Flexible Spending Accounts

[Scout333]

Any TSP'rs out there with experience with the Federal Flexible Spending Account program. Your thoughts- Good, Bad, or Ugly are welcomed. I understand that there is a move afoot to reduce or eliminate the program. I understand it works kind of like a Section 125 Cafeteria plan. Health care expenses such as co-pays, deductibles, dental bills, etc. can be paid pre-tax from your flexible spending account? Max. amount is currently $ 5,000?

[Silverbird]

I'd be &)*(&* if they got rid of it! Medical expenses are bad enough without getting taxed on them. I went over the amount I put aside for my Flexible Spending Account (FSA) due to an unexpected hospital trip. Just a gall bladder problem, rountine procedure.

This means everything up to the total amount of my FSA is not taxed. Yeah!

But everything I spent over my FSA for 2009 is going to be taxed - because next is the 1040 A. And on the 1040 A form guess what? Medical expenses equal to the first 7.5% of your adjusted taxable income are taxed. Bah. For instance, if my adjusted taxable income was 100K (I like round numbers notice I said if) that's the next $7.5 K after the FSA of medical expenses subject to tax.

The big headache is trying to calculate how much your expected expenses will be. You do not want to over-estimate, because if you incur expenses that are under the amount of your FSA from January to the end of March of the next year, that money goes away. So the only bad point of the program is you can't really put aside for the unexpected surprises. But it sure beats going to Mr. 1040A and that ruddy 7.5% ding first.

[XL-entLady]

One of the reasons I like Aetna so much is that I pay a $75 a month premium and Aetna puts $62 dollars of that into a health savings account that I can use to pay for Rx costs, doctor bills, the dentist, whatever medical costs I want to. And I can add my own funds up to the legal limit so I get more pre-tax money in there. :)

I love HSA's. But like Silverbird says, you have to consider needs carefully and then hope you don't have to spend more than that.

Also, some HSA's allow you to carry over any money remaining in your account from year to year. I know Aetna's does.

Lady

[James48843]

You guys are talking about two different types of accounts.

The Flexible Spending Account (FSA) is the one that does not roll over year-to-year. Flexible Spending Account: https://www.fsafeds.com/fsafeds/index.asp

The Health Savings Account (HSA) is the one that DOES roll over year-to-year, and is tied to a High-deductable Health Insurance Policy.

I would presume, Silverbird, that your Aetna is a Health Savings Account(HSA), not a Flexible Spending Account(FSA).


If you have a Healthcare Savings acccount (HSA), you cannot also at the same time utilize a Flexible Savings Account (FSA) for medical expenses. You have to do either one or the other for medical. FSAFEDS offers a limited FSA for those with HSA's, that covers only dental and vision.

[James48843]

Yes, Scout333- a FSA allows you to set aside pre-tax money to use towards your medical/dental/vision expenses for the year. You select the dollar amount for the year, and then it is deducted from your check bi-weekly.

When you have a doctor co-pay, or a prescription expense, you simply download the PDF form from the FSA website, fill it out, and then send in the form, along with your insurance company statement of benefit, if applicable. The FSA then reviews your claim to determine if it's eligible, and sends the money to your bank about in about a week. It's fast, easy, and works well.

Like everyone says- the trick is to make sure you set the right amount- because if you set aside too little, you run out soon. And if you set too much, you lose the money the following year.

Here is a link to some videos about FSA's through FSAFEDS:

http://shps.http.internapcdn.net/shps/

The first year they became available, I set aside about 2K for my family. It turned out to be a little more than I needed. So I downsized it the next year to 1K, and that was about right. I came up a few bucks short, but I didn't lose anything. Some people set aside far more, and use it. Others set aside less, but I guess it all depends on what you think you are going to use for pre-tax medical expenses.

FSA's are fairly new to the Federal Government- Congress first approved FSA's for federal employees in October of 2002, and the IRS allowed a 2.5 month "float" in the time period starting in 2006.

[XL-entLady]

Thanks for setting us straight, James. :embarrest: Yes, I used an FSA from the first year they came available until I retired from full-time service. It usually saved me almost $1,000 in taxes, assuming $1 of taxes for every $3 of FSA account. I'm a big fan of the government FSA account.

My only problem was getting my reimbursements. I was always having to send them something additional in the way of proof, which I thought was interesting. Because it was my money in that FSA account, not theirs. :rolleyes:

:D
Lady

[KevinD]

We used the FSA for the first time this past year. No problems getting reimbursements. They issued a Visa card that we used at the pharmacy so no need to fill out any forms. The card wouldn't work at the Dr. office for co-pays so we did have to fill out the forms for that. The reimbursements were direct deposited right back into our account.

The only problem I have with it is the whole idea that it's associated with tax collection. What the heck does one have to do with the other? But this ain't a tax thread...

[Show-me]

I've max'ed out the FSA 5 years, this will be my 6th. Great program, but you have to be forward looking. Copays, drugs, over the counter medical, dental, root canal, crowns, glasses, and if you have kids braces.

Congress needs to make it open ended.

[CountryBoy]

Yeah, I'd love for it to be open ended. Our med plan is paperless and automatically withdrawn and only have to send in invoices for OTC stuff.

As mentioned hitting the correct withdrawals is the key, but if it was open ended, you wouldn't need to be so conservative on picking a dollar amt. to be withheld.

[felixthecat]

Good program to make the most out of your hard earned dollars. I've used it to help cover the expense of braces for both the kids. I have alo used it to cover eye glasses, medical expenses not covered by Health Insurance, over the counter covered medicines, and speech therapy. In all, plan accordingly for the usage of the FSA expenses from year to year and you will find the program very beneficial. I must mention that you have until March 15th of the following year to still incur expenses should you not be able to use all the money in any particular year. That is an improvement since money normally not used any any year is forfitted. You get an extension in time to help you use the remainer of the money.

Perhaps the biggest reason to use FSAFEDS is because they pay a permitted expense upfront even if you haven't paid in full yet. For instance, say you know your kid is going to need $4000 dollar braces. Say you didn't have some extra plan to help pay that (like GEHA Dental which has a two year limitatation before you can get braces covered (hint...plan early), you can get the braces paid for January 1st or later in full from FSAFEDS and then take the rest of the year to pay into it. It would be like getting a free loan to yourself. Remember, it is your money, but nevertheless, it is a free free loan right off the bat. Anytime you can take the money off the top of your paycheck first, is a great thing since you lower your taxes. In the end, it might shave off a few dollars off your Social Security, but who knows if even that will exist when you retire.

So, FSAFEDS good. :)

[Scout333]

Thanks Everyone! Sounds like this is something I should really give some thought to! I understand the open season for this plan ends 12-14-09. Upon further reading many of the health plans forward your Explanation Of Benefits directly to the FSA administrator electronically for reimbursement i.e. Blue Cross Blue Shield does this. So co-pays, deductibles are reimbursed by direct deposit to your bank account, etc. Sounds like this would cut down on the aggravation factor. :)

[Scout333]

Found this FSAFEDs site. Link below.

https://www.fsafeds.com/fsafeds/index.asp

[Silverbird]

Sorry, I have an FSAFEDS FSA. I have Blue Cross blue shield insurance.

The automatic filing gets rid of 90 percent of the aggrivation, leaving only things that the FSA covers that BC/BS doesn't that you have to fax to them (you can send snailmail too, but that takes a LOT more time).

Things like cough medicine, bandaids, contact lens wetting solution...you will find a long list on the FSAFEDS site. They ask for a copy of the box or other information if it's not on the receipt - read up carefully or it won't get compensated. Up to you if you want to go through the trouble of filing - but it's good to know if you know you have over-estimated for the year.