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.
