March is here and for those of you who still have a balance in your 2009 flexible spending account (FSA); keep in mind it’s use-it or lose-it. If your employer provided the 2 1/2 months grace period (e.g. March 15th), then you may have a little more time to incur the qualifying expenses.
No one enjoys losing money, so consider these tips to help you use-it:
- Be aware of how your employer’s plan works:
- Understand what qualifies as an expense (e.g. doctor’s visit co-pay, daycare expenses) and the plan period in which the expense must be incurred (e.g. period January 1st, 2009 – December 31st, 2009). Note: Some employer’s provide a 2 1/2 months grace period
- Save your receipts for qualifying expenses
- Follow the process to submit qualifying expenses by the specified submission deadline for reimbursement
- Keep a copy of any account reimbursement submissions for your records
- Verify your flexible spending account balance is accurate and that you use all of your money before the plan period end date
What has worked for you? Please share using comments.
About Flexible Spending Accounts (FSA):
Employers typically offer healthcare/dependent care flexible spending accounts as part of their benefits package. FSAs offer attractive tax savings benefits. Your payroll contributions fund the account using pre-tax dollars and account withdrawals are tax-free.
When you setup a flexible spending account, your salary is reduced to fund the account. Employee contributions are deducted from your pay throughout the year in a specified time interval (e.g. monthly, biweekly). Money in a flexible spending account may be withdrawn when you submit qualified expenses (e.g. daycare costs, contacts solution) within the employer’s specified submission period.
While this account saves you money by using pre-tax dollars, if you fail to submit the receipts for qualified expenses within the stated submission period – then you lose your money in the account.
I have used Flexible spending accounts for Medical and Dependent Care. I really like the programs but yes first you must understand the program and what is covered. This program worked like a charm for me. I would estimate prescription costs (for me and the kids), doctor co-pay cost and plus add a little for unexpected things that may come up during the year. Create a plan on how your are going to use the money and it will work great. If you use it wisely this program could provide a great benefit and overall help with managing your money.
Teresa, you made an excellent point on estimating the costs of your expenses — in advance. Given that these accounts are use-it or lose-it, you definitely want to fund the account with what you expect to be spending. Many companies provide calculators to help you determine this amount. Thanks for sharing your thoughts!
You may be surprised at some of the items you can spend your FSA budget. Doing a little bit of research on what perks your company may offer in its FSA goodie bag could mean that you are spending your pretax money rather than your take home money on something you may need. (say hello to subsidized gym membership)
I have been a long-term user with the Flexible Spending Account with my employer. This program has really benefited me. Our insurance doesn’t really have a great dental plan, so the FSA helps cover the co-pays. I just adjusted it for the current fiscal year.
Monty & Stephanie, thanks for contributing to this blog. We value your comments and look forward to hearing from you on future blog posts.
I use FSA and I love it. I use it to pay my CTA monthly tickets, to pay for parking in Chicago which is getting really expensive and for medical expenses too. I don’t even need any receipts for the first two. I will recommend it to anyone. My money is deposited in my bank account in less than 24 hours after a request is placed with my FSA company.
Margarita, I must say you have a great FSA to have your money deposited within 24 hours. You mention that you use it to pay for your transportation costs. What program does transportation fall under at your job? Thanks for sharing your experience with us.