The New Employee’s Guide to Flex Spending


Flex Spending Accounts (FSAs) for health insurance plans are alternative coverage options that allow employees to utilize pre-tax dollars to pay for approved medical expenses. Not to be confused with Health Savings Accounts (HSAs), flex spending plans give you the latitude to use the money you’ve invested in your plan to cover the cost of doctor’s visits, medical supplies, alternative treatments, prescriptions, eyeglasses and other fees that are not normally covered under traditional health insurance policies.


Dedicated Funds – Flexible spending accounts earmark money from your paycheck (before taxes) and place these funds into a separate account. Typically, your money can be accessed through a debit card assigned to you or via a reimbursement process. If you’re short on money, you should opt for the debit card so that you eliminate out-of-pocket costs all together.

Reduce Your Tax Liability – Since FSAs are funded through pre-tax dollars, you are not liable for this money at the end of the year. This means that if you contribute $2,000 into a flexible spending account, you can reduce your overall taxable income by $2,000. This is a savings of $600 a year if you pay the average 30% in federal taxes.

Coverage Your Way – Withdrawals from your account are always tax-free as long as they are used for approved medical expenses. Some plans even cover specialty items like holistic medicines and herbal supplements.


Employer and Government Limitations – According to the IRS, the yearly max amount you can contribute to your FSA is $5,000 per year if you are married and filing a joint return or if you are a single parent. The limit is $2,500 a year if you are single or married and filing separately. However, some employers may cap the limit below this level, depending on the structure of their benefits package. Be sure to inquire about this prior to enrolling in a flexible spending account plan.

Waiting Period – Since you’re a new employee, you may be subject to a waiting period before any of your benefits can begin. While some employers begin plans immediately, others require a waiting period of anywhere from 14 days to 90 days.

Use It or Lose It
– Flexible spending account funds cannot be carried over from one year to another. This means that you must spend your contribution -- plus any matching contribution that your employer has made as well before the end of the calendar year. Some plans do allow a grace period, though, so be sure to check your benefits handbook for your particular plan details. Either way, you have to exercise caution when estimating your FSA contribution so that you can predict it as closely as possible to your family’s needs.

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