What Is an FSA?
A tax-free way to plan for your healthcare costs
If you expect to incur medical expenses that won’t be reimbursed by another plan, employer-sponsored flexible spending accounts (FSAs) are a great way to save money while covering those costs.
- You can save an average of 30% on qualified out-of-pocket healthcare expenses by using pre-tax dollars
- Your full election amount is available on Day 1 of the plan year — like an interest-free, tax-free loan
- FSA dollars are “use it or lose it,” so be sure to not set aside more money than you think you will use within a calendar year
Flexible spending accounts
2020 maximum contribution is $2,750
FSA tax benefits
|Federal Tax Rate||Annual FSA Contribution||Annual Tax Savings|
For illustrative purposes only. Savings calculations are based on the Federal tax rate listed in the table and 7.65% FICA. Your tax situation may be different. Please consult your tax advisor.
Frequently Asked Questions
Below is a quick reference list of expenses that can be reimbursed from a flexible spending account. For more detailed information, please refer to IRS publications 969
- Chiropractic care
- Contact lenses and cleaners**
- Copays, coinsurance, and deductibles
- Dental treatments (X-rays, fillings, braces, extractions, etc.)
- Diabetic supplies
- Doctor’s office visits and procedures (physicians, surgeons,
specialists, or other medical practitioners)
- Eye exams
- Eyeglasses (prescription and reading)
- Hearing aids
- Laboratory services and fees
- Laser eye surgery
- Operations/surgery (excluding unnecessary cosmetic surgery)
- Over-the-counter medications**
- Menstrual care products**
- Prescription drugs
- Smoking cessation programs
** Stockpiling of over the counter (OTC) items is not permitted, and expenses resulting from stockpiling are not reimbursable. When purchasing OTC items there must be a reasonable expectation that such items can be used during the plan year. Buying more than three of the same item in any one transaction is considered stockpiling and will not be reimbursed.
The Internal Revenue Service (IRS) has established a 2019 maximum contribution of $2,700.
Your Health Care FSA covers hundreds of eligible healthcare expenses: co-payments for doctor visits, prescription drugs, new eyeglasses or contact lenses, etc. Keep in mind that IRS rules determine which expenses are eligible, and some expenses require a doctor's note or prescription to be eligible for reimbursement under your Health Care FSA.
- Cosmetic surgery and procedures
- Dental whitening
- Expenses for healthcare services rendered outside the coverage period
- Expenses reimbursed by an insurance provider or another health plan
- Family or marriage counseling
- Herbs, vitamins, supplements, or other over-the-counter items used for general health
- Insurance premiums
- Personal use items (e.g., toothpaste, shaving cream, cosmetics)
Your Health Care FSA is funded through your employer. During your company's Open Enrollment period, you tell your employer how much you would like to contribute to your account for the coming year. The maximum amount you can contribute is determined by the IRS. For 2019, it is $2,700. Your employer then deducts your contribution amount (in equal portions) from your paychecks throughout the plan year. However, the entire annual election amount is available to you on the first day of your plan year. Any funds carried over from the previous plan year (up to $500) do not count toward your maximum annual contribution limit, so you could have a balance of up to $3,200.
There are several ways you can use the funds in your Health Care FSA:
- You can use the Health Benefit Solutions VISA Card associated with your Health Care FSA to pay for eligible healthcare products and services.
- You can be reimbursed for the eligible expenses you pay out of pocket.