FSA Frequently Asked Questions
FSA Frequently Asked Questions
What is a health flexible spending account?
A flexible spending account (FSA) lets you use pre-tax dollars to pay for eligible health care expenses for you, your spouse, and your eligible dependents.
Here’s how an FSA works. Money is set aside from your paycheck before taxes are taken out for the entire plan year. You have access to your entire plan year deductions starting day one of the plan, you can then use your pre-tax FSA dollars to pay for eligible health care expenses throughout the plan year. You save money on expenses you’re already paying for, like doctors’ office visits, prescription drugs, and much more.
Why is it a good idea to have a health FSA?
Setting aside pre-tax dollars means you pay fewer taxes and increase your take-home pay by your tax savings. The amount you save depends on your tax bracket.
For example, if you are in the 30 percent tax bracket, you can save $30 on every $100 spent on eligible health care expenses such as dental checkups, prescription eyeglasses, and bandages.
And depending on how your health FSA plan is set up, you may be able to carry over up to $500 of unused funds to the following plan year.
What expenses are covered under a health FSA?
Eligible health FSA expenses are those that you pay for out of your pocket for medical care that’s provided to you, your spouse, and eligible dependents. Generally, IRS rules state that medical care includes items and services that are meant to diagnose, cure, mitigate, treat, or prevent illness or disease. Transportation that is primarily for medical care is also included. Here are some examples:
- Your health plan deductible (the amount you pay before your plan starts paying a share of your costs)
- Your share of the cost for doctor’s office visits and prescription drugs
- Your share of the cost for eligible dental care, including exams, X-rays, and cleanings
- Your share of the cost for eligible vision care, including exams, eyeglasses, contact lenses, and laser eye surgery
Check out EligibleExpensesfor more details.
The list of eligible expenses is based on IRS rules. Here are some other IRS rules you should know about:
- Expenses reimbursed under your health FSA cannot be reimbursed under any other plan or program. Only your out-of-pocket health care expenses are eligible for reimbursement. Plus, expenses reimbursed under a health FSA may not be deducted when you file your tax return.
- FSAs have a start date and an end date, and the time in between is called the plan year. Expenses must be incurred during the FSA plan year. As noted in IRS guidelines, “Expenses are incurred when the employee (or the employee’s spouse or dependents) is provided with the medical care that gives rise to the medical expenses, and not when the employee is formally billed, charged for, or pays for the medical care.” This means the date of service must be within the current plan year and not when you pay for the service.
Are over-the-counter medicines eligible expenses?
Yes, but they require a prescription. IRS rules state that over-the-counter (OTC) medicines and drugs are not eligible for reimbursement under your health FSA unless prescribed by a doctor (or another person who can issue a prescription) in the state where you purchase the OTC medicines. These rules do not apply to insulin (including OTC insulin).
What over-the-counter items are still eligible expenses?
Items such as bandages and thermometers are eligible for reimbursement through your health FSA,. A detailed list of examples is on our Over-the-counter Expenses page.
What expenses are not covered under a health FSA?
- Cosmetic surgery and procedures, including teeth whitening
- Herbs, vitamins, and supplements used for general health
- OTC medicines that you don’t have a prescription for (except insulin)
- Insurance premiums
- Family or marriage counseling
- Personal use items such as toothpaste, shaving cream, and makeup
- Prescription drugs imported from another country
Also, as described in a previous question, you can’t use your FSA for:
- Services that take place before or after your coverage period
- Expenses that are reimbursed by another plan or program, including a health care plan
These are only a few of the examples of expenses that aren’t covered by a health FSA. Find a full list of eligible and ineligible expenses on our Eligible Expenses page.
Is there a limit to how much I can contribute to my health FSA?
Yes. As a result of the Affordable Care Act, employee contributions have been capped for health FSA plans. The annual limit is $2,600, and you cannot contribute more than this amount.
Is there a limit to how much my employer can contribute to my health FSA?
The statutory $2,600 limit does not apply to certain non-elective employer contributions made to an employee’s health FSA.
Can my spouse also contribute to an FSA?
Yes, if your spouse is eligible to make contributions to a health FSA. Each spouse may contribute up to the $2,600 maximum limit to their own health FSA. This applies even if both spouses participate in the same health FSA plan sponsored by the same employer.
How much money is available during the plan year?
Your entire health FSA election is available on the first day of the plan year. If your FSA is active, your available funds decrease as your claims are paid. You can find out your available funds by logging in to your online account.
How do I keep track of my account activity?
Your FSA information is available any time day or night by logging in to your online account.
Where can I get a reimbursement request form?
Just log in to your online account to file a claim for reimbursement.
What do I need to submit along with a reimbursement form?
You must save all itemized receipts and other supporting documentation for every FSA expense. Try to keep all of your documentation filed in an envelope or box. Appropriate documentation includes:
- For office visits – Your health plan’s Explanation of Benefits (EOB) statement or an itemized receipt or bill from the provider that includes the patient’s name, a description of the service, the original date of service, and your portion of the charge.
- For prescription drugs – A pharmacy statement or printout including the patient’s name, the Rx number, the name of the drug, the date the prescription was filled, and the amount.
- For over-the-counter medicines – A written or electronic OTC prescription along with an itemized cash register receipt that includes the merchant name, name of the OTC medicine or drug, purchase date, and amount; OR a printed pharmacy statement or receipt that includes the patient’s name, the Rx number, the date the prescription was filled, and the amount.
- For over-the-counter health care-related products – An itemized cash register receipt with the merchant name, name of the item/product, date, and amount.
In some cases, a Medical Determination Form completed by a doctor is required. Credit card receipts, canceled checks, and balance forward statements do not meet the requirements for acceptable documentation.
What happens if I have funds left in my health FSA at the end of the plan year?
It depends on the rules for your employer’s FSA plan. Your employer decides the features included in your FSA plan, and the way your health FSA plan is set up determines if you can use funds left in your account after the plan year ends. Your plan could include one of these features:
- Carryover – lets you carry over up to $500 of unussed health FSA funds to the following plan year. (Your health FSA may have a maximum limit that is less.) This feature gives you more flexibility on how and when to use your health FSA funds.
- Grace period extension – gives you extra time to incur eligible expenses and use funds remaining in your account after the plan year ends. The grace period begins on the first day of the following plan year and lasts two months and 15 days.
The IRS doesn’t allow a health FSA plan to have both a carryover feature and a grace period extension. If your health FSA had a grace period in the past, it no longer applies to your current plan if the carryover feature is now available.
What is a run-out period?
It’s a set number of days after the plan year ends that allows you to submit claims for eligible expenses incurred during the plan year. Not all FSA plans include this feature and the time frame of the run-out period may vary by plan.
Can I change my election amount?
Your election can’t be changed during the plan year unless you have a change in status or other qualified event – that’s an event defined by IRS rules – and your employer’s plan must allow the change as well.
What happens if I stop working for this employer?
If you stop working for your employer or you lose your FSA eligibility, your plan participation and your pre-tax contributions will end automatically. Expenses for services you have after your termination date are not eligible for reimbursement.