Flexible Spending Account Government Guidelines
A flexible spending account is used to pay for medical expenses. This account is offered through employers as a part of a benefits package. Contributions to flexible spending accounts are made with pre-tax dollars, but to take advantage of this tax break the Internal Revenue Service requires you to follow certain rules.
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Contribution Decision
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If you have a flexible spending account through your employer, you have to fund it through payroll deductions. The money that you contribute is not taxed, but it still comes out of your paycheck. At the beginning of the calendar year, you have to decide how much you want to contribute to your account over the course of that year. The employer will then divide the contribution by the number of pay periods and start deducting that amount from your pay.
Use It or Lose It
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With a flexible spending account, you have to use the money or lose it. The money that you contribute to your account resets at the end of each year. This means that if you put a certain amount of money in your account and you do not use it on qualified medical expenses, you will never be able to use it again. This can make it difficult to predict how much money you need to set aside annually.
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Qualified Expenses
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The money in your flexible spending account is designed to pay for various qualified medical expenses that are not covered by your insurance policy. For example, you can use the money to pay for co-payments, deductibles and prescriptions. While you can pay for many different things, certain expenses have to be avoided. For instance, you cannot use the money to pay for insurance premiums, cosmetic surgery or other cosmetic items.
Payments
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The money from your account can be accessed in a number of different ways, depending on what type of plan you have. Some plans provide you with a debit card or a checkbook that you can use to access the money. With these plans, you can also be reimbursed for medical expenses that you pay for out of your own pocket. If this is the case, you have to provide a receipt from a medical facility that proves you paid for it and that it was not covered by any other insurance plan.
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