Life throws a medical emergency along your way occasionally. What’s worse about it is they come at the most inappropriate time. When this happens, you are forced to dig deep into your pockets to pay for staggering medical costs. There would be no problem if you have the money to spend, but what if you do not? This is where Flexible Spending Accounts (FSAs) can help.
What is a Flexible Spending Account?
According to Healthcare.gov, an FSA is a special account where you can put your money and save it in cases of unforeseen health care costs. It’s like a savings account, although it does not earn interest or is subject to taxes. Your employers, if they choose to do so, can also make their own contributions to your own FSA account. Among the good things about FSA is that you are not required to pay tax on the money you contribute. This means that you will be able to set aside an amount that is equal to the taxes you could have paid on the money you saved.
How Do You Setup An FSA Account?
Unfortunately, you cannot privately set up an FSA account for yourself because only your employers are allowed to do so. Ask your supervisor if your company offers this kind of benefit. Employers who offer FSA normally would deduct an agreed upon amount from the employee, which could be anywhere between $2,000 and $3,000 annually.
Like a non-interest bearing savings account, you can withdraw funds from FSA for any qualified medical expenditure. A list of qualified medical expenses is available at Internal Revenue Service (IRS), which includes the purchase of over-the-counter medicines.
How Do You Manage Your Account?
FSA administration is often left to employers, as they are the ones in direct contact with employees anyway. Then again, managing a Flexible Spending Account for employees can be a huge task for employers. Proview Global says that this might cause them to lose focus on their company goals.
As such, many companies have started hiring third-party FSA administrators to help owners and managers oversee the accounts. These third-party administrators can help process FSA enrollments, assist in reimbursing claims, as well as generate periodic statements for participants and their employers.
No one knows when or where a medical emergency could strike. Everyone is at risk, which is why you must be financially prepared to face it head-on if it does occur. With a Flexible Spending Account, your financial worries will be greatly reduced.