A Medical Care Flexible Spending Account (FSA) can be used for qualifying health care expenses incurred by you or your family members.
Eligible family members are a legally married spouse and dependent or non-dependent children through age 26.
Eligible expenses are expenses not paid by your health insurance, such as deductibles, coinsurance, co-payments, prescription medications, some over-the-counter medications, eye care, and/or dental care. For a list of eligible expenses, you may visit IRS Publication 502.
The difference between opening an FSA versus claiming the same expense when filing your federal income taxes is that the Schedule A (IRS Form) requires a taxpayer to have 10% of their adjusted gross income (AGI) in health care expenses before they are able to deduct any health expenses. Most families do not have enough health care expenses to ever take a deduction.
You should estimate your upcoming out-of-pocket health care expenses for yourself and your families for the next Plan Year (Jan 1-Dec 31), total the amount, and divide by your selected number of paychecks for the year. This is the amount that will be deducted, on a pre-tax basis, from each paycheck. As expenses are incurred, you may submit a reimbursement request and be paid (reimbursed) each week. An additional benefit is that you will have the full amount that you have elected for the calendar year available on January 1. In other words, if you elected $800, the full $800 is available to you on January 1.
You must be eligible to participate in the health insurance plan, but are not required to participate in order to elect an FSA.
The IRS defined annual contribution limit is $2,750 per employee for 2021.
Up to $550 remaining in the FSA on December 31 will automatically be rolled over to the next Plan Year. Any amount over $550 remaining in the FSA at the end of the Plan Year is forfeited and will be retained by your employer.
If you are enrolled in a Health Savings Account, you may only enroll in a limited purpose flexible spending account (LPFSA). An LPFSA allows you to contribute additional pre-tax dollars to use for dental and/or vision expenses, allowing you to maximize your pre-tax HSA contributions.
To submit for reimbursement from your FSA, you should enroll in an online account and submitting for reimbursement through your portal, or downloading the App from the Apple or Android App stores.