FSA stands for Flexible Spending Account. A FSA is a tax-preferred account which provides you with money for paying medical related bills including prescriptions and sometimes over the counter products. The money for this account comes from pre-tax contributions by the employer and/or the member.
Any money that has not been used at the end of the fiscal year is lost.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
FSA stands for flexible spending account and are only available with employer-based health plans. In short, it's an account that uses pre-tax monies that are contributed by the employer and/or insured persons - up to $2500 can be contributed per year. The funds can be used to pay for certain out-of-pocket medical expenses including your deductible, copayments, coinsurance, prescriptions, and even over-the-counter medicines (with a doctor's prescription).
If you have any remaining money at the end of the year, the money is lost and the account, in short, resets. Since you lose the funds at the end of the year, you don't want to contribute more money than you think you will use on health-related expenses. However, employers can (but are not required to) offer one of two options:
1) provide a grace period of up to 2.5 extra months to use the FSA funds
2) allow you to carry over up to $500 per year to use in the following year.
Please let me know if I can be of further assistance. Thanks very much.
That is a great question! An FSA, Flexible Spending Account, is a part of a companies benefits package that allows you to take a portion of your pay before being taxed and put it in a dedicated account used to pay for medical expenses. It is a good thing to have, if prescription costs in your home are a regular expense, for example. The thing to be aware of with this kind of account though, ids that there are caps to what you can put into it, and whatever you contribute has to be spent by years end, or it disappears. Talk to your HR person, or plan administrator, and get some more details about this benefit, and what it will pay for. Thanks for asking!
An FSA is the abbreviation for a Flexible Spending Account plan which is an IRS approved means of allowing employees to set aside payroll deducted dollars on a pre-tax basis to use for several different types of employee personal expenses. Most people encounter an FSA in the context of setting aside money to cover medical, dental or vision expenses not covered by their group health insurance plan but you are not required to be enrolled in a health insurance plan in order to take advantage of your employer's FSA plan. Also, there are types of FSAs (Dependent care is an example) that I won't go into at this time.
For 2014 the maximum amount an individual can set aside in an FSA has been reduced to $2500. But this change has been somewhat offset by a change to the "use it or lose it" rule which in past years meant that any unused dollars in an FSA account at the end of the plan year were forfeited by the account holder. Now up to $500 in unused FSA funds can be rolled over from one plan year to the next. Such rolled over funds do not count against the $2500 maximum deduction the employee can make in the subsequent FSA plan year so some accumulation in now allowable if your employer has amended their FSA plan document to allow for this. An additional take away though is that over the counter medications are no longer eligible for reimbursement from an FSA.
Setting aside funds in an FSA account reduce the employee's gross taxable income on a dollar for dollar basis. So, depending upon the tax bracket an employee is in, the potential tax savings could be in the 25% to 40% range when Federal, Social Security and possibly state taxes are taken into account. An FSA can be a very cost effective tool in helping employees get more value by paying for eligible out-of-pocket expenses.
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Any money that has not been used at the end of the fiscal year is lost.
If you have any remaining money at the end of the year, the money is lost and the account, in short, resets. Since you lose the funds at the end of the year, you don't want to contribute more money than you think you will use on health-related expenses. However, employers can (but are not required to) offer one of two options:
1) provide a grace period of up to 2.5 extra months to use the FSA funds
2) allow you to carry over up to $500 per year to use in the following year.
Please let me know if I can be of further assistance. Thanks very much.
For 2014 the maximum amount an individual can set aside in an FSA has been reduced to $2500. But this change has been somewhat offset by a change to the "use it or lose it" rule which in past years meant that any unused dollars in an FSA account at the end of the plan year were forfeited by the account holder. Now up to $500 in unused FSA funds can be rolled over from one plan year to the next. Such rolled over funds do not count against the $2500 maximum deduction the employee can make in the subsequent FSA plan year so some accumulation in now allowable if your employer has amended their FSA plan document to allow for this. An additional take away though is that over the counter medications are no longer eligible for reimbursement from an FSA.
Setting aside funds in an FSA account reduce the employee's gross taxable income on a dollar for dollar basis. So, depending upon the tax bracket an employee is in, the potential tax savings could be in the 25% to 40% range when Federal, Social Security and possibly state taxes are taken into account. An FSA can be a very cost effective tool in helping employees get more value by paying for eligible out-of-pocket expenses.