Yes, FSA covers Lasik, PRK, and SMILE to name just a few procedures

Flexible Spending Account Explained

“I tried the Flexible Spending Account and lost a lot of my money!  The Flexible Spending plan is a rip-off.”  As an HR exec responsible for the company benefits plan, I hear this frequently this time of year. I get it.

Flexible Spending Accounts are part of our company’s benefit package, and I personally wouldn’t have it any other way. Our company is currently conducting open enrollment for the 2024 medical benefits plan, and times are busy. 

Per our normal procedure, we run analytics on the current year’s plan, and I just came across a shocking statistic. Fewer than 8% of our employees are using the Flexible Spending Account (FSA) benefit.

Shock and Awe

Frankly, I can’t believe it. I know there are many misconceptions about FSAs, but I didn’t think there was much mystery surrounding the program. Shame on me and the HR team for not promoting and explaining this benefit more thoroughly.  During one of our open-enrollment video calls, I counted 3 times as many participants wearing prescription eyeglasses. (We are a tech company, and everyone sits in front of at least two monitors. Everyone one of these folks should have had a Flexible Spending Account. 

So today, I am going to try to explain the benefits of an FSA program. I want more folks to take advantage of this great benefit.

First, let me address the opening statement: “Flexible Spending Plans are a rip-off!” FSAs don’t have to be a rip-off. If used correctly, I think you will wonder why you didn’t use them before. I am a fan and have deferred tax-free dollars to this plan for the past 20 years.

This isn’t your father’s Flexible Spending Account!

How does the FSA plan work?

FSAs are employer-sponsored, tax-free savings accounts that employees can use to pay for eligible healthcare expenses.

Let me break this down a little further:

      1. Employer-Sponsored:

This simply means that your employer is the host for these plans. An individual who is not working cannot set this up for personal use. We need the employer.

2. Tax-Free:

This is the benefit. Employees can deposit tax-free dollars to their accounts.  (Your payroll department takes care of this, deducting the funds from your check. You don’t have to do anything but sign up)

The math

If you want to buy two pairs of prescription glasses (daily wear, sunglasses, computer use, etc.), you may spend up to 300.00.  

If you want to spend $300.00 on anything, you will need to earn $380.00. This is because after taxes are withheld from a $380.00 paycheck, only $300.00 remains. 

• • • You are earning $380.00 and have $300.00 to spend.
    • Tax-free means you put $300.00 into your FSA account, and you get to spend $300.00.

If you purchase designer glasses that cost more, you save more.

3. Eligible FSA expenses:

Anything medical related. I have applied this to deductibles for doctor visits, orthotics, and prescription glasses every year for the past 20 years.

Here is a website for eligible items: https://fsastore.com/fsa-spending-deadline-guide.html

They even have a “Surprisingly Covered” link: https://fsastore.com/surprisingly-eligible.  Yes, I was surprised! This is a link to the secret benefits. 

• • Oura Ring? Check
  • Byte Teeth Straightening? Check
  • Condoms? Check. (Yes, He did just list that. I am trying to prove a point here, people!)
  • Nicorette gum? Check
  • Bose Hearing Aid? Check

You get the idea. There are nearly 250 in this category alone, with more categories to choose from.

How to use FSA correctly

Yes, if you don’t use the funds, you will lose the funds. The limit is $3050.00 US at the time of this writing. This doesn’t mean you need to put away the full amount. If you think you are going to spend 500.00 on prescription glasses and deductibles, this is the amount you put aside. If you think you are going to spend $1000.00 on various medical and dental expenses, don’t put away $2000.00.

First, figure out how much you will spend in 2024 on uncovered medical expenses, deductibles, procedures, etc.  For ease of calculation, let’s say it is $1200.00 for a family of 3.  $1200 divided by 12 months is $100.00 per month.

This means that $ 50.00 from your paycheck (if you are paid twice a month) will be deducted before taxes and deposited into your FSA account. At the end of January, you will have deposited 100.00. At the end of March, you will have deposited 300.00.

The beauty of this program is that you have access to the full $1200.00 in January. You don’t have to wait for December to have access to the full amount. Yes, if you don’t use it, you will lose it. Just don’t sign up for more than you will spend.

Share with others what you spend your FSA dollars on in the comments below. 

See you at the FSA store,

HRNasty

nasty: an unreal maneuver of incredible technique, something that is ridiculously good, tricky, and manipulative but with a result that can’t help but be admired, a phrase used to describe someone good at something. “He has a nasty forkball”.

Ongoing writing and context live on LinkedIn and Bluesky.

Subscribe to the free weekly updates here. I promise, no spam.