My employer offers me a Flexible Savings Account (FSA) and if you have the opportunity, you should take advantage of it.
What is an FSA?
The Health Care FSA allows you to set aside up to $5,000 of your income before any taxes are withheld for reimbursement of eligible health, dental, and vision expenses which are not paid by a health plan. The expenses must be incurred by you or your dependents (for federal income tax purposes). Anything you pay out of your own pocket for eligible medical care, such as deductibles, copays, eye exam fees, eye glasses/contacts costs, some over-the-counter drugs, and dental expenses such as orthodontia, are usually reimbursable expenses.
Why do I love it so much?
The FSA not only comes out of your salary pre-tax, but it is basically a way of budgeting for health expenses. Sometimes we should plan for them, such as dental appointments and regular doctor appointments. Others, however, we don’t see. In emergencies, we often have to pay out of pocket for certain expenses. I advocate setting aside a little bit of money for medical expenses so we’ll be prepared when something happens.
An FSA does the budgetting for us by taking out a little big from each paycheck and in return we get a debit card that we can use for health expenses. The best part? Instead of like my budget where I set aside money each money and after a year I have a hefty sum, the FSA gives you the money upfront and then takes money over the course of the year. So your mind is immediately put at ease and you don’t need to worry about coming up with cash should something happen.
When leaving an employer, the rules vary, but often times you can use the total amount designated for the FSA at the beginning of the year, while at times you may not use the remaining money in your FSA after the termination of your employment.