It's time to pick your employee
benefits for the new year. Is a flexible savings account, or FSA, one of your
options? Before you pass on this optional benefit, learn more about it and
decide if it's a smart choice for you.
What is an FSA?
Your employee benefits package could include an optional cafeteria plan that
allows you to pick and choose personalized benefits. An FSA is one of those
choices. It allows you to save part of your income for specific expenses listed
in the plan. While most of the qualifying expenses are medical related, an FSA
can also cover dependent care for your children or aging parents.
What are the Primary Benefits of an FSA?
Because the money placed in an FSA isn't taxed, you'll appreciate tax benefits.
Plus, you'll have money set aside for expenses like deductibles, eye glasses
and day care.
What are the Disadvantages of an FSA?
No matter how much money you save in your FSA, it's a use it or lose it deal.
That's why you'll have to carefully estimate how much money you'll need through
the year. Save too much, and you'll be scrambling to use it all before 2016
rolls around.
Is an FSA Right for You?
An FSA is a good choice for you if you expect to accumulate medical expenses
that your insurance won't cover, like high deductibles or copays. You can use
FSA funds to buy prescription and over-the-counter medications, pay for dental
procedures and stock prescription sunglasses. These funds also pay for specific
medical condition treatment and prevention like smoking cessation aids. Some
plans also cover dependent care for your children or aging parents.
However, you can't use FSA funds for cosmetic surgery, general health
improvements or your health insurance premiums. It also won't cover your
child's summer camp or your parents' nursing home expenses.
Now that you know more about it, could you benefit from an FSA this year? Talk
to your insurance agent for more information and specific details about the
options your employer offers. Then, get ready to save for expenses and be
prepared in 2015.