Flexible Spending Account Regulations

A flexible spending arrangement, or account, can be an effective way to lower your out-of-pocket medical costs for the year. If your employer offers this kind of account as part of a cafeteria plan, it usually a good idea to take advantage of it. To get started, it is important to know the rules around FSAs.

Contributions

• When you decide to participate in a FSA, you will need to contribute money to it. At the beginning of the year or the insurance cycle, you will fill out a form from your employer that outlines how much you want to contribute out of your pay. The employer will then deduct the appropriate percentage out of your regular paycheck. Your employer may have limits on the total amount of money that you can contribute throughout the year.

Using the Money

• You can generally use the money in a few different ways. Some FSAs will come with a debit card or a checkbook that you can use to pay for medical expenses. You could also receive a stored value card with money on it from the account. If you pay for medical expenses out of your own pocket, you will need to submit a request for reimbursement from your FSA with a receipt.

Qualified Medical Expenses

• You are free to use the money as you see fit as long as it is used for a qualified medical expense. This includes medical expenses that are necessary for your spouse or dependents. This could be used for doctor co-pays, insurance deductibles and prescription drugs. As of 2011, an FSA can no longer be used for non-prescription drugs. The only exception is when buying insulin as a diabetic.

Losing Access to the Money

• When deciding how much you want to put into your FSA, you have to think about how much you may actually use over the course of the year. At the end of the year, any money that is left in your account will be taken away. You will no longer have access to the money, and the balance of your account will be returned to zero. You should plan to use all of the remaining money by the end of the year.