A Flexible Spending Account is a US government plan which allows employees to set aside pre-tax income for qualified medical expenses, and this includes laser vision correction. It is sometimes referred to as a Health Reimbursement Account or Arrangement.
The FSA must be sponsored by your employer in order for you to participate, and the amount you designate is deducted from your gross taxable income in equal installments BEFORE taxes are withheld. No federal taxes or social security taxes are paid.
A FSA plan helps you reduce your tax burden as you set aside money for eligible medical expenses like LASIK. You therefore keep more of your hard earned money because you pay less in taxes.
Basic IRS Rules about Flexible Spending Accounts
The government has set up specific rules about how to use a Flexible Spending Account. The most important caveat is that you must use all the money you designate before the end of your employer’s plan year. If you do not spend all the money, you lose it. It is commonly known as the “use it or lose it” rule.
Other basic facts about a FSA:
- Once a year you will have an opportunity to set up your FSA account and that date is set by your employer.
- Your FSA pays for eligible out of pocket medical expenses, tax free. Therefore you save the amount of money equal to the taxes you would have paid.
- The IRS has put a maximum amount on the annual contribution at $2550 as of January 2015. Your employer may limit how much you can ultimately set aside, at or below that amount.
- Your employer deducts the amount in equal installments throughout the year before taxes are taken out.
- Some employers contribute additional funds to your FSA.
- You can combine your FSA with your spouse’s FSA to gain greater savings on LASIK.
You may spend the money and be reimbursed even if your have not contributed enough funds to cover a particular expense. The entire annual election amount is available to you on the first day of your new plan year.
This means you can use your FSA to pay for your LASIK in January even though you have not contributed the full amount by that date. This example applies to employers who base their plan year on the calendar year.
Greater Flexibility with the End of the “Use it Lose It” Rule
The Department of the Treasury has recently modified the “use it or lose it” rule with an amendment extending the deadline to use FSA funds.
Some employer groups have added this change to their health plans providing even more flexibility and offering a choice of “grace periods” to use your account. The rule change limits your risk of forfeiting unused funds, and at the same time gives you more flexibility and control as you manage your out of pocket health costs.
- There are employers who offer “grace periods” of up to 2 ½ months to use the account after the official close of the plan year.
- One other option is to carry over $500 of unused account money into the following plan year without affecting the next year’s amount maximum. This one seems to be the more popular of the two.
- An employer may only choose one of these two options.
Speak to your plan administrator and determine if your employer now offers this new amendment change.
Health Savings Account Compatible FSAs
A Health Savings Account is like a 401K for health care. It also allows you to pay for out of pocket vision, medical and dental expenses.
One additional way to keep more of your hard earned money is to use a Health Savings Account Compatible FSA. This is a FSA that works with your high-deductible health plan and a Health Savings Account. You can combine the tax free benefits from both accounts simultaneously to maximize your savings for LASIK.
Take the Next Step
If you have been considering LASIK, check with your Human Resource Manager and find out if and when you can enroll into a Flexible Spending Account for the coming plan year.
Next, make an appointment to find out if you are a candidate for LASIK.
Once you are certain you are a candidate for LASIK, then enroll in your FSA for the coming year.
If you have any questions about a Flexible Spending Account and how you can use it to save money on LASIK, contact us toll free (855) 522-2020.
Email us firstname.lastname@example.org
Use the advantage of your FSA to make LASIK more affordable with tax-free money.