I’ve noticed that a lot of my female co-workers and friends avoid taking advantage of their employer’s benefits simply because they are overwhelmed or don’t understand them. As I was gathering up several receipts to submit for my $200 Flex Spending Account reimbursement (yay!) the other day, a female co-worker commented that she doesn’t “get involved in those types of things, they are just too hard to understand!”
Don’t miss out on potentially hundreds, or even thousands, of dollars in perks and tax breaks just because you don’t understand a benefit.
Since this is a topic that I think is very important, yet potentially boring for some, I will periodically blog about one benefit at a time. Don’t fall asleep on me here!
Flex Spending Accounts
FSA’s allow employees to set aside money from their paychecks on a pre-tax basis to pay for eligible out-of-pocket medical expenses. In most programs co-pays for doctor’s visits, prescriptions, over the counter medicines, deductible expenses and contact supplies are eligible to be reimbursed by your FSA account.
If you spend a lot of money at Walgreens, go to the doctor, or have a few prescriptions you take regularly, I highly recommend this account. You must determine how much you spend each year on these types of expenses in order to know how much to contribute. Some people may choose to contribute the amount of their insurance deductible in order to have money set aside in case a large medical expense comes up that year. Be careful though: FSA’s are only good for that calendar year and do not carry over (i.e. use it or lose it).
The amount you choose will be pro-rated. For example, if you contribute $500 per year and get paid 26 times per year, 500/26=$19.23 will be deducted from each paycheck and set aside for you. The funds are usually accessed by a FSA debit card linked to the account, or you submit receipts and get a reimbursement check in the mail! (Very helpful for some of us!)
Why is it a tax benefit? Well, if you are currently in the 25% tax bracket and contribute $1,000 to your FSA account, you just saved yourself $250 in taxes!
Rememer to keep your receipts!
The open enrollment period (when you can sign up for this benefit) is around the corner for many companies this time of year. Make sure you consider participating in this great benefit!