Flexible Spending Accounts (FSA) provide you with an important tax advantage that can help you pay health care expenses on a pretax basis. By anticipating your family’s health care and dependent care costs, you can actually lower your taxable income and that means you get to keep more of what you earn.
There are two types of FSA’s that allow you to make deductions to pay for qualified medical expenses. The Health Care FSA allows any qualified medical expense and the Limited Purpose FSA allows ONLY dental and vision expenses. If you are enrolling in the HSA-qualified medical plan, the Limited Purpose FSA is the only option you have available since other qualified medical expenses can be paid for by using your HSA.
To determine if a Health Care or a Limited Purpose FSA makes sense for you, estimate your eligible expected expenses for you and (if applicable) your dependents for the calendar year. This amount could be your annual election as long as it doesn’t exceed the allowed contribution maximum. The amount you elect is available to you at the beginning of the plan year, regardless of how much you have contributed via payroll deduction.
Please review the following information so you are aware of the rules applied to the Health Care FSA and the Limited Purpose FSA plans. This is only a brief summary. More information is available in the Summary Plan Description (SPD)
Resources
Important points to remember:
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- You may elect to contribute the maximum amount even if your spouse is also contributing to an FSA at his or her workplace.
- The Limited Purpose FSA reimburses you ONLY for qualified dental and vision expenses not covered by insurance, like co-pays and deductibles.
- The Health Care FSA allows any qualified medical expense to be reimbursed.
After you enroll, you can’t change the amount you contribute for the year, because your election stays in effect during the entire plan year (January 1 through December 31). However, if you have a “Qualified Life Event” you may change the amount of your contribution, but the change must be consistent with the event.
The following “Qualified Life Events” may permit you to change your FSA election outside of open enrollment: a change in your legal marital status; a change in the number of tax dependents; termination or commencement of employment by you, your spouse or dependent; a change in employment status that results in gaining or losing eligibility for health coverage; and, Medicare or Medicaid entitlement for you, your spouse or dependent.
