Don’t Neglect to Review Your FSA Contributions for Open Enrollment
Open enrollment is the time of year to review your health insurance benefits and make changes to your plan. While open enrollment periods vary between employers and organizations, they typically fall toward the end of the year and take effect January 1 the following year.
Flexible spending accounts (FSAs) are employer-sponsored savings accounts that let you set aside funds to use for eligible medical expenses for yourself and family members. Qualified expenses include over-the-counter and prescription medications and products, physician and hospital services, and insurance copays. Contributions you make to your FSA are pre-tax, and you won’t pay taxes when you use your FSA for approved expenses.
If you want to enroll or re-enroll in a FSA, you’ll need to determine how much you wish to contribute to your account before open enrollment expires. When determining your contributions, there are many considerations to make:
Your 2018 Health Care Expenses
Look at how much you spent on medical expenses in 2018 - make sure to include medical supplies, doctor’s visits, insurance co-pays, and any other out-of-pocket costs. If this year was a typical reflection of your medical costs, you will probably want to contribute at least the amount you spent in 2018.
But if you had a significant event - such as the birth of a child or a major illness that has now been resolved - you might want to contribute less than this year’s expenses in the anticipation that you won’t spend as much on medical supplies or services in 2019.
Your Anticipated 2019 Health Care Expenses
You should try to estimate how much you think you’ll need for medical expenses next year. If you anticipate spending more in 2019 - because of a medical condition or the birth of a child, for example - you may want to contribute more. If you anticipate fewer medical expenses, you may want to contribute less.
Remember, you can adjust your FSA contributions outside of open enrollment if you experience a qualifying life event such as the birth of a child, a divorce, or the covered death of a family member.
The Contribution Limits
FSAs have strict annual contribution limits. For 2019, the contribution limit is $2,700. In most cases, you will lose the funds you don’t use by the end of the year. However, some plans offer a grace period into the following year, or will allow you to roll over a maximum of $500, so check your plan.
In Closing
Since you don’t have a magic crystal ball, there’s no guaranteed way to predict exactly how much money you’ll need in your FSA. However, if you tend to spend a lot on medical expenses, you may want to contribute your maximum, and spend as much as possible by the end of the year if you have any left over. If your medical expenses are fairly straightforward and you don’t anticipate a significant change, you may want to use 2018’s expenses as a guideline.
Have some last minute medical spending to do? Here are six unexpected things you can use your FSA to purchase.
Sources:
https://www.coreproducts.com/blogs/news/6-unexpected-things-you-can-purchase-with-a-flexible-spending-account
https://www.coreproducts.com/blogs/news/how-to-know-if-you-re-eligible-for-a-health-savings-account
https://www.healthcare.gov/have-job-based-coverage/flexible-spending-accounts/
https://www.healthcare.gov/glossary/health-savings-account-hsa/