Around here, open enrollment has come and gone. All in all, it was a pretty painless process for us. Our health insurance increased in price by roughly 7%, my long term disability (LTD) coverage actually improved a bit, and everything else remained pretty much the same. The only real decision that we had to make was how much to set aside in our flexible spending account (FSA).
Funding our FSA
In the past, we’ve always erred on the side of caution due to the use-it-or-lose-it nature of FSAs. Thus, we’ve typically spent out our account well before the end of the year, and have thus (effectively) left money on the table in the form of tax breaks that we didn’t take. For 2008, we tried to be a bit more aggressive, but still ended up spending it out by the end of summer.
This time around, we’re pulling out all the stops. The maximum allowable election for 2009 is $5k, and that’s exactly what we’re doing. The primary reason we’re being so aggressive is that our oldest son is slated to get braces in January, so we’ll spend a major chunk of our FSA right off the bat. As for the remainder, we’ll easily blow through that over the course of the year.
Now it’s your turn… Use your FSA
If your employer offers an FSA, you really should consider participating. While the extent of your savings depends on the amount you set aside as well as your income tax bracket, you can easily save hundreds of dollars on your tax bill. And if you’re looking to reduce your taxes even further, be sure to check out my list of common income tax deductions.
10 Responses to “Open Enrollment and our Flexible Spending Account”
I love FSAs, but today I am in a neat situation. Since I’m unemployed, I am paying the premiums of my former employer’s health insurance, and today they have a HDHP, which means I can have an HSA. So, I have put the max each month into that ($483.33) even though that takes money away from my emergency fund. I will wait until near the end of December before I decide what to do, but if I am unemployed as of December 1, I am eligible to make the entire year’s HSA contribution ($5,850 if memory serves). BUT – I will still be eligible for an FSA if that’s what my new employer has.
So, if I get employment in December, I will contribute the remainder of the $5,850 into my HSA, and will fund my FSA properly. Then, if I need to spend more than what I allotted in the FSA, I’ll just spend the HSA money.
Yes, it works this way – I’ve looked into it. The only limit on HSAs is that you must be eligible in the month during which contributions are made. The money can be spent even if you aren’t eligible to make contributions.
I’m an Air Traffic Controller. You know, the guy who can juggle
20 speeding jets with one eye tied behind my back?
I find my federal Aetna High-deductable with HSA and LEX
remarkably complicated and confusing.
I have no idea whether it’s right for me, a wife, three kids, two cats, and a dog. Let’s throw in three cars and a two-year-old new home
with an upside-down mortgage !
Beaver Cleaver where are you ?!
Good timing, we’re about that time. This year was easy because I hired on mid-year and put a low amount in order to ensure I didn’t lose it. Still, I’m ahead of the game and a bit worried about “using it all” though this week’s spending on cold meds helped bring it down a bit.
I need to really think about this in the next couple of weeks to figure out how I can best use my FSA and guestimate how much I can contribute.
Danielle: I don’t know for certain, but I suspect that this is okay. This is really an IRS issue, so I would imagine that you could use the money on any dependents that you might have.
As for the losing it if you leave employment before spending it, I agree that that policy sucks, just like the use-it-or-lose-it at the end of the year. Keep in mind, however, that you you cash in the full amount of your election and then quit mid-year, you end up profiting.
Here’s an article (linked above) where I talk about how I think these things should work:
I have been using an FSA for a few years now and I never realized that if my employment ended that I could still have used the full amount. What a ridiculous restriction, no wonder it is not more universally adopted by employers! As ridiculous as losing it if you don’t use it!
I hate it when people ask questions like this in comments but since I didn’t know that, maybe there is more I don’t know, so I will ask and then answer my own question.
Does anyone know if you use money in an FSA for someone that is not covered under your insurance is it valid?
I checked with my FSA administer and IF the person is also a dependent or spouse then it is a valid claim to use FSA money for them… even IF they are not covered under you own insurance.
One might wonder why I care about this small distinction, but when we get around to having kids we will need to decide where to cover our child, on my insurance or on my husbands. And he is the type that would never use a FSA, but he has better coverage.
Both of our employers pay a part of the premium towards our insurance, but don’t for a spouse or dependent, so it saves us about $75 a month to remain on our own employers plans.
It might be hard to get employers to drop the use it or lose it provision, they use it to offset the losses from the pre-funding side of the equation. Not sure what I’m talking about – you can use your entire FSA amount in January even if you haven’t contributed any money from your paycheck. If you then leave the company you don’t have to pay back that money and you aren’t taxed on it. Here’s a little HSA/FSA write up I did:
FSA vs. HSA
It’s that time for us, too. We have both the HSA (rolls over) and the FSA (use or loose), but the HSA is only available to those who choose the high deductible health insurance. I ran the numbers and unless I totally over estimate on the FSA, I’m better off with the FSA/lower deductible health insurance – mostly because of the lack of perscription drug coverage on the high deductible plan. No employeer match on these, unfortunately (but a good match on the 401K, so I’m not too unhappy).
I agree that the FSA for health expenses needs to roll over, then cash out for medicaid supplement insurance when you retire. I think I might write my congress person about that, she seems to be pretty on the ball so far.
My employer not only offers an FSA, but we have until March 1st of the ‘next’ year to use our funds (I.E., we can submit expenses against our 2008 FSA account thru March 1, 2009). Also, depending on which of the three medical insurance options we choose, they MATCH OUR FSA CONTRIBUTION, at either 50% (for higher deductible plans) or 25% (for the lower deductible plan) on up to $1,000 of our contribution, for a maximum of $500!
Before sinking $5k into the FSA, look at how much in medical bills you would have to have to deduct them. Better to take $5k+other bills deduction than just $5k.
Now to rant: with all the talk about affordable medical coverage, I can not understand why there is not a federal FSA (with no “use it or lose it” provision) available to all of us.
My job doesn’t offer an FSA, but I definitely will be talking to the big wigs about seriously considering throwing this into our benefits package.
They do however offer a HSA (health savings account). An HSA is an account that your employer will contribute to on a monthly basis. You can use the account for any medical expenses that your health insurance doesn’t cover, like co-pays, over-the-counter medicines, braces, ect. And the biggest plus is you get to keep the account, accumulating month after month, regardless of your job status with that company. The funds never expire. I really love the cushion that it provides.
But now I have my eyes set on a FSA.