Flexible Spending Account (FSA)
If you have a health plan through a job, you can use a Flexible Spending Account (FSA) to pay for copayments, deductibles, some drugs, and some other health care costs. Using an FSA can reduce your taxes.
What is an FSA?
A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.
You don’t pay taxes on this money you put in. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
FSA’s are “use it or lose it” accounts. So by the end of the plan year, usually December 31st, you will need to have spent all the money you contributed to your FSA.
Employers may make contributions to your FSA but aren’t required to.
How does an FSA work?
In general, here is how an FSA will work for you:
- You will elect to have a certain amount of money taken from your paycheck. That amount will be deducted from your paycheck every month, for the next 12 months. For example: you elect to have $100 dollars taken from your paycheck every month, or $1200 over the next 12 months.
- you benefit because the money is taken from your paycheck before taxes are withheld, increasing your take-home pay.
- you will also have access to your annual election from day one of the plan, which means you can spend more than you have put in.
- The drawback is you must use all of your contributions by the plan year or you will lose it.
A few fast facts about FSAs
- FSAs are limited to $2,700 per year per employee. If you’re married, your spouse can put up to $2,700 in an FSA with their employer too.
- You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you’re married, and your dependents.
- You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.
- You can spend FSA funds on prescription medications, as well as over-the-counter medicines with a doctor’s prescription. Reimbursements for insulin are allowed without a prescription.
- FSAs may also be used to cover the costs of medical equipment like crutches, supplies like bandages, and diagnostic devices like blood sugar test kits.
- See a list of generally permitted medical and dental expenses.
FSA limits, grace periods, and carry-overs
You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:
- It can provide a “grace period” of up to 2 ½ extra months to use the money in your FSA.
- It can allow you to carry over up to $500 per year to use in the following year.
Your employer can offer either one of these options but not both. It’s not required to offer either one.
At the end of the year or grace period, you lose any money left over in your FSA. So it’s important to plan carefully and not put more money in your FSA than you think you’ll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.
Standard Plan Features
Flexible Plan Design Options
ISG has options for a grace period, rollover, Benefits Card, and employer contributions. If the organization has multiple divisions, each division can have separate fees, contacts, and reporting. We work with brokers and employers to build a benefit that meets their needs for the new plan year, and we’re happy to accommodate a mid-year administration change for clients.
Online Administration Capabilities
Our processes and content are designed to make administration easy and effective. Employers easily administer the BESTflex Plan online, with access to multiple funding options, detailed claim registers, invoices, workflows to enroll or terminate participants, and online renewal processes to establish the next plan year.
Money-Saving Participant Experience
Our technologies provide participants with a great money-saving experience and easy options to access their FSA funds. Participants can pay directly from their FSA at the register with the Benefits Card or use their preferred payment method and then submit a claim for reimbursement on our website, via our mobile app, or with a form. Available participant technologies include the Benefits Card, Mobile App, online claims for reimbursement, and Direct Deposit into the participant’s bank account.
The ISG Difference
Because ISG is a Savings Group, and not just a Third Party Administration company, we can offer our Savings Group account to both employee and employer alongside traditional health plans such as FSA’s and HRA’s. For employees, we can eliminate the “use it or lose it” rule that has haunted every FSA participant. For employers we can “fix” your claims funding each month which will make paying your FSA claims simple and predictable. Click here to learn more.