What You Should Know About a Flexible Spending Account (FSA)

Regardless of the situation you are in you reside in a world today that has concerns about health care all over the place. Who do we insure? How much do we charge them? How much should government play a role in health insurance? These are all very top level questions that involve all of us, but there are health insurance questions that apply to you directly. Below are a few things you should know about Flexible Spending Accounts, or, FSA, that could save you a lot of money.

1. Contributions that you make to a Flexible Spending Account through your employer are considered to be "pre-tax". This means that your paycheck will be reduced by the amount that you are contributing before Uncle Sam gets to take a bite. In other words, more of your money goes to helping you.
2. You can contribute up to $5,000 in one year to a Flexible Spending Account according to the IRS. Unless you are expecting some major medical expenses in the same year, you should be covered pretty easily by this amount.
3. If you don't spend the money in your Flexible Spending Account by March 31^st in the following year on related medical expenses in the same year, you lose it. This account does not flow over to the next year, if you don't use it, you lose it.
4. If you elect, for instance, to set aside $2,400 for the year and you get paid bi-monthly (24 paychecks per year) then you will have $100 per paycheck deducted. However, with the Flexible Spending Account the entire balance is available to you right away. Regardless of if your major expenditure is in January or November, you will have the entire allotment available to you with the understanding that you will be paying it off for the rest of the year.
5. Flexible Spending Accounts are intended to help you save for the next year only. If you don't plan on having a baby or a major surgery in the next year, it may not benefit you to open an FSA.

These are just a few things to consider when you are trying to determine if you want to open a Flexible Spending Account or not. If you have questions that are not answered here it may be beneficial to speak to your employer's HR representative or consult a health care provider directly.