16 November 2010

FSA Tips and Tricks

It's that time of year again:  Open Enrollment Season.  I'm all for tax deductions and tax credits... so we take full advantage of the Flexible Spending Account (FSA).  The years we had babies or eye surgeries, it was a real perk!  However, this year, we didn't have anything big, so I'm left with a mess of receipts.

I keep all my receipts in a pile file.. okay, in a piled file.  Having a credit card receipt from the doctor's office is NOT sufficient documentation.  The mysterious reimbursement people also require a copy of the sheet that has the doctor's notes on it, and you have to *ask* for it every time.  Try remembering that while you are lugging two bambinos around, and then keeping it with the right receipt.  Here's my tip.. I just discovered this today, and I'm rather excited!  Call the billing office and ask them for a Year-to-Date summary of your account (usually by patient, so the pediatrician will have one summary for each child).  They can mail it, and you won't have to reconcile all those receipts.  Hallelujah!

*** If you don't use the FSA because you don't see the point, 
keep reading, 
the rest of this post is for you *** 

An FSA requires a little bit of effort and a bit of organization, but otherwise, it's free money.  Here's how it works:  Each November, try to anticipate what your out-of-pocket medical expenses will be for the next year ~ anything that insurance will not cover.  Over the course of the year, the entire amount is deducted from your payroll and held in the FSA.  Example: one year we planned to have a $3500 "elective" surgery (epi-lasik) and $1500 in other expenses.  $5000/ 52 weeks comes out to a weekly pretax payroll deduction of $96.  We paid for the surgery in February and it was reimbursed to us as soon as we submitted the (fairly easy) documentation.    
          ***Translation: "Pretax payroll deduction" ~ tax free income. 
The FSA is not just for big expenses, it is also for all the little ones that add up.  Five doctor visits at twenty bucks a pop for copays is $100...  if you have that in your FSA, you have $100 of tax free income, and for a family in a 15% tax bracket that's $15 in your pocket ~ it's like a coupon for 15% off all doctor visits, prescriptions, deductibles, dental expenses, crutches, contacts, braces, glasses, well baby checks.. and if you have little boys, ER visits.   If you are in the 30% tax bracket, it's an even better deal... if you spend $1000 a year on medical expenses you could save $300 in taxes.  How can anyone pass that up?

In general, I don't think the government is out to purposely trick people, but there are a few things to note:  In the past, you could include non-prescription (Over-the-counter or "OTC") drugs toward your FSA ~ things like allergy medicine, pain relievers, heart burn medicines, bandaids, & diaper cream), but starting January 1, 2011 these will no longer be reimbursed unless you have something in writing from a doctor.  I'm not terribly upset as it is a  hassle to keep up with all the receipts and it really didn't amount to that much for us, but for some people this may come as a big surprise next year.  Can you imagine asking the doctor for something in writing when you want to buy some Tylenol for your three year old?  Doctors are not going to like this.  anyway... that brings us to Trick #2: The FSA is a "USE IT OR LOSE IT" plan.  If you plan to spend $2000 this year, but by November, you've still not gone to the dentist or made an appointment to get that refill that you planned to take all year, you lose the money you put into your FSA.  They don't reimburse money you didn't spend on health care, and it's really hard to get appointments for elective surgeries in December!  Let's just say the Tot may get a lifetime supply of Band-Aids for Christmas this year.

All in all, the FSA is not a money making plan, but it is a significant savings on medical expenses for people who have a lot of prescriptions, high deductibles, or copays.  ~ it's Plain & Simple As That.

******** NOTE:  I am NOT a tax expert; this is just my rambling.. please check all this with your company's FSA options and/or with your tax professional!!!!!!!*******

1 comment:

  1. We have used this for years now- usually spend this max allowed quite early in the year. It's nice to have tax free money put aside this way...hope it lasts.