- Oriana Skylar Mastro
Fact: You can't be an adult without an FSA account
You have just started a job and one of the benefits is an FSA account – congratulations! You are a grown-up. FSA (flex spending account) is a special account you put money into that you use to pay for certain out-of-pocket health care costs. You may also have access to a dependent care FSA which you put money into (pre-tax) that you can then use for certain dependent care expenses. FSA accounts are great because you can save money on medical expenses and/or childcare by using pre-tax income for them. In other words, whatever money you put into these accounts you don’t have to pay taxes on.
But they are also a pain, because you have an estimate accurately how much money you’ll need that year (hmmm, what unforeseen medical events should I foresee?) and the admin needed to prove you are using the funds for medical reasons can be annoying. If you don’t go into it knowing the admin landscape, it often takes more time than it should. So a little FSA primer as part of the set up costs.
Pay the setup costs.
The MAX you can put into a medical FSA is $2,650. When you chose an amount for the year that you want to go to you medical FSA, this total will be available to you starting January, but 1/12 of it will be taking out of every paycheck. So if you choose a total of $1200 to put into your medical FSA for the year, each month $100 will be taken out of your paycheck. Make sure the right amount is taken out of your first paycheck – my HR made a mistake and I didn’t notice for a month and then the period of time they allotted for fixing such things had passed. Also make sure you get the FSA credit card associated with your account and change any medical autopays (like prescriptions) to that card and add that to your amazon account. A lot of stuff you'd by at the drugstore is covered, so take some time to look through websites like this one: https://fsastore.com/. Also, download the app and create an online account for the FSA company your company uses. Mine uses connectyourcare, so that’s what I reference here. Review the app and website to get comfortable with it.
Make sure to use your FSA credit card on any medical expenses – it is more admin to buy something with another card or cash and then submit a claim to get reimbursed. It is the same process, but you have to add the extra step of checking your account to make sure you were indeed reimbursed.
So here's a checklist for the setup costs.
Set up an FSA account through your work – medical and/or dependent care
Check that the amount taken out of your paycheck is correct (1/12 of the total annual
amount you’d like)
Check that the total amount in the FSA medical account is correct
Create an online account and download the app – familiarize yourself with both.
Enroll in direct deposit for claims
Order FSA credit cards
Confirm receipt of credit cards
Update all medical autopay with this card like mail order pharmacies and amazon
Put it all together.
I keep the login link, my login info, and customer service phones numbers all in one Evernote. I also note how much money there is to spend and ideas of best ways to spend it (I sometimes forget that vitamins are covered, for example).
Receipts. They say they will ask you for documentation if they need it, but don’t wait. They ALWAYS need documentation. Extensive, often extraneous documentation. It saves time if you upload everything you need right when you make a charge. Most companies will have an app that makes such things easy (I currently use connectyourcare). You just click on the expense, ‘add document’ and can take pictures of the receipt directly. They want something that says what was bought, as well as the charge receipt showing you paid for it. In many cases you need doctor’s proof you need something. So take a picture of a prescription and upload it (Especially for things like breast pumps, get a prescription!) Or, if it is a medicine that isn’t over the counter, but isn’t a prescription, they will want a version of a ‘medical necessity’ form (usually found on their websites). So for vitamin D drops for my kids, for example, which we get at the doctor, I have the doctor fill out the connectyourcare medical necessity form right there because it is a hassle to send to the doctor to get them to do it once you’ve left.
Upload receipts and other medical documentation (medical necessity form, prescriptions) immediately to the claim through the app. This way you don't even need to add it to the to-do list. Make sure all members of the family know how to do this so they can submit their own.
Follow up with them if claims are not processed. They say they will contact you if there are any issues with any of your purchases, but in my experience I’ve never received communication from connectyourcare. I have to check the app regularly to make sure.
FSA vs Dependent Care FSA. There are two types of accounts you may be able to take advantage of at your work – a medical FSA (often just called an FSA) and a Dependent Care FSA. The former is for medical expenses, the latter for childcare expenses. They work somewhat differently.
The max you can choose to withhold for dependent care is $5000. As an example, if you chose this amount, $416.67 will be withheld for this purpose every month from your paycheck. But unlike the medical FSA, the full $5000 won’t be available from the get-go. It accumulates. So in January you have $416.67 available, February a total of $833.33 etc.
So, to save on admin time, I wait until I have spent $5000 on childcare (I don’t even want to admit how quickly that is in my case) then I submit one claim for that amount. If you go to a daycare center, you can get an official invoice from them, probably from some sort of online account. If you use a nanny or an in-home daycare, you will have the caregiver sign a form saying they provided $5000 of care.
Then, you don’t get the $5000 right away. As I mentioned, the full amount isn’t available like for the medical FSA. You’ll get whatever has accumulated in your account ($416.67x number of months that have passed) immediately, then $416.67 each month into your bank account after that.
Make sure to spend it! You lose whatever you don’t spend. Most give you a grace period of using all your funds by March 15 of the following year (versus December 31) but double-check. Some let you roll over funds (my work lets $500 roll over) If at the end of the year you have extra funds, think about using it for over the counter drugs, glasses, etc. If you need some ideas, you can select the FSA/HSA filter on amazon and then search and see what qualifies.
Once everything is set up, you only have to set reminders for yourself to check on claims and use the funds.
Here are the reminders I use:
Always use the FSA credit card for medical expenses. I create a reminder for myself to use the card whenever we have a planned medical or dental visit that week
I don't create reminders to upload receipts and other medical documentation (medical necessity form, prescriptions) because I always do it immediately after the appointment through the app.
Check that the claims have been processed and you've received your cash.
Some companies process the cash to your account, but require you to request it be
deposited into your bank account (like TASC)
Once you’ve spent the total amount you’ve allotted for the FSA dependent care, submit your claim. I create a reminder for the month when this is likely to happen.
Make sure once it is processed you receive the amount that had accumulated in the
dependent care account to take as a lump sum, and that you get the correct monthly
amount after that.
Make sure to spend it all!