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
Mom, kid and doctor

Contribution Limits

Flexible spending accounts

2021 maximum contribution is $2,750

FSA tax benefits

Federal Tax Rate Annual FSA Contribution Annual Tax Savings
15% $1500 $340
15% $2700 $612
25% $1500 $490
25% $2700 $882
35% $1500 $610
35% $2700 $1152

 

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

View All ›
Can I change my election amount mid-year?

Elections can only be altered if you experience a change in status as defined by IRS regulations, such as a marriage, divorce, birth, or death in your immediate family.

Are over-the-counter medications eligible for reimbursement from a FSA?

Yes, over-the-counter medications are an eligible expense. An OTC medication is a product with an active drug ingredient. A few of the most common items are pain relief medication, cold and flu products, allergy products, and heartburn medication. You can find a comprehensive list on the FSA Store website.

What is the deadline for submitting claims?

You can submit claims for reimbursement at any time during the same plan year that you incur the expense. You may also have a run-out period at the end of the plan year. Check the summary plan document your employer provided.

How soon can I start spending my FSA funds?

With a healthcare FSA, your entire annual election amount is available on the first day of the plan year even though you haven’t yet contributed that amount.

How do I determine the date my FSA expenses were incurred?

Expenses are incurred at the time the medical, dental, or vision care was provided, not when you are invoiced or pay the bill.

Who is eligible under an FSA?

Most FSAs cover eligible expenses for you and all of your dependents, even if they’re not covered under your primary health plan. For more specific coverage details, please refer to your employer’s Section 125 document.

Need Support?

Connect with our people online