Flexible Spending Accounts

A flexible spending account (FSA) lets you design part of your benefits package to suit your needs. You defer pretax income to the account and use that money to pay for qualifying expenses. This effectively makes the things you pay for less costly than if you had to pay for them with after-tax income.

Common expenses you can cover with an FSA include:

• Uninsured medical expenses
• Over-the-counter medications with prescription
• Child care
• Extra life insurance

But be warned. You must decide how much money to set aside in an FSA before January 1 of the year you’ll draw on the account. You can’t roll over the amount you don’t spend from one year to the next, though some plans give you up to three months after year end to use up your balance. But when the deadline arrives, any amount you haven’t used is gone for good.

 

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