A flexible spending account, or FSA, is an amazing way to save your hard-earned cash, before taxes, to pay for health-related items and services you need every day. While many account holders are rock stars at maximizing their account usage, there are always a select few who wait until the end of the year to use their account, or simply let the funds expire.
Don’t be that person! Learn how to make the most of your account with our quick tips and FSA-eligible items at a glance.
But First: An Overview of the Three Types of FSAs
Health Care FSA
The Health Care FSA allows you to set aside pre-tax money for eligible medical expenses that you would normally pay for using personal funds. These expenses include deductibles, copays, or coinsurance (not reimbursed by any medical, dental, vision, or prescription plans for you, your spouse, or eligible dependents).
You can even use your account to pay for your family’s medical care, regardless of their health care coverage.
Limited Purpose FSA
A Limited Purpose FSA is an FSA that is paired with a health savings account (HSA). These accounts apply to dental and vision expenses only. With a limited purpose FSA, you can focus on maximizing your HSA funds (which accrue interest, can be invested, and roll over year after year, remember?) to save for the future.
Dependent Care FSA
The Dependent Care FSA allows you to set aside pre-tax money for eligible dependent day care expenses so you and/or your spouse can work, look for work, or attend school full-time.
The account may cover child and elder day care, before- and after-school care expenses, summer day camp, nursery school, and pre-school costs.
Tips for Making the Most of Your FSA
Hang on to those receipts. Consider this the golden rule of your FSA account. If you purchase something you think is FSA eligible, but you aren’t sure, it’s always better to save your receipt. Any time you go to the pharmacy, physician’s office, eye doctor, or dentist…even if you buy an FSA-eligible item at a grocery store “pharmacy” section, hang on to that receipt just in case you need to submit a claim. You can also check out this search feature for IIAS-approved stores for FSA eligible purchases.
Keep tabs on your plan year deadline, and grace periods. Your FSA funds are “use it or lose it,” so that money will disappear at the end of your plan year. The end of the plan year doesn’t necessarily mean “December 31.” Each employer is different, so double-check with your employer on the date. Some, but not all, employers have grace periods (this is like a “last chance” for you to use your FSA funds, even after the plan year is up). Once you talk to your employer, add the deadlines and last-chance dates on your calendar. Set reminders if you have to!
Plan ahead. When it comes to your FSA, a little planning can go a long way. At the start of each plan year, take inventory of the times of year you’ll likely have FSA-eligible expenses. Are you planning a summer vacation? (Did we catch you off guard? See this blog post). Need to pay for a day camp over a holiday break? Anticipating a yearly “back-to-school” cold or upcoming physical for sports? Do you need to order contacts once every 6 months? Just taking 10 minutes to outline those yearly expenses that are also FSA-eligible items can help you maximize your FSA funds.
Know what’s covered. Check out the infographic below with a quick overview of FSA eligible items – including a Health Care FSA, Limited Purpose FSA, and Dependent Care FSA. For a more detailed version, check out this expansive list.
