FSA is one of a number of tax-advantaged financial accounts, that can be set up through your employer.
Anaheim, CA – Visit: PRLog.com With Flexible Spending Accounts for Medical and Dental Expenses – You may be able to save tax dollars when you pay for out-of-pocket medical and dental expenses using your employer’s flexible spending account (FSA).
With many company medical insurance plans coming up for renewal in October, this is a good time to find out if your employer offers an FSA and what rules govern unused funds at the end of the benefit year.
What is a flexible spending account (FSA)
A flexible spending account (FSA) is one of a number of tax-advantaged financial accounts that can be set up through your employer.
An FSA allows an employee to set aside a portion of earnings to pay for qualified expenses, most commonly for medical or dental expenses but sometimes for dependent care or other expenses. Money deducted from an employee’s pay into an FSA is not subject to payroll taxes, resulting in substantial payroll tax savings.
The maximum amount you can elect to direct to an FSA is $2500. You’ll save an amount equal to the taxes you would have paid on the money you set aside.
What happens to unused funds?
The “use it or lose it” feature of these plans has been amended in recent years. Under the terms of the Affordable Care Act, an employee may carryover up to $500 into the next year without losing the funds.
Alternately, the employer can opt for a grace period of up to 2½ months, allowing use of the remaining funds for up to 2½ months after the end of the plan year. The employer may choose one of these two options, but not both.
Any other unused funds (beyond the $500 or after the grace period) are forfeited and can be applied to future plan administrative costs or can be equally allocated as taxable income among all plan participants.
Get your FSA debut card to easily access your funds
Many FSA plans now use an FSA debit card that participants can use to access funds directly for eligible expenses. Some still use paper claim forms. In either case, participants need to keep all their itemized receipts. These funds can be used for co-payments, deductibles, and prescription drugs, among other things.
You can’t use an FSA debit card for the employee’s contribution to monthly insurance premiums.
Pay your dental expenses with FSA
Some people who have unused funds toward the end of the benefit year are spending the funds on orthodontic treatment or preventive services such as fluoride varnish. These are beneficial treatments that patients might not have chosen without the FSA funds to spend.
So now is an excellent time to get information from your employer about available FSA plans.