Does your employer offer this type of pre-tax benefit? It can be a convenient way to set aside money for dependent and medical expenses. As a single adult, you may not have children or huge medical bills, so you might wonder whether enrolling is worthwhile.
This account lets you save money from your paychecks to cover eligible medical and dependent-care costs that insurance does not pay. Contributions are taken before payroll taxes are applied, which can reduce your taxable income.
How it works
When you enroll, your employer deducts a set amount from each paycheck and holds it in the account to pay eligible expenses. Contribution limits and specific plan features are set annually and can change, so check your employer materials before you enroll.
Many plans offer either a small rollover amount or a short grace period for unused funds; the exact option and amount depend on your employer's plan rules.
What it may cover (and what it may not)
There are two common types of accounts: one for health-related expenses and one for dependent care. Dependent-care accounts have separate contribution limits; for many households the allowable amount is up to $5,000, but limits vary by filing status and plan.
The health-related account can be used for items and services the IRS considers eligible medical expenses.
Common eligible expenses
- Copays
- Deductibles
- Prescription medication and some over-the-counter items when allowed
- Medical supplies such as crutches and bandages
- Dental and vision care not covered by insurance
Common mistakes to avoid
Don’t overcommit: estimate your predictable medical and dependent-care costs before choosing a contribution amount. If you enroll for more than you use, unused funds may be forfeited depending on your plan.
Also, confirm which expenses your employer’s plan accepts and what documentation is needed to submit claims.
Questions to ask an agent
Ask how your employer’s plan handles unused funds, whether a grace period or rollover is available, and which expenses require receipts. For an overview that compares workplace benefits and saving strategies, see Workplace retirement plans, FSAs, HSAs, and saving tips.
If you want more details about account options through financial institutions, review Savings Institutions, Federally Chartered for general saving and account information.
Next steps
Consider typical out-of-pocket costs you expect this year—prescriptions, planned dental or vision work, regular copays, or dependent-care expenses—before enrolling. If you decide to open an account, talk to an agent who can help you compare options and confirm plan rules.
Frequently Asked Questions
Can I use the account for over-the-counter medications?
Some plans allow certain over-the-counter items, but rules can change and may require a prescription or documentation; check your plan’s eligible expense list.
What happens to unused money at the end of the plan year?
It depends on your employer’s plan: you may have a small rollover, a grace period to use funds, or you could forfeit unused amounts—confirm the policy before enrolling.
As a single adult with few medical expenses, is it worth enrolling?
If you expect regular copays, prescriptions, dental or vision work, or dependent-care costs (including care for qualifying older relatives), an account can provide tax savings; otherwise, weigh your likely expenses against the risk of unused funds.