Flexible Spending Accounts FAQs for Employees

I’m glad you asked! A healthcare flexible spending account (FSA) is an employer-sponsored benefit that allows you to set aside pre-tax dollars into an account to be used for eligible medical expenses. And as the name suggests, it’s incredibly flexible and customizable to your individual needs!

Do you like saving money? Contributions to the FSA are deducted from your paychecks on a pre-tax basis, significantly reducing your taxable income. This means you can increase your spendable income by an average of 30% of your annual contribution with tax savings!

Each year, you can choose an annual deduction amount within that year’s contribution limit. That election will be divided by the number of pay periods in your plan year. Then, that amount will be deducted from your paycheck before taxes are assessed.

Contribution limits change from year to year based on IRS guidelines. Please visit www.claritybenefitsolutions.com to see this year’s most updated contribution details.

You guessed it… it’s flexible! An FSA covers eligible expenses for yourself and your dependents, even if they are not covered under your primary health plan!

Did I mention flexibility? FSA funds can be used for health plan co-pays, deductibles, co-insurance, eyeglasses, dental care, medications, and even certain medical supplies. The IRS provides specific guidance regarding eligible expenses. (See IRS Publication 502). You can also explore the FSA Store for a full list of eligible items.

Expenses are incurred at the time the medical care was provided, not when you are invoiced or pay the bill. So the date you need when submitting a claim is likely the day you had your appointment.

There are a few easy and convenient ways! If you have a Clarity Benefit Card, you can simply swipe it at the register when you receive the service or product. Otherwise, you can file a claim, including the receipt, documenting the type, amount and date. Once approved, your reimbursement check will be mailed or deposited directly into your bank account!

Here’s where it might get tricky. Any unused funds at the end of the plan year are typically forfeited, which is known as the “use-it-or-lose-it rule”. To avoid losing any of your funds, be sure to only allocate dollars for medical expenses you are sure you can predict throughout the year.

Right away! With a healthcare FSA, your entire annual election amount is available on the first day of the plan year, even though you have not yet contributed that amount.

Only under specific circumstances. Elections can only be altered if you experience a qualifying change in status as defined by IRS regulations, such as marriage, divorce, birth, or death in your immediate family.

Participation in your FSA is also terminated. This means that only expenses that were incurred prior to the termination date are eligible for reimbursement.

It’s fairly flexible! You can submit claims for reimbursement at any time during the same plan year that you incur the expense. You may also have a grace period at the end of the plan year. Check the summary plan document provided by your employer for additional information.

Yep! However, you cannot deduct the same expenses for which you have already been reimbursed from your FSA.

Yep! Most OTC medications are FSA-eligible. You can also explore the FSA Store for a full list of eligible items.

Some FSA-eligible items may require a Letter of Medical Necessity (LMN) from a doctor detailing that the product is required for a certain individual’s health. The IRS mandates that eligible expenses be primarily for the diagnosis, treatment, or prevention of disease; this also includes treatment of conditions affecting any functional part of the body. For example, vitamins are not typically covered because they are used for general wellness, but a doctor may prescribe a vitamin to treat a medical condition. The vitamin would then become eligible in this instance.