Enrolling in an FSA? Here Are 5 Questions You’ll Want to Answer

September 17, 2019

Flexible Spending Accounts (FSAs) have been a staple of employee benefits packages for decades. However, with so many benefits options to choose from, misconceptions can emerge. That’s why we wanted to compile a few questions to consider once you’ve decided you want to save money by participating in an FSA. By answering these five questions, you’ll feel empowered to make the best FSA decisions during open enrollment. And watch our video below to learn more about each type of FSA and what expenses they cover.

What are the Flexible Spending Account options?

Choosing which FSAs to enroll in depends on what types of expenses you commonly experience. There are four types:

  • Medical FSAs, which cover eligible medical, dental, vision and preventative care expenses.
  • Limited Medical FSAs, which cover eligible dental, vision and preventative care expenses.
  • Combination FSAs, which is a Limited FSA that converts into a Medical FSA once the IRS deductible is met.
  • Dependent Care FSAs, which covers eligible day care (up to age 13) and dependent care expenses if certain conditions are met.

You can’t participate in a Health Savings Account (HSA) and a Medical FSA at the same time. However, you can pair an HSA with a Limited Medical FSA, Combination FSA or Dependent Care FSA.

How much should I contribute?

First, take into account how much you’ve spent in the past year on any of the eligible expenses covered by the four types of FSAs listed above. Then, determine if those numbers align with what you’d expect your eligible expenses will be for each FSA you participate in. You can use our FSA Calculator or our FSA Tax Savings Calculator to see how much you can save and to help you plan for the year ahead. You’ll want to keep in mind that the IRS sets contribution limits for each FSA, so it’s important to stay within those limits.

Does my employer’s FSA include a carryover or grace period?

FSAs are governed by the IRS’ use-or-lose rule, which means you must spend all of your funds by the end of the plan year or be forfeited to the plan. However, your employer’s FSA may include a carryover or grace period, which gives you more flexibility to spend your funds.

A carryover lets you carry up to $500 of your FSA funds to the next plan year. A grace period gives you up to an additional 2½ months past the plan end date to incur expenses.

How do I substantiate FSA claims?

The IRS requires you to prove the eligibility of your FSA purchases. In some cases, that may require you to submit documentation that includes certain information to prove these purchases are eligible. Your administrator should provide you with a few ways to file a claim and submit documentation. For example, our participants can do this through their online account or through the Benefits Mobile App by Discovery Benefits.

The Discovery Benefits debit card simplifies this process when you use it at merchants with an Inventory Information Approval System (IIAS). Just swipe your debit card and it will automatically substantiate your claims so you won’t need to provide additional documentation. Signing up for our Recurring Dependent Care program also simplifies reimbursement of Dependent Care FSA purchases by letting you submit just one reimbursement form per year.

What expenses are eligible?

Flexible Spending Accounts cover a wide variety of purchases. And some of the eligible expenses might surprise you! Before you enroll in an FSA, check out our interactive eligible expense list to familiarize yourself with what’s eligible. Our participants can also use the eligible expense scanner within the Benefits Mobile App to easily scan the bar code of their purchases to determine whether or not they’re eligible for their FSA funds.

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