The 6 Most Surprising Benefits of Flexible Spending Accounts
Do you understand the real benefits of flexible spending accounts?
It’s surprising how many enrollees don’t understand the benefits of flexible spending accounts, even when they’re meeting the maximum investment each year. FSAs use pre-tax dollars to cover dependent care and medical expenses, providing you with 30 – 40 percent savings in the process. However, most employers don’t know how to help employees take full advantage of this benefit. Being able to effectively train your staff on FSA use will lower their expenses for essential health and childcare costs, creating a more stable, more loyal workforce. Here are six ways you and your employees can get the most from your FSAs:
1. Lower your tax bill throughout the year.
By shifting money from your paycheck to your FSA before taxes, your tax amount will be lowered with every check. You wind up with money earmarked for essential expenses and more spendable income every payday. You may even make a lower tax bracket, seriously shrinking your obligations. Over the span of a year, married couples can save a few thousand dollars.
2. Cover medications and medical supplies.
While FSA spending limits have become more restrictive, you can still cover the costs of any medication as long as you have a prescription. Remember that before you stop by the store for some aspirin or allergy meds. Your doctor’s office may be willing to call in an order. Most plans also cover a wide range of supplies, such as band-aids or condoms.
3. Pay for copays and elective procedures.
Pairing a FSA with a high deductible insurance policy is a winning plan because your pre-tax account money can be used to cover appointment and procedure copays. Your FSA can also be used for services and supplies your insurance won’t cover. For instance, if your insurance won’t pay for more than one ultrasound or for laser hair removal, your FSA can often be used to fill those gaps.
4. Take advantage of alternative therapies.
Acupuncture and chiropractic care are just two forms of alternative treatments covered by FSA dollars. Holistic treatments, herbs and many other treatments are eligible, making the FSA a huge bargain for those who seek natural healing.
5. Send your child to Mommy’s Day Out or camp.
FSAs generally cover dependent care during times parents are working, but they can be used to pay for infrequent care like Mommy’s Day Out programs and summer camps, too. Much depends on the policy and programs you’re choosing. One of the biggest benefits to employers, of course, are plans that cover sick child care and those which pay for a babysitter even when a sick employee stays home. Both allow for employees to be healthy and at work instead of off-the-clock and holding up your productivity.
6. Roll over funds or stretch out spending periods.
With changes instated by the IRS, employers now have the option to allow FSA spending to last up to 3 months into the next spending year or a rollover of up to $500 worth of the funds remaining in an account at the end of the year.
You can choose one or the either, and while you don’t have to allow either, there are big benefits. First, people are more likely to invest when they know they’ll have greater flexibility. Second, you’ll keep your employees happier by allowing them extra time to spend their account balance, or alternatively, the chance to keep $500 they otherwise would have lost. FSAs don’t have to be “use it or lose it” products. When managed correctly, they allow workers to significantly shrink costs in two areas which traditionally have caused problems at work.