Health Flexible Spending Accounts

Health care is expensive. That's a known fact. In any country that doesn't have government provisions for health care, or where those provisions are limited, a large portion of the population does without simply care because the cost will eat too far into pockets that are already shallow. To compensate, some employers provide their employees with special accounts as an adjunct to their normal health-care benefits. These accounts could include a health savings account, flexible spending account (FSA) or other account specifically for health-related items, among them over-the-counter products like cough syrup, headache medication or aids to relieve indigestion.

Basics of a health flexible spending account

Essentially, the purpose of a health flexible spending account is to give individuals tax-free reserves of cash to cover any medical- or health-related expenses not already covered by a health insurance plan. These are usually done as payroll deductions, with enrollment selected by the employee during predetermined periods. The first generally occurs when you start the job. Subsequent open enrollment periods usually occur once a year thereafter unless you experience a major life change.

During open enrollment periods for your FSA, you will also set how much you can spend from your account within a given amount of time. Some employers will even match a percentage of your contributions into your FSA.

Limitations to flexible spending account usage

As of 2011, the Internal Revenue Service changed the guidelines on exactly how a flexible spending account can be used. Previously, over-the-counter medications could be purchased without any prior visits to your doctor. The change requires prescriptions for all pharmaceuticals purchased in order to be covered by the FSA. The exception is insulin.

The primary differentiating factor between a flexible spending account and a health savings account is that the money kept in an FSA must be used during the current year, and any unused funds will be lost. While efforts are ongoing to get this requirement changed, it simply requires accurate planning in order to use the exact amount of the funds within the account every year.

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Flexible spending accounts (FSAs) allow you to set aside pre-tax income now in order to spend it later on anything ranging from ointments to operations. To help you make a well-informed decision about flexible spending accounts (FSAs), this guide explains how they work, describes the different types available, and provides an overview of the rules you'll need to keep in mind when managing a flexible spending account (FSA).

The primary benefit of a flexible spending plan is that if you use it you realize a substantial tax benefit. Along those lines, the key drawback is that if you don't use the money within a certain coverage period, you will likely lose it.

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Many employers offer flexible spending accounts to offset the burden of un-reimbursed medical expenses, including co-pays and treatments that aren't covered by your medical insurance. However, flexible spending accounts can have a downside, so it's important to evaluate your position before you sign up for a flexible spending account.

Associated Content writer Kendra Dalstrom mentions in her article about rising healthcare and the many problems that we cause to help the state of healthcare America. She mentioned Americans have helped healthcare costs to skyrocket within the last ten years, but realistically it has been rising for more than a decade.

What is a Flexible Spending Account? A Flexible Spending Account (FSA) is a great option for reducing your taxes as well as setting aside funds to cover medical and dependent care expenses. With this account, you contribute money from your paycheck each period, before taxes, and you can use that money to pay for certain health care costs.

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