It’s never too early to start budgeting for next year’s Flexible Spending Account (FSA), especially for those looking to make the most out of their employee benefits.
It’s also a great time for employers to offer guidance to employees on how to budget and prepare for open season allocations. The best place to get started when it comes to budgeting for your FSA is an online calculator — like the one provided by the FSA Store. These should give you a basic idea of what you could be saving, if you were using your FSA to really take advantage of your benefits.
The first step to FSA budgeting is understanding how you can make your flexible spending account work best for you. Here’s a breakdown of what your FSA is, what you can use it for, and how it can help you save on medical or dependent care-related expenses.
What is an FSA?
FSAs — or flexible spending accounts — are accounts that eligible employees can allocate pre-tax dollars to throughout the year. The funds may be used to pay for eligible expenses, like medical care not already covered under their health insurance or co-pays. There are a few different types of FSAs, but the two primary ones are Health FSAs, which cover eligible healthcare expenses, and Dependent Care FSAs, which can cover expenses like childcare and summer camps.
Because that money is set aside from your paycheck before taxes are taken out, the savings can be substantial with thorough budgeting. The annual limit for a health FSA is $2,850 while the limit for a Dependent Care FSA is $5,000.
What health FSAs can cover
Health FSAs can cover a wide variety of costs, including the following:
- OTC Medications (acne meds, antibiotics, cold/flu medicine, etc.)
- Sunscreen with SPF +15
- Vaccinations
- Acupuncture
- Chiropractic care
- Deductibles (e.g. for vision or dental plan)
- Eyeglasses (both prescription and OTC)
- Some surgeries (e.g. laser eye surgery)
- Dental work
- Menstrual care products
- Therapy (for treatment of a medical condition)
Employers will want to provide their employees with a comprehensive list of eligible expenses or refer them to the FSA Store for eligible products.
How to get the most bang for your buck
Considering how many easy and practical ways there are to spend your FSA budget, coming out ahead while using an FSA might seem like a no-brainer, but there are still some simple things you should keep in mind.
Many employers sponsor plans that allow annual carryovers at the end of the year. In 2022, the carryover limit was increased to $570.. With that in mind, if you're not sure what your budget is going to look like or when you'd want to spend it, a minimum budget of $570 for this year would be a safe bet.
When budgeting, take into consideration any large medical procedures, deductibles, co-pays, and average cost of health-related products. Budgeting for your Dependent Care FSA might be a bit more straightforward with a fixed annual childcare cost.
As far as reimbursement goes, the process is relatively straightforward. The most important thing to remember is to hang on to all receipts for FSA eligible items, as well as doctors notes for any items requiring further documentation. It’s also important to remember that your FSA is administered through your employer — so if you’re planning on leaving your job at some point during the year, be sure to budget accordingly.
Have questions about how your employees might benefit from an FSA managed in one central platform and easily accessed from a web and mobile app? Drop us a line at sales@getbenepass.com.
Frequently Asked Questions
