What is an FSA and How Does It Work?
A Flexible Spending Account (FSA) is offered through lots of employers and it permits employees to allocate funds on a pre-tax basis that may be used for certain eligible health care expenses that would otherwise be completely out-of-pocket. This means that an employee is not paying tax on the portion of their income set aside in the FSA.
But employees aren’t the only ones who benefit from an FSA. Such programs may also lower an employer’s FICA taxes on employee payroll tax, as well.
Unlike other tax advantaged benefits, FSAs are a use-it or lose-it benefit. Any available benefits must be used for eligible items or services by the end of the year. If they are not, that those funds are forfeited by the employee.
It’s important for employees to know how to use their FSA, so they can save money and take advantage of the tax preference this benefit offers. Keep reading to learn our top tips and considerations for FSAs.
Tips and Considerations for FSAs
Employees who may not often seek care at a provider’s office likely still purchase many FSA eligible items. For example, common items for minor cuts and scrapes like adhesive bandages, most like to keep on hand. Some may also run humidifiers in winter months to help prevent nose-bleeds that can result from inhaling cold air that is overly dry. Many people wo may decide not to go to an eye doctor, will still buy reading glasses for everyday use. Even employees who have vision insurance can still use a Flexible Spending Account to cover an additional pair, such as prescription sunglasses. These may all be eligible for FSA reimbursement, depending on the particular FSA plan.
FSAs Cover More Than You Think
Some of the items covered by FSAs might surprise your employees, such as:
- Shoe inserts
- Acupuncture or chiropractic visits (portion not covered by medical insurance)
- Fertility treatments (portion not covered by medical insurance)
- Prenatal vitamins and baby items like monitors and thermometers
- Feminine hygiene products
- Freezer ice-packs (even those shaped like cartoon characters)
- Electric heating pads
- Arthritis cream
- Canes (for use on occasion or regularly) or crutches
These are the types of expenses every employee should be keeping in mind when considering how much to contribute to an FSA being offered by their employer. Employees who have declined participation in the past may change their mind when they realize all of the eligible items there are!
Learn How to Use an FSA with benefEx
Our lives have changed post-pandemic. It is essential to ensure that employees have a clear understanding of all of their employee benefits and of what a Flexible Spending Account could do for them.
At benefEx, we are industry leaders with decades of experience in the insurance business. We’re eager to be of service to you, so reach out to us now to learn more about FSAs and other cost-effective benefits packages for your company.