Why Don’t You Have a Flexible Spending Account?

By Tammy Flanagan

November 16, 2012

One big issue in retirement planning is health insurance benefits. During the federal benefits open season that runs from Nov. 12 to Dec. 10, I’ll be addressing some insurance-related issues.

This week, I’ll focus on the flexible spending account program. FSAs offer employees (but not retirees) a way to set aside tax-free dollars to pay for a variety of eligible health care and dependent care expenses. But only about a third of eligible federal employees use it. Those who do can save an average of $30 for every $100 they spend for necessities such as medicines, eyeglasses, doctor or dental visits, day care and adult care expenses. If you are retiring sometime in 2013 or later, it makes sense to consider using this tax-saving program prior to your retirement.

Consider this:

There are three types of FSA plans:

Health Care FSA

This can be used for out-of-pocket health expenses that are not covered by FEHBP, the Federal Employees Dental and Vision Insurance Program, or other insurance. The dollar limit for 2013 is $2,500. (Your spouse can have a separate account and fund it with an additional $2,500). The minimum amount you can put in an account for 2013 is $250.

Limited Expense FSA

The Limited Expense FSA (LEXFSA) is for eligible dental and vision expenses in connection with a Health Savings Account. This is available only to those who are enrolled in a high-deductible health plan. The LEXFSA dollar limit is $2,500 for 2013.

Dependent Care FSA

This can be used to pay for nonmedical day care expenses (such as child care and elder care) so you or your spouse can work, look for work, or attend school full time. The dollar limit is $5,000 per household.

Things to Remember

Here are some things to consider about the federal FSA program as you prepare to make your open season choices this year:

Want more information about FSAs? Here are some answers to frequently asked questions.

By Tammy Flanagan

November 16, 2012