Flexible Spending Accounts (FSAs)

Flexible Spending Accounts (FSAs) allow you to pay for eligible expenses using tax-free dollars. Important: There is a “use it or lose it” rule imposed by the IRS. If you do not spend all the money in your FSA by September 28 of the following year for expenses incurred from July 1 – June 30, unused dollars will be forfeited per IRS regulations for pretax contributions.

     The Two Types of FSAs Are:

    Plan Information

    Plan Name: XXXX

    Policy Number: #XXXX

    Effective Date: XX/XX/XXXX

    Network: XXXX

    Healthcare FSA

    Contribute up to $3,200 per year, pretax, to pay for copays, prescription expenses, lab exams and tests, contact lenses and eyeglasses. If you are enrolled in an HSA plan, you can use your FSA for vision and dental expenses only. This is called a Limited Purpose FSA.

    Dependent Care FSA

    Contribute up to $5,000 per year ($2,500 if married and filing separate tax returns), pretax, to pay for daycare expenses associated with caring for elder or child dependents that are necessary for you or your spouse to work or attend school full-time. You cannot use your Healthcare FSA to pay for Dependent Care expenses.

    Use It or Lose It

    If you don’t spend all the money in your account, you can roll over up to $600 to use the following year. Any additional remaining balance will be forfeited.

    How Much Could You Save?

    Here’s an example. Let’s say Tom decides to set aside $2,000 in an FSA for the year. Normally, on that money, he’d pay $560 in federal income tax, $100 in state income tax, and $153 in FICA tax. So, by contributing that $2,000 to his FSA, he’ll get an $813 tax savings for the year.

    Without the FSA, Tom would pay:

    • 28% in federal income tax: $560 savings
    • 5% in state income tax: $100 savings
    • 7.65% in Federal Insurance Contributions Act (FICA) tax: $153 savings

    His total tax savings for the year with an FSA: $813