Healthcare Flexible Spending Accounts (FSA) are tax-advantaged healthcare accounts that let you use tax-free money to pay for eligible medical expenses. Millions of Americans use an FSA to help reduce their healthcare costs through payroll deductions. Whether you are new to FSAs or have had one for years, here are eight important things to know.
#1 Contributions are tax-free
When you contribute to an FSA, the money is deducted from your paycheck before taxes are calculated. That means you don't pay federal income tax or FICA taxes on those funds. Check this page for the latest contribution limits.
#2 Your entire annual balance is available on day one
Unlike an HSA, your full FSA election amount is available at the start of the plan year — even before all your contributions have been deducted. This means you can use the funds for qualified expenses right away.
#3 After annual enrollment, you can only change elections with a “qualifying life event”
Once you set your FSA contribution during open enrollment, you generally cannot change your election amount until the next enrollment period — unless you experience a qualifying life event such as marriage, birth of a child, or change in employment status.
#4 An FSA lets you pay for more than you think
Your FSA funds can cover thousands of other products and services beyond doctor visits and prescriptions — including vision, dental, first-aid supplies, and more. Visit the FSA Store to explore eligible items.
#5 You can pay for eligible expenses directly, or get reimbursed later
Use your FSA debit card at the point of sale, or pay out of pocket and get reimbursed later by submitting a claim. Either way, you benefit from tax-free spending.
#6 FSAs let you pay for your spouse and eligible dependents too
Your FSA funds can be used for qualified medical expenses incurred by your spouse and eligible dependents, even if they are not covered under your employer's health plan.
#7 FSAs are ‘use it or lose it’ accounts
Unlike HSAs, FSA funds generally do not roll over from year to year. Any unused balance at the end of your plan year may be forfeited, so plan your contributions carefully. Learn more about Flexible Spending Accounts.
#8 Many organizations offer extensions
Some employers offer a grace period or carryover provision that gives you extra time or lets you carry over a limited amount to the next plan year. Check with your benefits administrator for details. Browse the FSA Store to make the most of your remaining funds, or visit our Help Center for more information.
