The ABCs of Flexible Spending Accounts
With the escalating costs of healthcare, more and more people are looking for ways to save money. One great way is to participate in employer funded healthcare savings accounts which can be used for medical, dental and comprehensive vision care. There are three main types; Flexible Spending Accounts (FSAs), Healthcare Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs). All are tax-free, but each come with specific rules about how the money can be spent, how many pre-tax dollars can be contributed and more.
Flexible Spending Accounts – A Great Way to Save
Flexible Spending Accounts (FSAs) are employer-sponsored health care spending programs in which employees can elect to contribute a certain amount of pre-tax dollars to a year by year account that can be used to pay for eligible out-of-pocket health care as well as dependent care expenses. An FSA can be an extremely beneficial means of saving on the cost of health care. Both employers and employees can contribute to FSAs and money is meant to be spent in-year.
FSAs are available only through employer health plans, and they are entirely voluntary. It is extremely important to note that FSAs differ from other federal programs in that each FSA cycle is only eligible for use during one Benefit Period, or one year. You must therefore enroll each year that you choose to participate in the program.
You are only permitted to allocate $2,550 to your FSA, though you do not have to contribute that much. Since you lose any money that you do not spend throughout the Benefit Period, it is extremely important to consider carefully the amount of money that you could spend in one year. Employers have the option to provide one of two additional plans to mitigate the risk of losing unspent money. Employers may offer a “grace period” of two and a half months in which money from the prior FSA may be spent, or they can permit employees to carry up to $500 over into the next Benefit Period.
Money in an FSA can be spent on a wide range of healthcare options. FSAs can pay for medical, vision and dental copayments, deductibles, prescription drugs, over-the-counter drugs accompanied by a doctor’s prescription, as well as a comprehensive list of healthcare services and equipment including glasses and contact lenses.
Comparison of Healthcare Spending Accounts
The chart below outlines the differences between FSAs, HRAs and HSAs.
HRAs and HSAs are typically paired with high deductible insurance plans and can be combined with FSAs.
Healthcare spending accounts are a great way to save on your family’s healthcare spending. Your comprehensive eye exams, glasses and contacts are all eligible for FSA funds. Contact us today to schedule an appointment to use rollover FSA funds or 2016 contributions and part of your overall eye health plan. Call 303-991-9600 or schedule online.