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Use It or Lose It: Flex Spending Accounts

POSTED ON December 1, 2010

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A flex spending account (FSA) can provide substantial payroll tax savings, but by not using it by December 31, it can result in lost tax-free money! According to SmartMoney.com, only one in three eligible employees participates in the FSA offered by his or her employer and some don’t spend all the money they set aside. Last year, the average FSA holder left $43 unspent. According to The New York Times, healthcare expenses can be reduced by 20 percent by using a FSA. ...

A flex spending account (FSA) can provide substantial payroll tax savings, but by not using it by December 31, it can result in lost tax-free money! According to SmartMoney.com, only one in three eligible employees participates in the FSA offered by his or her employer and some don’t spend all the money they set aside. Last year, the average FSA holder left $43 unspent.

According to The New York Times, healthcare expenses can be reduced by 20 percent by using a FSA. A FSA helps reduce your income taxes by allowing you to set aside money from your paycheck before any of your taxes are calculated. The pre-tax money put into a FSA can be used for numerous medical, dental and vision expenses including health insurance co-pays, uninsured treatments or over-the-counter drugs.

FSA money can be used for many eye care services, including an eye exam. A yearly eye examination is important for good eye health. Getting an eye exam with a FSA not only saves money, but helps save health. A comprehensive annual eye exam helps detect symptoms of diabetes, high blood pressure and cholesterol, among other vision diseases. It also ensures you have perfect vision.

Eyeglasses and contact lenses with a medical prescription can be purchased with FSA money. Reading glasses are also included. Some eye care accessories are even eligible. Contact lens solutions, contact lens cases, eyeglass cases and eyeglass cleaning supplies are among the covered items. FSAs can also be used on prescription sunglasses. So it can be said that flex can be used for all kinds of specs!

It’s important to stay up-to-date with FSA guidelines, especially since the rules are changing for 2011. Beginning January 1, FSA holders will no longer be able to purchase over-the-counter medications without a prescription. Starting in 2013, the annual limit that an employee may contribute to his or her FSA will be restricted to $2,500. According to Mercer Health and Benefits, this shouldn’t be a problem for many since the annual account balance is approximately $1,400.

Each provider’s FSA coverage can vary, so it’s imperative to check the list of eligible expenses. As the end of the year quickly approaches, the FSA motto rings true: “use it or lose it!”

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