Davidson Family Medicine wants to show you how an FSA works.
Many employers offer health flexible spending accounts (FSA) as part of their employees’ benefits package to help offset out-of-pocket medical expenses. Davidson Family Medicine wants to help you understand how an FSA works and how it can be cost-effective for you and your family.
What is a FSA?
An FSA lets you use pre-tax dollars to pay for eligible health care expenses for you, your spouse and dependents. Money is set aside from your paycheck before taxes are taken out and placed in the FSA. You can use the pre-tax FSA money throughout the year to pay for health care expenses such as doctor’s visits, prescription drugs and more.
At the beginning of the health care plan year, you designate how much money you want to contribute for the entire year to your FSA. Your employer will deduct money from your regular paycheck to apply to your FSA.
Why is an FSA helpful?
Setting aside pre-tax dollars means you pay fewer taxes and increase your take-home pay with your tax savings. You can then use the money to pay for out-of-pocket expenses you’ll already be responsible for. The amount of savings depends on your tax bracket. For example, a person within the 30 percent tax bracket must earn approximately $142 to pay for $100 in health care expenses. But $100 in an FSA can pay for $100 in health-related expenses.
What expenses does an FSA cover?
FSAs cover many different types of medical expenses. Each employer’s plan outlines specifics, but items often covered include:
Deductibles and co-payments
Over-the-counter medications with a doctor’s prescription
Medical equipment (crutches, bandages, diagnostic devices)You can find a list of commonly covered expenses here, but it is important to check with your employer’s specific plan.
Many FSAs work on the “use it or lose it” principle: Any money leftover in the account once the plan calendar closes is often lost. Therefore, it’s important to estimate as best you can what health costs you may have in the upcoming year. Some plans do provide a grace period where money can be carried over. Check with your employer to learn if this option exists.
If you have any questions about how Davidson Family Medicine utilizes your FSA, please call us at (704) 892-5454.