Benefits Funding- Taxable / Non-taxable

Guide

What is Health Flexible Spending Account?

A health flexible spending account is a different kind of account where individuals put money they can use to pay for certain out-of-pocket healthcare costs. Money in such accounts is not taxable which means that people can save an amount equal to the taxes they could have paid on the money they set aside. Some employers make contributions to their employees’ FSAs but this is not usually a requirement.

Flexible spending plans basically give employees a chance to spend tax-free dollars to pay for medical expenses that are not covered by their healthcare plans. It is up to employees to decide how much contributions they want to make through payroll deductions to their FSA at the beginning of every financial year.

When the time to make a claim for the money you have spent on medical expenses comes, you will be required to submit a claim to the FSA through your employer with a proof of the medical expenses plus a statement showing that the said expenses have not been covered by your plan. Once the claim is accepted, you will receive a total reimbursement for your costs.

Flexible savings account rules employees should be aware of

FSA contributions are usually limited to $2,650 per year for every employer. To maximize the contributions for a larger coverage especially for people with families, both husband and wife can make separate contributions to their respective FSAs, each with their own employer.

The money in your medical flexible spending account can be used to pay for certain medical and dental expenditures for the contributor, their spouse and their dependents. The money can for instance cover copayments and deductibles and not pay for insurance premiums. It can also cover for prescription medicines and those that are bought over-the-counter with a doctor’s prescription. Medical equipment can be paid for, including bandages, crutches and sugar test kits.

Money contributed to a certain medical flexible spending account should be used within that planned year. If you have not spent the entire amount of money, your employer may give you a grace period of up to 2 ½ months to use the money. If not, you can only be allowed to carry over a sum total of $500 to use the following year. Employees have to pick only one option of the two.

It is important to know that at the end of every year, employees lose the money in their flexible savings account. Proper planning is therefore important so as to ensure that you are only putting money in the account that you can use within that year.

Paying for medical expenses that are not covered by healthcare plans can be taxing on the part of employees, which is why employers offer health care flexible spending accounts that employers can contribute to bit by bit to ensure they have money when a medical need is felt. Employers are required to take time to discuss FSA rules and options to their employees for better decision making.

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