For those of you who recently went through open enrollment, take a closer look at what you contribute to your Flexible Spending Accounts in 2011. FSA’s allow employees to contribute pre-tax dollars to an account set up by your employer. You can later withdraw these funds tax-free to pay for out-of-pocket medical costs, day care provider fees, or private pre-school and kindergarten expenses as an example.
One of the big items that you could use your Flexible Spending Account for in 2010 was to obtain over the counter medications. Going forward beginning in 2011, you will no longer be able to use your Flexible Spending Account for these items unless expressly approved by your doctor. You will be able to use the account for many of the expenses currently included in the plan, but OTC items such as vitamins, antacids, and pain relievers will not be allowed going forward. This means that you will need to keep a much closer eye as Flexible Spending Accounts will continue to be use or lose in 2011.
One of the huge benefits of these Flexible Spending Accounts was the ability to put away up to $5,000 pre-tax into these accounts. Underneath the new health care reform, beginning in 2013 there is a federally mandated cap of $2,500 for the Flexible Spending Accounts. This means that you can do some financial planning in 2011 and 2012 with the higher cap on the Flexible Spending account.
You should keep a close eye on this type of account and how it compares to a Health Savings Account going forward as you make your benefit elections in 2011. These type of financial planning decisions make have a big impact on your bottom line.
oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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