If you need to enroll in your employer provided Flexible Spending Account due to your plan’s open enrollment, changes in employment, or family size, here are some tips to help you figure out how much to contribute to your FSA from Elle Martinez of Couple Money.
Flexible spending accounts can be a great tax benefit for you, but the downside is that you may have to use your benefits by the plan’s year end or lose the money contributed into the account. For some people, overestimating means that they have to scramble to use everything at the end of the year.
However it’s possible to optimize your FSA. For those planning on using a flexible spending account for the first time or for those who want a FSA fund closer to their actual spending, I have some tips for estimating the right paycheck deductions for you.
Review Your Actual Spending
The best way to anticipate future expenses is to see your track record over the past year or so. You can check the bills you’ve probably filed or your can check with your bank and manually review the payments.
If you don’t have the records handy on you, free services like Mint can be used to track your out of pocket expenses. It takes about 5- 10 minutes to set up and it will pull that data and organize it by transactions. You simply have to review all your medical related payments to get a total.
Here’s how our medical expenses came out this past year:
- Doctor Visits: For our baby girl, well visits are free. I had some appointments and since we didn’t meet our deductible, we paid out of pocket. The total we will have spent will be around $500 by the end of the year.
- Vision: I have pretty strong prescriptions so I usually get contacts for mostly day to day activities. As a back up I buy glasses every few years. This year I got a cheap, but nice pair of eyeglasses from Zenni Optical. The bill for contact lens for the entire year was $175 and the eyeglasses were $200.
- Dental: Regular check-ups and cleaning are covered with no out of pocket with the insurance plan.
Looking Ahead for Medical Expenses
Looking at our numbers from above we can now try to anticipate what we can expect. I know that I will be getting contacts again, but I don’t get eyeglasses every year, so I will probably leave that out of my estimates.
My husband and I have relatively good health so the only doctor visits I expect will be annual exams. As for our baby girl, she’ll also be getting her check-ups, but I’m going to estimate that she may need to visit the doctor’s office for a few visits in case she gets sick.
Now that we have a ball park figure, my husband can change the amount he’d contribute to the flexible spending plan. As a note, I would also recommend using your deductible as a guide as well.
If you’re not sure about your deductible or you don’t know your benefits very well, contact your Human Resources Department. They may be able to go over everything one on one or you can go ahead and review the benefits package that the insurance company prints out.
Also remember, after December 31, 2012, you may not request salary contributions for your FSA cafeteria plan in excess of $2,500.
Thoughts on Maximizing FSA Benefits
I’d love to hear from you. How many of you take advantage of your Flexible Spending Account? How many of you have over or underestimated your deductions? What do you use to keep on top of your medical expenses?