How Much Should I Pay into My Healthcare Flexible Spending Account?
If you don’t use all the funds in your Flexible Spending Account during the year, the funds are forfeited. This fact prevents roughly 7O% of the people who have access to FSAs from using them. That’s too bad because it is one of the few tax breaks most employees get on their healthcare costs and could save you thousands of dollars. Using our checklist will help you consider all your eligible, planned out-of-pocket expenses as you estimate your spending levels. Learn More>>>
Healthcare Flexible Spending Account [FSA] – Eligible Expenses
These items ARE reimbursable for people in your family that are or could be claimed as dependents (except if the person filed a joint return with someone else, the person had a gross income of $365O or more, or you (or your spouse] could have been claimed as a dependent on someone else’s return.
As you review the checklist, keep in mind that expenses paid for by a second healthcare plan are NOT reimbursable.
After identifying items where you believe you will incur expenses in the new plan year, you’ll need to complete an estimate for each one. Keep in mind that you may not incur all of your deductible costs for dental if you have great teeth and seldom have major dental work done.
Estimate FSA Funds to Set Aside
1. Find out your FSA funding limit from your benefits package.
2. Compile your out-of-pocket costs from last year
3. Adjust co-pay costs based on changes in your insurance plan (e.g., if your co-pay jumped from $15 per doctor visit to $25, count all your physician visits and multiply by $25
4. Adjust your co-insurance costs if you changed doctors, changed plans, your favorite doctor is now out-of-network, or your existing plan changed the coverage percentages. Limit the co-insurance based on max-out-of-pocket limits, if you plan has them.
5. Adjust your deductibles if your deductibles have changed.
6. Review your pharmaceutical plan changes, paying close attention to any medications you take regularly. If the list of medications covered by your plan changes, you’ll need to know how much your medication is going to cost now.
7. Determine what procedures or services you are planning for the upcoming plan year (use the checklist to be sure you consider all of them. Estimate costs for each one.
8. Total all estimates.
a. If the total is well-above the FSA funding limit, we would recommend funding the full amount
b. If the total is near or below the FSA funding limit, we would recommend considering the likelihood that you will use all the services you have written down. If you’re pretty certain… say 95% sure…. Fund 9O to 95% of the total you estimated. If you’re only 75% sure, use 7O to 75%, and so on. Of course, these are just recommendations and you should use your own best judgment about how much risk you’re willing to take. [One of our clients ALWAYS funds the full amount. If they don’t use all the funds, they use the remainder to buy items they can donate to needy causes.]
FSA Eligible Expenses Checklist
Deductibles
- Medical
- Vision
- Mental Health
- Pharmaceutical
- Dental
- Orthodontia
Co-Pays
- Medical
- Vision
- Mental Health
- Pharmaceutical
- Dental
- Orthodontia
Co-Insurance
- Medical
- Vision
- Mental Health
- Pharmaceutical
- Dental
- Orthodontia
MEDICATIONS – The New FSA Exception
Over-the-counter medications Covered only with a prescription, except insulin which will be reimbursed without one
Covered Medical and Dental Services FSA Checklist
Check off the items that you plan to use in the coming plan year.
- Abortion
- Acupuncture
- Alcoholism treatment, meals and lodging, transportation
- Ambulance
- Annual Physical Exam
- Artificial Limb
- Artificial Teeth
- Autoette (wheelchair
- Bandages
- Birth control pills
- Body scan
- Braille Books and Magazines
- Breast Pumps and Supplies
- Breast Reconstruction Surgery
- Special Equipment / Home improvement
- Car hand control and special equipment
- Chiropractor
- Christian Science Practitioner
- Contact Lens
- Crutches
- Dental Treatment
- Diagnostic Devices (blood sugar kit, etc.
- Disabled Depend Care Expenses
- Drug Addiction treatment, meals, lodging
- Drugs (Medicines
- Eye Glasses
- Eye Surgery
- Fertility Enhancement
- Guide Dog or Service Animal
- Health Institute
- Hearing Aids
- Hospital Services
- Intellectually and Developmentally Disabled Special Home
- Lab Fees
- Lactation Expenses
- Lead-based Paint Removal
- Learning Disability
- Legal Fees paid to authorize treatment for mental illness
- Lodging
- Medical Conferences
- Medical Information Plan
- Medicines (but not medical marijuana
- Nursing Services
- Operations (that are not unnecessary cosmetic procedures
- Optometrist
- Organ Donors
- Osteopath
- Oxygen and oxygen equipment
- Physical Exam
- Pregnancy Test Kit
- Prosthesis
- Psychiatric Care
- Psychoanalysis
- Special education
- Sterilization
- Stop-smoking programs
- Surgery
- Telephone equipment for hearing impaired
- Television for hearing impaired
- Therapy
- Transplants
- Transportation
- Tuition (Special education
- Vasectomy
- Vision Correction Surgery
- Weight-loss program prescribed by a physician for a specific disease diagnosis
- Wheelchair
- Wig
- X-Ray
ADDITIONAL RESOURCES
IRS PUBLICATION 969: Health Savings Accounts and Other Tax-Favored Health Plans
IRS PUBLICATION 502: Medical and Dental Expenses
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