by WEX Benefits
A flexible spending account (FSA) lets you save money by setting aside pre-tax dollars to pay for eligible medical, dental, vision and dependent care expenses incurred by you, your spouse or your eligible dependents. Whether you’re a newcomer to the account or have routinely participated in this benefits staple, we’ve compiled answers to some common questions to help you better understand your FSA. Or check out this episode of Benefits Buzz to learn eight things you should know about medical FSAs.
How does an FSA work?
You’re able to set aside pre-tax dollars from your paycheck to pay for eligible expenses. Putting money into a flexible spending account decreases your taxable income, which means you’ll take home more money.
What are the different types of accounts?
There are four common types of accounts:
- Medical FSA, which covers eligible medical, dental and vision expenses.
- Limited medical FSA, which covers eligible dental, vision and preventative care expenses. Unlike a medical FSA, it can be paired with a health savings account (HSA) and a high-deductible health plan (HDHP).
- Combination FSA, which is a limited FSA that converts into a medical FSA once the IRS deductible is met.
- Dependent care FSA, which covers eligible daycare (up to age 13) and dependent care expenses if certain conditions are met.
When can I enroll?
You can enroll during open enrollment, at the time of your hire or if you have a status change.
How much can I contribute?
IRS contribution limits in 2020 allow you to set aside $2,750 into a medical or limited FSA and $5,000 into a dependent care FSA.
Can I change my annual election amount?
You can change your election amount if you have a status change. Status changes include:
What happens if I have money left over at the end of the year?
The IRS has a use-it-or-lose-it rule for FSAs, which means funds must be spent by the end of the plan year unless your employer offers a grace period or carryover.
What is FSA eligible?
Eligible expenses are determined by the IRS and include a variety of products and services. Visit our searchable list to see what kinds of expenses are eligible.
How can I spend my FSA funds?
The WEX benefits debit card works anywhere that offers an Inventory Information Approval System (IIAS) or at merchants that meet the IRS’ 90 percent rule. If used at an IIAS merchant, simply swipe your card to have any eligible expenses automatically approved. You can also pay out of pocket and request reimbursement.
How does reimbursement work?
For out-of-pocket expenses and some debit card purchases, the IRS requires more documentation to validate that purchases were for eligible items or services. You’ll be notified via mail or email if more documentation is required. You can submit documentation through your online account, mobile app or via fax or mail, and you can receive reimbursement via your debit card, direct deposit or check.
What needs to be on documentation for reimbursements?
The IRS requires that documentation include:
- Amount of expense
- Date of purchase
- Product description
- Provider or merchant name
An Explanation of Benefits (EOB) typically contains the information the IRS requires. If an EOB isn’t available, you can also submit an itemized receipt as long as it has the necessary information.
We offer a number of tools and resources to help you make the best FSA decisions. Check out our Benefits Toolkit in the Resources section of our website.