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Is Flexible Spending Really Flexible?

Most likely it is more flexible than you think.  Health care flexible spending accounts (FSA) have been around for many years. Through pre-tax dollars, individuals are able to fund these accounts and use these funds to pay qualified medical expenses. Qualified medical expenses are most often used to reimburse deductibles, copayments, and coinsurance for an employee’s health plan. Over-the-counter medical devices such as bandages, crutches and eye glass repair kits are also allowable. Participation in a health care FSA does not prohibit an employee from participating in another type of FSA (i.e. dependent care), however, funds may not be transferred from one FSA to another FSA.

You may have been contributing to an FSA for years, and the concern with FSAs has been that you never know how much you will need to reimburse these out-of-pocket expenses. And in past years, with fewer expenses than you anticipated, you possibly forfeited money in your FSA. For that reason, many people have sworn off FSA participation.

With open enrollment just around the corner, if you haven’t been participating in your company’s
FSA, take another look this year. The ACA made changes to FSAs in 2014 which have been implemented by most employers, so it’s worth your while to revisit participation in the plan. Perhaps the most important change to the FSA is the carryover provision. Whereas in the past your contributions to the plan would be forfeited if not used for reimbursement of expenses accumulated during a calendar year, the ACA established a provision permitting individuals to carryover $500 from one year into the next year. Therefore, if you don’t deplete your FSA, up to $500 can be carried over to the next year.

While the maximum allowable contribution to a health care FSA has been reduced to $2550 in 2015 by the ACA, there will most likely be an adjustment for 2016. In any event, reimbursing out-of-pocket expenses with pre-tax dollars is certainly attractive.


For additional information, contact EAB HealthWorks.