Tis the season. Not that season! I’m talking about open enrollment time. The time of year where workers across the country go through the process of signing up for the next year’s benefits by reviewing health plan options (especially with the Affordable Care Act), life insurance, dental and vision plans. I mean, who doesn’t like talking about accidental death and dismemberment?
There are also the flexible spending accounts. Where I work I’m always surprised of the number of employees who do not take advantage of the flexible spending accounts my company offers. Nicole and I have taken advantage of medical flex spending for years. No, it won’t make you rich, but it will certainly save you money. You like money, don’t you? I’m going to speak to the medical/health flexible spending account since this is the one we take advantage of. There are other accounts such as dependent care FSA (yearly contribution max, $5k) and a commuter FSA (contribution max varies).
First, to give you an idea of what it can save you let’s use a yearly contribution of $1k to your flex spending account. The money is deducted from your paycheck over the course of the year. And the $1k comes out of your paycheck pre-tax. So if you’re in the 25% tax bracket you’re saving $250!
There’s a couple catches, but they’re easy to deal with so don’t let this stop you! First catch, you’re limited on what you can use that money to pay for. They need to be qualified medical expenses. This link covers the other types of flexible accounts depending on what your employer offers. The biggest use for a medical flex spending account is to use it for expenses such as co-pays, medical bills left after the insurance portion, contacts/glasses, and prescriptions. For those with kids, this can add up quickly.
The second catch is that it’s a “use it or lose it” account. Expenses need to be incurred during the plan year. You can submit receipts (as long as they’re in the plan year) up until March 15th of the following plan year. Using 2013 as an example, if you have an expense from November 2013, you have until March 15th of 2014 to submit that expense against your 2013 account.
There have been some recent changes allowing up to $500 to “roll over” into the following plan year. Employers also have that as an option along with extending a grace period. They can opt for either but not both. Check your plan for your details.