What is an FSA?

Sometimes referred to as a cafeteria plan, flex plan, or a Section 125 plan, a Flexible Spending Account lets you fund an account with pre-tax dollars. During the year, you have access to this account to help pay for eligible out-of-pocket medical, dependent daycare or transportation expenses.

How does it benefit me?

• You decide how much to contribute to the plan each year based on you and your family’s needs for covered expenses up to an IRS-set maximum.
• Your contributions to the plan are made automatically through payroll deduction.
• Because you use tax-free dollars to pay these expenses, you increase your spending power and realize substantial tax savings.
• You can receive reimbursement for your entire claim, up to the amount you elected to contribute for the plan year, regardless of what’s been deducted from your pay to date
• You can file a claim as often as you want. No waiting until the end of the year.

What else do I need to know?

• Unless your employer’s plan has a carry-over provision, the plan is use-it-or-lose it. If you don’t spend all the money in your account by the end of the year, you will forfeit the balance. Plan wisely.

• Once you have decided the amount to contribute to the plan, it is set for the rest of the plan year, unless you have a change status, like getting married, having a baby, or an employment change. Again, plan wisely.

• Proper documentation, like an Explanation of Benefits statement from your insurance company or receipt for over-the-counter medications, must accompany your claim form.