04 February 2009

FSA: Flexible Spending Arrangement

When I mentioned flexible spending accounts yesterday (contrasting with health savings accounts), I was a bit dismissive. Yes, the drawback of the spending account is that you forfeit whatever money is sitting in the account at the end of the year. But few people actually lose money, and most people do quite well by setting aside money for medical expenses. With the set-aside comes a tax advantage: they are pretax dollars.

Success is most likely when you make good estimates of what you'll need in the coming year and when you reconcile the lists of allowed expenses. Seems there are 2 lists: one by the IRS and one by the employer sponsoring the plan. The lists don't always match.

But when the research is complete, the happy flex-spender can end the year by purchasing approved over-the-counter supplies and medicines to clean out the account. Otherwise, the flex account holder finds himself joining in the lines at the eye doctor at year's end. (February is the month of hurried activity to spend what's in the account.)

IRS web pages: Flexible Spending Arrangements (FSAs)

© 2009 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

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