If you’re among the nearly 35 million Americans with a Flexible Spending Account, then you’re not only saving on taxes and increasing your spendable income, but also saving on health care costs throughout the year.
Each year before you sign up for an FSA during your company’s open enrollment period, you must estimate how much you will spend towards the plan. For plans years starting after December 31, 2012, contributions to an FSA are limited to $2,500 per person, or $5,000 for married couples with two FSAs. Flexible Spending Accounts are “use it or lose it,” so you must spend whatever amount you put into it before your plan year expires. Plans have plan years in which monies have to be used. You should check important deadlines with the plan administrator to ensure you don’t lose your tax-free money. Some employers offer an additional grace period of up to two and a half months after the end of the plan year to spend your funds, but that depends on the plan provided by your company.
What happens if you have leftover FSA funds, or did not spend your money by deadlines?
Say it’s January 1, and you realized that you had money leftover in your account.
Is it too late to spend it? It depends. Check with your plan administrator to see if your plan has a grace period. If not, then it is too late as funds don’t roll over.
Where does the money go? Unused FSA money returns to your employer. The funds can be used towards offsetting administrative costs incurred during the plan year, employers can also reduce annual premiums in the next FSA year, or funds must be equally distributed to employees who enroll in an FSA for the next year.
FSA funds are available to you on day 1 of your plan year. FSA money is taken out of your paycheck each month, and sometimes employers also contribute to the FSA.
1. Keep in mind that certain health issues can pop up unexpectedly, so it’s important to be cautious when calculating FSA contributions. Try FSAstore.com’s FSA calculator to estimate yearly expenses.
2. If you regularly visit a specialist or have certain medications on refill, think about these as you estimate costs.
3. Budget contributions throughout the year as best as possible.
FSAstore.com offers FSA-eligible products exclusively so there is no confusion about which products qualify for your FSA. Browse thousands of high-quality products on our site and avoid losing your tax-free dollars when important deadlines hit.