In a 2017 survey from Mercer, about 88% of large employers offer Flexible Spending Accounts. But as of July, only 22% of employees take advantage of this health care option. The reason 78% of employees aren’t enrolled? They don’t know the Flexible Spending Account pros and cons.
Every year health care costs rise, even with comprehensive health insurance. An FSA can ease that burden for you. If you’re still thinking about getting one, we gathered all the pros and cons of a Flexible Spending Account. But let’s face it, there’s only 1 con - losing your money before you have time to spend it!.
Read below for our simple pros and cons of a Flexible Spending Account.
Con: You’re afraid to lose money
One of the biggest reasons people stray from opting into FSAs is their fear of losing their funds. While Flexible Spending Accounts are usually available for one year, the IRS recently created two extension options.
One option is an extension of two and a half months. The second is a carryover option of $500 into the new plan year. In 2015, 60% of employers offer the carryover option, according to the Society for Human Resources Management. Therefore, there’s a good chance your employer covers you so you don’t have to worry about lost funds.
Plus, your tax savings is most likely more than your unused funds. If you’re in the 25% tax bracket and allocate $1200 to your FSA, you’re estimated to save over $400 a year with an FSA. That means even if you only spend $900 of your FSA dollars, you still save over $100 in taxes!
Pro: Give yourself a tax break
A major benefit of an FSA is that you can contribute up to $2700 (in 2020) per year in tax-free funds to your FSA. These are pre-tax dollars, allowing you major tax savings. If you are in the 25% tax bracket, that can save you up to $670 per year in taxes. Keep in mind you will still have that $2700 to spend on medical expenses and equipment you need.
Once you plan out how much you want to contribute to your Flexible Spending Account, your employer must make the funds available all year. This gives you plenty of time to spend all your funds, so you don’t have to worry about running out of time to spend your funds.
Pro: Save on everyday items
You can use your FSA on band-aids
, co-pays, reading glasses
and more. What’s better, you’re saving money on these items, because you’re using pre-tax dollars to purchase them.
Think about it: if you’re in the 25% tax bracket and you have $75 of medical expenses, it actually cost you $100 pre-tax dollars. if you use FSA dollars, those expenses are still only $75. Plus, at FSA Market, our prices are unbeatable so you’re saving even more money! It’s basically a no-brainer.
Pro: It’s like shopping online for anything else
The SHRM found 35 million people sign up for Flexible Spending Accounts every year. But over 50% of those people who signed up wait until December to spend their funds!
While your company may offer an extension, you might be one of those people afraid of losing your money for a different reason. A common misconception of the FSA is that the funds are too difficult to access. But funds are now preloaded on an FSA debit card, so you can easily use them on FSAmarket.com because we accept FSA cards! Now it’s just like shopping online at any other retailer, only you’re utilizing your tax-free dollars.
If you’re weighing the Flexible Spending Account pros and cons, just think of all the ways you can spend those funds. The possibilities are endless: acne-treatments, ambulances, breastfeeding classes, hot/cold therapy
, and even x-ray fees. These are a mere handful of examples of medical products and services that you can buy with your Flexible Spending Account, so the pros definitely outweigh the cons.
With the end of the year just around the corner, now is the time to buy those medical products you need or have always wanted. Shop today and discover what you never knew was eligible!