The proliferation of high deductible health plans has sharply increased employees’ costs for their health care. In response, the federal government has created multiple tax-advantaged accounts to pay for medical expenses. One such account is called a Flexible Spending Account (FSA). Employees can set up these accounts with their employer, allowing them to pay qualifying out-of-pocket medical expenses in tax-free dollars.
There are many benefits to having an FSA, some of which we’ll describe below. However, knowing some of the best things to buy with an FSA is essential to maximize the benefits. Here’s your guide!
What Is an FSA?
An FSA is a savings account dedicated to money that you can use to pay for qualifying medical expenses you must pay for out of your pocket. In addition, you won’t have to pay taxes on the money saved in an FSA, meaning that you’ll save whatever amount you would have been taxed on that money. Employers can contribute to the FSA if desired, but it isn’t a requirement.
Employees must submit a claim through their employer to use money in an FSA, proving that their health care plan didn’t cover a medical expense. After the cost receives approval, the employee receives reimbursement.
The federal government limits how much money can be saved in an FSA annually, just as they do for other tax-advantaged accounts. For FSAs, individuals can save as much as $3,050 per year. Both spouses in a married couple can save that amount separately from their employers.
The money saved in an FSA generally must be spent within the plan year. However, if you have leftover funds, employers can offer two options.
First, they can give employees a grace period of up to two-and-a-half more months to use whatever remains in their FSA. Or second, they can allow employees to carry over as much as $610 per year into the following year.
Where Can FSA Funds Be Used?
In addition to specific limits, FSA funds can only be used for certain medical expenses. One of the nice things about these accounts is that the money can pay for costs related to the primary insured, their spouse, and their dependents. An FSA can pay for deductibles and copayments, but it can’t be used to pay for the health insurance coverage’s monthly premiums.
If you have an FSA, it’s essential to understand qualifying medical and dental expenses. This will help you maximize the tax benefits that the account provides. Below is a description of some of the most commonly purchased items and some surprising FSA-eligible expenses, too!
Common Items Purchased with an FSA
Some of the most common items purchased with an FSA include prescription and over-the-counter medications, as long as the doctor prescribes them. For example, insulin is one of the most expensive prescriptions many people need. However, one of the nice things about the medication is that it is eligible for FSA reimbursement, even if you don’t have a prescription, just like allergy medication is.
Other preventive items include sunscreen, found over the counter without a prescription, and even daily facial cleansing pads for acne. Medical equipment eligible for FSA reimbursement includes crutches, blood sugar test kits, and bandages.
Surprising FSA-Eligible Items
There are many surprising FSA-eligible items that you may not have considered before! These items include electric breast pumps for mothers of newborns, a foot circulator with remotes, and even light therapy treatment machines for acne.
If you suffer from sore muscles and joints, you can purchase a joint pain-relieving massage gun with heat therapy and receive reimbursement from your FSA. Similarly, heating pads that treat similar ailments are also eligible for FSA reimbursement.
Finally, you can receive reimbursement for at-home test kits that provide personalized genetic insights from well-known companies such as 23andMe.
Beckham Insurance Group Has You Covered
We hope you enjoyed this blog on the best things to buy with an FSA! As you can see, FSAs are an excellent option employers can offer employees to help them pay for out-of-pocket medical expenses. In addition, they allow employees to pay for these expenses tax-free, which is a massive benefit for them.
As an employer, you may have questions about how to offer an FSA to your employees or what choices you will have. If you’re in the South Carolina or Georgia region, our team at Beckham Insurance Group is happy to guide you through the process.
Located in Charleston, SC, and St. Simons, GA, we proudly offer complete access to all group health and supplemental insurance markets and products. Creating a competitive—and compliant—benefits package that meets the needs of your business couldn’t be easier.
To get started, contact us today for a free quote. We can’t wait to help you create a healthier and happier workplace!