plan) for every OTC drug. An FSA might work for you, but beware you are dealing with the IRS (and no grudge against them; I personally know very nice agents; just be prepared handle paperwork) and check out your plan administrator.

    • Julie says:

      I stopped using out debit card because our administrator would deny every claim. I put every medical expense on our personal credit card, then submit the claims to them. We can fax the required receipts, etc. to them. We then get a check within days.

    • Andrea Q says:

      The documentation that came with our FSA plan clearly states that the debit card cannot be used at doctor’s offices and the like. It can only be used at pharmacies/drug stores for approved items (band aids, etc). At least with our plan, all other expenses have to submitted via mail or fax for reimbursement.

      • Sarah says:

        I checked, ours actually did allow us to use it at offices. It did warn that we “may” have to substantiate, but it was not noted as a requirement. It wouldn’t have been bad if we hadn’t been encouraged to use the card and told what a time/money saver it would be 🙂

        As someone else noted the original question was about how they work. I just wanted to inform about the possible headaches of the FSA. Is it worth it? For some! But for the little we saved (due to our tax situation), it wasn’t a huge savings for us.

        I certainly think it is worthwhile if someone can max out the benefits of the FSA and either has a good administrator or doesn’t mind a lot of paperwork. If you can fax your paperwork, that does help.

        The new rules for OTC drugs did make a difference to me; maybe it wouldn’t to everyone.

        To answer part of the original question of how much to budget … others have commented, but again, figure in fixed expenses (regular prescriptions, eyewear, etc) and think about possible major expenses (having a baby?) and you will have to come up with your own idea of what the right amount. I would be conservative because I don’t think it is a good idea to lose money, but that’s just my comfort level.

        • Andrea Q says:

          That is a bummer! I can see how frustrating that would be. Our debit card is in my husband’s name and it can’t be used at offices. Since I’m the one doing all the appointments and pharmacy runs, we’ve never used it.

          The OTC rules have changed, but there are still some things that don’t need an RX. Our doctor wrote us prescriptions for tylenol, neosporin and cough medicine last month, so I can buy them whenever I see a good sale 😉

          • Sarah says:

            Now, that’s one thing where our plan was actually easier! We had a card in each of our names. Didn’t help on the paperwork end, but I had that card! We had to make a special request for it, though. Thanks for the info 🙂

      • Alexis says:

        That’s interesting because our FSA debit card specifies that it is ONLY to be used for doctor co-pays and prescriptions at the pharmacy (No OTC items or accessories). You still get reimbursed for dental visits, lab visits and OTC drugstore items (like bandaids or tylenol) but you have to submit a form.
        Last year was the first year we used the FSA (no high-deductable plan for us, so no HSA) and I expected a nightmare. But it was really simple. They didn’t even want to see our receipts! They paid out based on the EOB’s (Explanation of Benefits) from the insurance company. And you could submit everything on 1 form instead of a different form for every person or every claim. Check came in the mail within 2 weeks.
        It is a little scary that you could lose the money, but when you know that you will incur certain expenses (Monthly Rx’s, well-child co-pays, etc) it is better to get the tax benefit.

    • ericka says:

      The plan adminstrator I had the one year I did a FSA were also a nightmare! I needed receipts for everything, and the customer service people weren’t based in the US. I followed all the rules on the site as to how to submit, but of course it was denied. When I called to find out, I ended up getting in a fight with someone who doesn’t speak english as a first language on the use of a comma and what it means. Never again!

      • CC Hall says:

        I have had an FSA for years with various employers, and I used to work in an HR department. FSAs have always provided a tremendous tax savings for me and are very convenient now with the benefits card MC. I think the IRS requires receipts for dental visits because some of them may be cosmetic and therefore ineligible. However, needing receipts for doctors visits and pharmacy visits with a benefits card seems odd. It could indeed be a quirk with your flex plan administrator, or possibly if your co-pay is a percentage rather than a set amount that the administrator can program into their systems as being okay. I believe all major store chains’ cash register systems are now able to distinguish between FSA and non-FSA items and are required to in order to accept benefits cards as payment. The tax savings made it worthwhile for me even back when the debit cards weren’t available and I had to submit forms and receipts for everything. Hope this helps someone.

        • Sarah says:

          One person said their card was only for store use, another said only for offices. It looks like it just depends on the plan 🙂 Yes, our plan required detailed receipts for routine doctor visits, eye exams, everything! Either way … hold onto those receipts and EOBs! It was just a long process of getting reimbursed for us; the only one we haven’t been given money was on non-cosmetic dental work and we are still in the grace period for ’10, so we’ll try and use the money on a prescription item.

    • Suz says:

      Sarah, you may want to contact the plan administrator. When I talked to our FSA (Aetna) rep last year, she was shocked that I had to do so much substantiation for scripts and visits I made to the hospital system at which I worked. She fixed something with my account, and since then I have only had one item bounce back to me for documentation. Of course, this happened to be the only item I can’t find the receipt, but oh well. I ingored the I-9 when it came in for that $10.

      • Amanda says:

        You have to have receipts for all of your FSA purchases due to IRS regulations—not your FSA plan and/or FSA administrator. If your personal taxes are audited, you will have to provided a detailed receipt or an EOB (explanation of benefits) in order to validate the claim. So, the FSA administrator being “picky” or “annoying” is actually a help to you.

        FSA provide HUGE tax savings, which is why OTC items are no longer allowed (again, an IRS rule not an administrator’s rule) and why the IRS is very detailed in what qualifies.

        I love my FSA for Rx co-pays, contacts, glasses, and doctor office co-pays. Not everyone can have a HSA or MSA…unless you have a qualified insurance plan. All insurance plans can have FSA, if your employer sponsors the program for both healthcare expenses and day-care expenses (including adult day care expenses).

  • Ellisa says:

    We have an FSA through my husband’s work. We upped the amount deducted from his paychecks because we’d like to have another baby this year and we’ve also decided to dedicate this year to good health. We normally don’t have a lot of money left over at the end of the year, but in case we do, we usually buy first aid supplies, over the counter meds, and other related items. There is sooooo much that is covered with the FSA. We aren’t too concerned with ‘losing the money’ because this money was already deducted tax free from his pay, so it shaves our income tax bill a little bit even if we don’t spend it.

    One thing to consider with the FSA is that with the healthcare changes for 2011, over the counter meds are no longer reimbursable with an FSA unless you have a doctor’s prescription for those items. This essentially adds another step to the FSA process because you now need a doctor to write a script for the medicine with dosing instructions and submit that with your med receipts to be reimbursed for those items. We’ve let our doctor know that we have an FSA, and she said that we can call the office when we purchase OTCs and she’ll do this for us.

    How does the FSA actually work? During the open enrollment period we decide how much we’d like to have deducted and hubby’s work deducts this in even amounts each pay check. We receive an FSA debit/credit card that we swipe whenever we have a qualifying expense. Some places are registered with the FSA company, so we don’t need to keep the receipt, but just in case, we keep them. Each month, the FSA company sends a report showing our deductions and listing any transactions that require a receipt, EOB, or repayment if the transaction does not qualify. We have 90 days to provide documentation or repayment. Its actually a relatively easy process and we can actually submit documentation online.

  • Crystal says:

    We have a FSA. Each year, I try and make a ‘baseline’ of how many times I think each of us will go to the doctor and our regular medications. Also since with the new FSA rules, I called up and we will send in scripts for the OTC meds we take, so we can send in those receipts and get reimbursed for that as well. My first year (being single) I had extra and got me some prescription sunglasses, but I’ve figured out how to do it now mostly with kids and husband. Also the $ isn’t gone at the end of the year, you have till March to finish up your FSA. Your old $ gets used first, so you go to the doctor and you had $ from last year, that gets used first before your ‘new’ year and $. So you really have almost 15 months in stead of 12 to use it all up.

    For people trying to save $, it’s a good way to go. However, it is better to underestimate if you are weary or it’s your first time, as I rather pay some post-tax $ than pre-tax $ for something I didn’t want, kwim? The place that takes care of our FSA is pretty good in that if it’s a script or doc’s office, we don’t have to send anything in.

    • Michelle says:

      Actually you are a little mistaken… The money out of pocket must be spent by midnight dec 31… You can submit your reimbursements for the previous year up to march. You cannot carry it over to March.

      • daybreaking says:

        Actually, she’s not mistaken; it’s just that only some people have the option of carrying the balance over to March 31 of the following year. I believe it’s up to each individual employer to make that decision. My husband works for a college that opted to go with the 3 month extension a few years ago. Since then, we’ve always been reimbursed for any expenses that occur from January of a given calendar year through March 31st of the following year. Basically, if December 31st rolls around and we have $200 left in our FSA account, for the next 3 months, any expenses will automatically come out of that $200 and once the $200 is depleted, then the expenses will start being deducted from the next year’s amount. We love our FSA. We’ve saved hundreds and hundreds of dollars and have never lost a penny.

  • Julie says:

    We LOVE having an FSA. We knew that in 2011 one daughter would need an expensive retainer so we increased last year’s total contribution by the exact amt of the retainer. We also like that the money is taken out of my husband’s check before taxes.

  • Trinity says:

    We had it for years and canceled it this year. There were too many problems with it. We always had money left at the end of the year and would buy OTC items but now they have changed that starting this year. You cant buy anything with the card unless you have a prescription even OTC! Also found that I was being charged more for my visits than if I paid cash for it. There were also many times that it would take months of calls, letters etc for things to be paid for or things were reversed and sent back to me. I just changed it to depositing it to a separate savings with before taxes in the same amount that I had for the FSA. It will take a ittle longer for the full amount bu I think it will be better in the long run because we will also get interest on anything that is not used. Maybe some people it is better for but the one we have I find is not worth the efforts. If we would have stayed the same it was possible we would “loose” over $400. I will try it for this year and see which worked out better.

    • Andrea Q says:

      Some OTC items are still covered!

      From Cigna’s website:

      “Items that will continue to be eligible without a doctor’s prescription after January 1, 2011 include, but are not limited to band aids, bandages and wraps, braces and supports, catheters, contact lens solutions and supplies, contraceptives and family planning items, denture adhesives, insulin and diabetic supplies, diagnostic tests and monitors, and first aid supplies, peroxide and rubbing alcohol. “

  • Helene says:

    I opened a HSA last summer. I was then unable to contribute more and the $3.95 a month fee ate away at what little I had. I forgot about that fee and when I went to the doctor months later to pay the $50 copay, my HSA card was refused. I then found out I lost about $20 over those months on fees. That was the end of it.

    • Ashley says:

      You’re free to open a HSA at whatever bank you choose (the bank doesn’t have to be tied to your health insurance provider). The bank where we have our HSA doesn’t have any fees, and the interest rate is higher than most banks “recommended” by the health insurance providers.

  • Amanda says:

    We have had a FSA through my husband’s work for many years now. It was especially helpful when we were pregnant or the children were tiny and needed to go to the doctor more often. Our plan has always been a debit MC and is allowed at doctor’s offices to use for copays. We have, however, been disappointed this year that we cannot buy OTC meds as we have been able to do that in all years prior. We can get glasses, contacts, things pertaining to dentists and even shoe inserts with our plan. At the end of the year if we see we are going to have money leftover, we stock up on things we might need. This year might be more difficult with the OTC guidelines, which is a MAJOR BUMMER.

  • Jennifer G. says:

    Sounds like the thing to remember is to research the details very carefully before you commit. Many of these things would have never occuried to me to check first. Thanks for the tips!

  • Emily says:

    We also have an FSA/Dependent Care Reimbursement account through my employer. I would highly recommend it, especially with small children in day care. There is a set amount that comes out of my paycheck, pre-tax, and then I am reimbursed twice a month directly back into my bank account. Through my employer (and it may be a gov’t-mandated amount), we are allowed $5000 of pre-tax dollars to be taken out for day care per child per year. To not have to pay taxes on $5000 of my hard-earned money is a huge deal! I know the amount for the FSA is less, but still. Our plan carrier is great and only requires a short form to be filled out and faxed, along with a receipt. I would highly recommend doing your homework and using this option.

  • Jennifer says:

    Our FSA has been wonderful. It’s thru hubby’s work. We are able to anticipate certain expenses (monthly Rx, guestimate with 3 kids how many time go to the MD, planned events like major dental work, new glasses, chiropractic plans). We’ve never not used all our $ (and we put $3000 on it last year). It helps with budgeting as we don’t have to worry about unplanned events (hospitalization last year of a kid); b/c we can just pull out our card. It has my husbands’ name on it, but I can still use it, I just sign my name on the back of the card. It’s pre-tax so it’s the best you can do to save $.

  • Reesa says:

    We had a FSA through my husband’s work for 8 years and had a variety of HMO and PPO plans during those years. I thought it was great to just pay the co-pays. Then the firm merged with another and our insurance changed to a high deductible plan. We opened a HSA and hope to never go back. Even with the high deductible, we are spending less each year.

    The first year, we put in the amount equal to our family deductible. Now, we just put the difference in each year so we know the deductible will be covered.

    This is the start of our 3rd year with this insurance plan and I love it. I thought I would hate having to pay for the sick visits but it made me realize just how expensive they are. If our kids have something that is likely just a virus or strep, I swing by the CVS minute clinic that is 1 mile from our pediatrician’s office. It is almost 1/2 the cost of the regular doctor visit and unless we are having a reoccurring illness, I have no problem not seeing a doctor.

    Of course, if we have breathing issues, or like last week when we had a kid that needed stitches, we hit the ER without a thought to the cost.

    With medicine, I am more likely to ask for something different when the prescribed meds are 3x another option. Before, paying $10 or $15 more didn’t seem that bad so I never questioned it.

    The point is, we are very pleased with our high deductible insurance plan and HSA account.

    • anonymous says:

      If you think your child has strep he/she needs to be tested for it. Strep needs to be treated with antibiotics to avoid possible complications (the bacteria can spread and cause other health problems).

      • Reesa says:

        They do strep tests at CVS. My point is issues that are life threatening or reoccuring can be dealt with cheaper at CVS. If CVS diagnosed an ear infection, I would have the recheck done at the pediatrician’s office. If a child did not get over strep after the CVS visit (and antibiotic), we would go to the peditrician for the next visit. Asthma issues are pediatrician or ER only. Hope that clarification helps.

  • Kim says:

    FSA’s are great but keep your eye on it. I made the mistake of not and just realized we had $400 left in our account. Good thing we had an a claim for a dental bill that I was able to submit for. Otherwise we would have been out that money.

  • Thanks for the information on MSA’s. Our family is considering this option. I love it anytime the savings is yours to keep. We work too hard to pay insurance companies thousands of dollars each year. I would rather have my money going directly to the source of service (doctor). All the in between “paper work” is helping to cause medical expenses to rise.

    Blessings, Renee
    http://Renee-joyjourney.blogspot.com

    • Lori says:

      I am a physician in private practice. I, like almost all other psychiatrists in the area do not take insurance. Many patients are surprised over the phone, but actually find that after the initial visit the cost is close to the same as their “co-pay” with their insurance. It is incredibly expensive to take insurance. I would have to employ more people to verify insurance on the front, pay someone on the back end to “collect” from insurance, someone to answer billing questions. In addition I would have to rent or buy a larger space and pay utilities an insurance on that space.
      I would also like to offer the following advice on prescriptions. Call pharmacies and ask what the cash price for a medication is— then decide if you want to use your insurance. Many health plans that my patients have charge $10 for generics. This is fine, but some of my favorite medications are on the $4 lists at Target, Kroger, etc. Also, each company has a different formulary which offers different prices on branded medications. My “great” insurance— which by local standards is actually very good— charges me $60 for my son’s medication. The cash price at Costco is about $55 and Target is $59. pharmacies don’t offer this information to you. You have to ask, and insist on a cash price.

  • Christy says:

    I have had one for several years. This is how I avoid the leaving money on the table problem:

    – first year I put in under what I estimated I would spend–I added up my copays for yearly exams, my allergist visits, my prescriptions, etc. Of course, we ran out in Aug. or Sept. Then we kept track of how much we spent through Dec. so we would know how much to put in the following year.

    – I put in more each time we have a child (estimate ped. visits).

    – On years I have had some left we have a grace period until March. If doctor’s appts, regular prescription refills are not going to use it up before March, I refill 90 day supplies of all 3 of my allergy prescriptions and my son’s singulair. One year I bought enough children’s Zyrtec it lasted my son until Aug., although I know you need a prescription now (which we got). That same year I had a baby so I used up everything in the account and it was nice not to worry about buying Zyrtec until Aug. since we had to pay out of pocket for it.

  • Christy says:

    We also have 2 dependent care FSAs. One through my employer and one through my huband’s. You can put in a max of $5,000/year and since day care for one child costs more than this, we put in the max. Since the money is taken out pre-tax, I was surprised at how little my net pay changed. We just set one up at my husband’s new job for our newborn. We will pay $125 a week for him. Starting with the last paycheck, my husband’s pay check will be decreased by $119/week. He also has deductions for health insurance, etc. that started with this last check. His net pay was only about $80 less after everything was taken out (he gets paid weekly) so we do save money. I also did my research and there is no fear of leaving money on the table with this. If one of us loses our job or chooses to stay at home with the children, we can fill out a Change of Life Situation form (or something like that) and stop the account.

  • Christy says:

    I can’t find the comment now, but about the stamps. I can swipe my card at doctor’s offices and at pharmacies. Now that I have to have a prescription for my son’s Zyrtec, I will have to pay for it and be reimbursed (I will have to send them the prescription), so I guess I will have to use a stamp to send them the original. But otherwise, I fax all paperwork. We happen to have a fax machine at home. You can also scan documents if you have a scanner and fax them via internet.

    • Chrys says:

      I have a prescription so that I can deduct my gym membership, but I kept the original, and it hasn’t been a problem. Sure you can’t fax that as well?

      • Christy says:

        I haven’t tried yet as this is all new. I need to read the rules and see. Do you have a medical condition that requires the gym membership–not trying to get nosy, just wondering how that works? I pay a monthly Y membership but have no medical reason to go, other than the obvious health benefits.

      • Michelle says:

        Same question here… How are you doing that with your gym membership? As far as I’ve been informed via an excerpt from the IRS guidelines, gym memberships are not reimbursable…

        • Chrys says:

          Sorry, just noticing this again, but yes, I’m fat :-), medical diagnosis morbid obesity, which allows the gym membership deduction. 80 pounds lighter though 🙂

  • Suz says:

    I am disappointed that I can’t use my FSA for Tylenol, Pepto, etc. anymore without a prescription. I don’t understand why they made that change, other than to facilitate more visits to doctors offices.
    I still put in the same amount as I usually do, about $800 since I don’t have kids and my husband usually picks up his own prescriptions. With $400 for contacts with an eye appointment yearly, unexpected dental bills, unexpected physical therapy, etc., you never know when you are going to need it! I usually run out by the summer, which is too bad.
    My FSA is a benefit offered by my employer, so all I have to do is sign up and it is taken out of my paycheck. $800 is about $30 per bi-weekly check.

  • Beth Kennedy says:

    i would highly recommend a flexible spending account. i have it directly deposited into my checking acoount once the insurance co receives notification of the dr visit, rx, etc…….it doesn’t pay for everything, and you have to be on top of what is covered, etc……in case they miss something but a definite recommendation to anyone who can get one!!

  • sue says:

    I don’t really think it’s a hassle to figure out what you will need. Most of us budget anyway. Look back a few years and figure out what about how many times you go to the doc, cost of prescriptions, cost of contacts, cost of glasses, cost of contact solution, etc. Come up with a number and if you are conservative lower it a bit. Remember you are losing money too by NOT using one because you are paying taxes on the money.

  • Amy Lloyd says:

    FSA (Flexible Spending Account) and DCA (Dependent Care Account) are accounts that you can set aside money tax free. The maximum amount on FSA accounts is determined by the employer, I believe, but there is new legislation that may limit that amount to $2,500 in the future. Typically this maximum is around $3,000 per year. The dependent care FSA is federally capped at $5,000 per year, per household (no matter how many children you have).

    If you work for an employer, you most likely will have access to one or both of these accounts. Most HSAs, as Jesse speaks to, are for people who have high-deductible insurance plans. Some employers are moving to these types of plans (high-deductible), but probably the majority of people who have HSA are self-employeed.

    To determine the proper amount to place into your FSA, there are worksheets available, usually provided by your HR department, that will list possible expenses and allow you plan for what you think may happen that year in terms of medical cost (co-pays, employee deductible contribution, prescriptions, glasses, contacts, etc) that is allowed by the law. It is also important to note that a Qualifying Event will allow you to change this amount such as the birth of a child. When I had my son almost 3 years ago we increased our FSA contribution after his birth to cover the cost of our deductible since we had already incurred the expenses and knew how much to have deducted.

    Your employer may also offer a FSA Debit card which will allow you pay for these expenses directly at the doctor’s office or pharmacy and many times will require NO additional documentation for you to provide. If any documentation is required, typically it is a copy of the Explanation of Benefits (EOB) that your medical health plan will provide.

    To determine to proper amount to place in your DCA should be much simplier as most people have a general idea what their childcare expenses are going to be and the maximum is $5,000. Childcare in our area for 1 child per year runs approximately $10,000. For most people espeically if you have more than 1 child, the $5,000 will be used easily.

    Documentation is that you submit a receipt to your DCA administrator that shows the qualifying expense in addition to a Claim Form. Many plan administrators allow you to do this online and will deposit the money, after verification, into your checking account.

    Many FSA and DCA plan administrators have websites that will allow you to do any correspondence via the internet. In addition, your medical health plan probably has a website as well. In our case, the entire process is paperless because everything I might need to do in terms of documentation is available online.

    Both of these accounts will reduce your overall taxable income and can be a great benefit. I don’t know why someone wouldn’t want to take advantage of them!

  • Jennifer says:

    We now have a HSA, but at my husband’s last job we had several years with FSA accounts for both health care and dependent care. It really was a huge headache to keep track of, because all our expenses had to be “substantiated” like a prev. poster mentioned. Also, there were discrepancies about what amounts were available when with the dependent care. The full scheduled amount of the health care FSA was available Jan. 1, although my husband had not contributed any money yet (this was several years ago), but then the amount in the dependent care account built up like a regular savings account, so that I was never sure when there was enough money in the account to cover a full month’s reimbursement of daycare. Then there was a huge problem where my husband’s company was sold, so when we submitted some expenses and they tried to contact his employer through the old e-mails, they weren’t working so they basically filed us away and forgot about it (without paying us of course). We had to have a huge conference call with HR and someone in India and my husband and a lawyer to finally get them to pay us the money! The paperwork really can make this a headache depending on what your plan is like and what kind of expenses you have. This is our first year with a different employer, health plan, and an HSA, so we will see if it is any easier this time around.

  • Sarah C says:

    We have enjoyed having an FSA account for the past 2 years. We decided to lower the amount this year due to not being able to purchase OTC with it. We have a very simple FSA plan…when we go to the Dr., dentist, pharmacy, etc…they scan our card and the amount is immediately deducted from the account – no mailing, faxing, etc… They recommend keeping all receipts for records in case they “dispute” anything, which we have never had happen. I just go in monthly and make sure my balance is as it should be. Our plan also “technically” ends at the end of the year, but if we have any remaining balance, it is held in our account through March of the following year for use. So we have no complaints at all.

  • JoannaTopazT says:

    I think only one commenter above has mentioned a key point about Flexible Spending Accounts (FLEX, or FSA): you have to sign up for them during the open enrollment period for the employer’s benefits. Ours was in November 2010 for 2011. So, unless your employer is really late on this year’s benefits, or you have a qualifying event to change your benefits (if you have a new baby or adopt a child, death in the family, I think if there’s a spousal employment change), it’s too late to set up an FSA for 2011. But you can be learning about them for 2012. 🙂

  • Amy says:

    I really like our FSA. After our insurance claims are finished they automatically get submitted for FSA reimbursement. We get a check for our portion that is left. When we get a prescription filled I don’t have to do anything. I just get a check about a week later for the amount. I have 3 kids and one has a seizure disorder so I have never had a problem using the money, but we don’t even contribute the max. My husband’s company offered a high deductible plan for the first time this year, but I sat down and figured out and it doesn’t make sense for us because my daughter has to see the ped. neurologist at least once a year and has an EEG done once a year. Since it is only a $300 deductible per person on our plan, and I know that my daughter will have to go, it makes more sense to me to not go with high deductible plan. I am afraid we are all headed for high deductible plans in the future and I am not excited about it. I think that people with kids that have to routinely see a specialist lose out.

  • Nic says:

    We’ve had an FSA for several years. If you know you’re going to have steady medical expenses, which we know we will. Then I think they are wonderful. My husband is diabetic and we have two kids in braces, so it’s more than easy to use up our allocation.

    My gripe about them came this year, when the IRS changed the items on which you could use your OWN money on. I understand that the system was set up for medical needs, but I used a fair portion on over the counter medicines, which in turn reduce the need to go to the Dr’ and therefore reduce the healthcare cost….I suppose the government doesn’t want me reducing healthcare costs (grins).

    At any rate, I’m fortunate to have a great Dr, who simply said “Ok tell me what you regularly use and I’ll write scripts. So it only took one visit and one copay for me to have scripts for normal things like Tylenol.

    The information above is correct, its still available for first aid and many other products available over the counter.

    For someone who does not have healthcare needs and costs so that they know they will use the benefits, I’d not suggest using this option. For us, it works.

    • Andrea Q says:

      From the IRS:

      “The new rule does not apply to items for medical care that are not medicines or drugs. Thus, equipment such as crutches, supplies such as bandages, and diagnostic devices such as blood sugar test kits will still qualify for reimbursement by a health FSA”

      And, the IRS didn’t change the rules. Congress did when they passed the healthcare reform legislation.

  • JoannaTopazT says:

    Both my husband and I have Flexible Spending Accounts. For the dependent care account, you can set aside a maximum of $5,000 a year per family before taxes. We split that evenly — had $2,500 a year taken out of each of our paychecks, before taxes, so it didn’t reduce the paycheck by too much but we were still getting the benefit. We will be paying the daycare fees anyway, but now we get reimbursed for at least some of them. As somebody mentioned, the rules for the dependent care are that you can’t ask for distribution of the money in your Flex account until you’ve actually accumulated that much money in there — I keep track of how much comes out of each paycheck and submit for reimbursement whenever one of us has built up enough to cover two or three weeks’ worth of daycare. We’ve been using it as kind of an easy boost to our savings — we’ve already spent that money out of our regular budget, so when we get the reimbursement check, it goes into things like building up an emergency fund (last year) or making extra payments on a car loan (this year). In the past, submitting all those end-of-year reimbursements has also helped in paying off Christmas bills in January. (Haven’t had that issue for a while now. Yay!)

  • Kelly says:

    I have used the FSA for over 11 years. Once you do it is is easy to estimate your out of pocket each year. I get a VISA card with mine, so I just use that card at the doctor for co-pays and at the pharmacy. SImple easy and the money is tax free! Our policy allows us to spend into Feb of the following year just in case you have $$ left over. It is also good on contact supplies, so if I have $$ left, I stock up on contact solution. If I do have to get reimbursed, I simply fax the receipt in and the $$ is direct depost!

  • trisha says:

    We have a high deductible insurance and an HSA. Love it. I used to contribute the difference in what I’m paying for insurance versus what we were, but I’ve decreased that down due to “life” happening. I’m hoping to up that back up here in a month or so. We do have money in savings if we really needed to transfer the money to the HSA so I’m really not worried about it. Even though I have put the money in the HSA, I love how it doesn’t mess up my budget just to go to the dr or pharmacy (especially when you get 5 out of 6 family members sick!). I always felt like health insurance that we had before always screwed us anyway on those visits since we rarely ever met the deductible and had to pay for them anyway out of pocket

  • Mrs. Peel says:

    Flex savings accounts are an individual thing. If you don’t have large recurring expenses, I wouldn’t bother. In my case, I am deaf and wear contacts, so I know that along with the dentist visits, I’ll easily spend $1000 per year just on my required checkups, lenses, earmolds, batteries, etc. And every fifth year, I have to buy a new pair of hearing aids. Because my loss is profound, I have to wear power aids, which cost $5000 a pair. The last time I bought new aids, the flex account saved me about $1500 because it was pre-tax.

    I am NOT looking forward to 2013…in addition to the flex account maximum being lowered to $2500, medical device manufacturers are facing huge new taxes, which of course get passed on to me, the consumer. And I’m neither young enough nor old enough to qualify for any tax breaks on my hearing aids. At least I’ve been putting money aside for them each month, so I should be able to cover anything over the $2500.

    As for paperwork, mine requires a simple form with the EOB and possibly receipt. Money gets deposited straight into my checking account. There’s also an option to have uncovered charges sent directly from insurance to the flex account people for processing, so that it’s all electronic, but the year I tried that, everything got rejected and I had to fill out the forms anyway.

  • Jay says:

    I scanned the comments but did not see this stated explicitly for those considering an HSA or FSA: be aware that your eligibility for an HSA depends on your insurance coverage; it must be a “high deductible” policy. Last year we saw that the fees for our work FSA were higher than for our local credit union’s HSA, so we decided to go with the credit union HSA and save some fees, plus you avoid the “must spend it all this year” issue. But when we went to sign up, we found that the deductible for our health insurance plan was too low and we could not open an HSA.

  • Stephanie says:

    I love our FSA! During the sign-up period in December, I add up all of the copays and prescriptions I know we’ll have for the next year (and usually add one or two “bonus” copays and prescription amounts for the inevitable illness one of the kids will get during the year) plus enough to cover eye doctor and dentist appointments. Then I know I don’t have to budget for that stuff each month because it will automatically be saved for me out of my husband’s paycheck.
    The thing I’ve loved the most though is that even though that account technically doesn’t have all that money in it, I still have access to all of it starting January 1. It was great when an annual check-up in January turned into a trip to a specialist and some extra testing and medications that I wasn’t counting on. If I was saving that money myself, I wouldn’t have had it yet and would have had to dip into our savings account, but this way the FSA just covered it all. I’ll probably set aside a little each month now to make sure we’re still good through the end of the year, but that’s a whole lot better than having to scramble for it while in the midst of dealing with tests and doctors appointments.
    Even if you ignore the tax benefits, the year-round budgeting for expenses that typically only happen sporadically throughout the year is fantastic!

  • Andrea says:

    I have a FSA and I love it, I have one for medical bills and one for depenedent daycare. I put back $5000 a year in dependent daycare because I know that I will use that and more for my daughters daycare. I also put back $500 a year in a medical FSA which I use for eyecare and prescriptions. My eye care insurance does not cover a lot and my hubby and I both need contacts year year. We love using these accounts to save on taxes.

  • I have had an FSA for 3 years now and I love it. I love the ase of knowing that money is available if I need to go the doctor or dentist office. I contribute the maximum amount of $5,000 to my account. Our company opted for the debit card and it is amazing. What I have found is that information needs to be supplied on both ends to make the FSA work smoothly.

    1. The employer needs to provide correct information to the FSA administrator regarding Co-pay amounts, doctor visit amounts so that the FSA adminstrator could load these amounts into the system.
    *What happens is that if this information is not correct then it triggers the need to send in additional documentation. Let’s say your co-pay has increased to $25, but the employer supplied $20 co-pay information to the FSA administrator, this will trigger the need to send in additional information

    2. Most doctor and dentist offices credit card machines are not properly set up to take FSA cards. A code for each treament that you receive is supplied to the FSA administrator, if this code is incorrect, you will be required to send in additional information.

    3. Since Drug Stores and some grocery stores have updates their credit card systems to take FSA debit cardm, this is the reason why you are rarely asked to supply receipts for anothing purchased at these stores.

    Bottom line is:
    1.I tell all of my employees to keep all of their receipts for the year. In case you are asked to supply additional information.
    2. Make sure to update your personal information so if they need to contact you, they will have the correct information.

  • Kacy says:

    We started using FSA after I was diagnosed with Fibromyalgia and Chronic Fatigue. We do know that under the new health care law we can only put a cap of $2,500 a year on, which used to be $2,500 per peson.

    However, a BIG advantage to FSA is something we are currently doing right now. We opted to put $2,000 for the year on our FSA card. My husband just found out he will be losing his job in April. We have only been contributing to that $2,000 since Jan, but we can use the ENTIRE $2,000 before he loses his job and will not have to pay the FSA card back for all of the money we will have not contributed to the $2,000.

    The down side is obviously not using all of the money if you don’t have a lot of medical or dental expenses, but this card covers so many things that I would find it hard not to use it all. I have been doing chiropractic care, accupunture, massage and buying medical supplies and we are going to use up the 2k easy!
    There are pro’s and cons to both FSA and HSA. If we have a high deductible at our next job, we may explore HSA too.

  • Gloria says:

    I LOVE my FSA. This was my first year using it and I am loving it. I think I underestimated the amount I would need but I am learning as I go.

  • brookeb says:

    I use an FSA, and I love it. If you wear contacts or glasses, it’s super easy to use up any remaining money, because you can stock up on contacts or solution, or an extra pair of glasses. I primarily set aside money for copays for standard visits each year, enough for contacts/solution, and then a little extra for things that I know will come up. I’ve always ran out of funds in it a month or so before the end of the year, so never lost any money there. The other big benefit, though, is that you have that money available to you from the start of the year. So the $1200 I set aside all year is available from the beginning. If I have dental work in Jan that costs $300 out of pocket, I can pay that with my FSA card, even though I haven’t paid that much into in monthly yet.

  • Rhoda says:

    Depending on ones’ work situation, not all these options are available. We have FSA available, but not the others. For us the FSA works as two in our family have medical conditions needing several visits throughout the year plus the regular checkups. We purposely keep our FSA on the lower side in order to make sure it is used up and not have issues at the end of the year. My husband keeps track of receipts and paybacks, so I’m spared that part. Mine–making sure I get a receipt when I take the kids in!

  • Lea Stormhammer says:

    We have an FSA through my husband’s work. Since we don’t have vision coverage and 3 of us have glasses, we put in the cost of glasses for all three of us each year (about $1000/yr total). Then we add in our clinic co-pay for 2 doctor visits for each of us, 1 ER co-pay and 4 prescriptions at the base rate for my most common prescription. Then we add in a ‘fudge’ factor. Our total contribution each year is normally $2500. Our twins were born in May so that year we upped our contribution since we knew we’d have extra expenses due to the birth. I had surgery 2 years ago and we knew that was coming up as well, so we upped our contribution then too. We’ve never left money in the account and we’ve never used the money for OTC items.

    We looked at a HSA but for us it wasn’t a good option – we didn’t meet the qualifications for the ones we looked at.

    For our FSA we pay out of pocket and then submit an itemized receipt for each item. For us, prescription medications need a copy of the label for reimbursement so we just ask them to print an extra label for us, which we stick on the receipt. We’ve never had a problem.

    Cheers, Lea

  • katie sherry says:

    Actually, this is not true, coming from Healthcare experience, there is a Federal Healthcare reform act that has already affected what can and can not be done in an appointment.

    Fear mongering about how doctors are trying to spread out appointments or how the docs will not write prescriptions for tylenol so you can get reimbursed is simply not true.

    When you are there for your normal check ups, ask the doc for your regular prescription refills and while he/she is at it, just say, I need a 800 count advil from sam’s club or wherever.

    This ordeal with the Flex Spending is NOT your doctors doing.

    Further, if you do some of your own research on how the Healthcare reform is being phased in, you will find that that next year, we will only be able to set aside 2500 instead of the max 5000 for a couple.

    Think that’s fair? Think that’s reasonable? What happens if a person is planning on having gastric bypass surgery that is not covered by insurance? What happens if an adult needs to have braces again for health reasons? What happens if your health insurance doesn’t cover orthotics, and you just found out you have a foot condition that can only be treated by orthotics or foot surgery?

    In my opinion, the Healthcare Reform Act was enacted to limit our choices!

    The Flex Spending Plan was never intended for you to have 800.00 at the end of December just in case! For future reference, you might want to plan ahead a little better. For example, if you know you have a $60.00 copay for a medicine you are on regularly, calculate what a year will cost and put that money in your FSA. Same with orthodontics or dental crowns or whatever you KNOW you have coming up. Add a little for incidentals over the year. No need to put aside thousands of dollars for bandaids and Advil… plus we all knew in advance that we wouldn’t be able to do those starting Jan 01 of 2011.

    Good Luck!a

  • Adrienne says:

    Hi everyone.
    I see from reading these responses that there is still quite a bit of confusion. I don’t blame you 🙂 . I used to work in employee benefits and ran enrollment meetings for FSA’s and I still wasn’t clear on the options for HSAs since they are not handled by employers.
    In any case, I found a great article on the internet that clearly explains the differences. It is at http://www.associatedcontent.com/article/1455922/fsa_versus_hsa_pg3.html?cat=3.

    The basic difference is that FSA’s are offered through employers and HSAs are not.

    Of course, all of the laws that exist are subject to change and I just found out that, if the government reform of healthcare goes through then FSA allowable limits will be reduced in the somewhat near future.
    I would encourage everyone to look into all of the deductible expenses and use these accounts while you can. One item that is almost always overlooked is mileage. You can expense mileage for medical visits, including driving to pick up prescriptions. The allowable expense for 2011 for mileage is 19 cents per mile. But keep records!

    I hope that helps!

  • Leighann says:

    I haven’t been able to get our FSA card to work on doctor copays, which is a little frustrating, but it is great for paying for prescriptions. I have a lot of medication I have to take, and the way our FSA plan works is:

    A set amount is decided during the enrollment period. Over the course of a year, amounts equal to the total amount are taken from the paycheck, pre-tax. However, the entire amount is available to use immediately, in the form of a debit card. For example, I figured up the cost of the medications I would need over the course of a year, and then added in an extra $20 every other month to cover other problems that come up (which it’s a good thing I did, as now my daughter needs ADD medication and that is paid for with the card!). We got the $600 to use all at once on the debit card, but it comes out each week as $10 or so off the paycheck (not quite sure on the figures there) before taxes.

    This has made getting our prescriptions very easy, because before we were struggling to pay the big copays on 3 month prescriptions (the only way our insurance will let us get recurring prescriptions) and now we don’t have to worry about it. We will always have money to pay for the prescriptions, and that freedom of mind is worth a LOT to me.

  • Jen says:

    My husbands new employer last year set us up with a HDHP and an HSA..to which THEY contribute $6000 a year (the same as our deductible)! They told us this was the cheapest way to offer free healthcare for their employees. This last year I have more than $3000 left in my HSA, even after stocking up on OTC meds this past December.

    Question: Since our insurance pays 100% after the $6K deductible, I’m wondering how I will ever use all the money in my HSA? I know it carries over but can I ever get the excess money without paying penalties and fees? Do I just need to save it until retirement or until our insurance coverage changes? We are only in our twenties and could end up with $10s of thousands of dollars in our HSA if there are several years where we don’t meet our deductible.

  • I used to love our FSA and at the end of the year would stock up on disposable contact lenses if there was money left over. However, last year my husband’s company switched who managed their FSA and we had a TON of trouble with it. In August, we received a letter from them asking us to “substantiate” a large number of our “claims”. In reviewing what they wanted “substantiated” it was EVERY visit to a doctor, dentist, eye doctor, or hospital, pretty much every claim that was put through with the exception of our prescription co-pays. To put a “claim” through, we simply used the debit card they gave us and the place of business submitted the bill to them. We had to contact each place and ask them to send us a bill with whatever code the FSA company was looking for and then fax/send them all to the FSA company. It took several hours of phone calls to do this and I think it was ridiculous on their part to even ask for it, but I did it. We faxed AND mailed the papers to them (I did not save copies, but now wish I had) and thought all was well. Then last week we received a tax form from them stating all the money we had used for those visits were being reported as income unless we sent them all those forms within a week. In our case, this will result in a negligible amount of additional taxes, if any at all, so I cannot be bothered with going through all of that again. Just be warned that some FSA companies can be extremely difficult to work with. Doctors visits are covered under FSA, as well as dentists, eye doctors and hospitals. If they have submitted a bill for me or my covered family member, it should not need to be “substantiated”. JMHO

  • Amy says:

    We loved the FSA we had while I was still working. It is especially great if you know you’ll have MAJOR medical expenses in the coming year. For example, we had a baby due last May, so going into the year, we knew we needed to put as much into it as we could, and we spent it all without any trouble. Since it went straight into the saving account, and never into my checking, we didn’t miss the money, and we had it available to cover the cost of our son’s birth when the bills came. And we never had to pay tax on any of those earnings, so it worked out great.

  • Becky says:

    I was trying to print this entry off for my husband, but it takes me to a totally different entry (Babbling Becca’s). Am I doing something wrong? Love that feature though!

  • Tracey Rogers says:

    My family uses a FSA. I love it. I have a family of 6, my children range in age from 9-21 and this has been a great tool for my family. I have never had a problem with leaving money in the account. It comes in handy for all those co-pays, unplanned prescription, glasses, dentist, and so much more that can add up with a larger family. I would recommend it to anyone.

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