Monthly Top 10 List for August – Flexible Spending Accounts

Hi everyone, we’re continuing with our ChatGPT assisted Top 10 Benefit Lists and this month will be going over the top 10 questions that ChatGPT could find online relating to Flexible Spending Accounts (aka FSA’s).  I’m adding some context and a little elaboration as well on many of the questions as you’ll see below.  Let’s dive in!

From Ryan – “Hey ChatGPT, can you tell us what the 10 most common questions are for Flexible Spending Accounts and provide the answers?  Thank you!”

From ChatGPT to Ryan –

“Sure, here are 10 commonly asked questions related to Flexible Spending Accounts along with their answers:

1. Q. What is a Flexible Spending Account (FSA)?
   A. A Flexible Spending Account (FSA) is a type of savings account that allows you to set aside pre-tax dollars from your paycheck to pay for eligible healthcare and dependent care expenses.
2. Q. What expenses can be covered by an FSA?
   A. An FSA can be used to pay for a wide range of eligible healthcare and dependent care expenses, including co-payments, deductibles, prescription medications, dental and vision care expenses, and dependent care expenses such as childcare and eldercare.

   NOTE FROM RYAN – There are several types of FSA’s, you need to be enrolled on a HealthCare FSA to be able to pay for health-related expenses, there’s also a Dependent Care FSA.  That is a different vehicle so if dependent care costs are what you are looking to pay for through as FSA, you will need to be enrolled specifically on a Dependent Care FSA.  These are different types of programs and not all employers offer both.

3. Q. How much money can I contribute to an FSA?
   A. The maximum amount you can contribute to an FSA is determined by your employer’s plan, but the maximum contribution limit for healthcare FSAs is $2,750 per year, and the maximum contribution limit for dependent care FSAs is $5,000 per year.

   NOTE FROM RYAN – I thought this one was interesting.  The Healthcare FSA Amounts tend to update annually where the Dependent Care costs we have not seen get increased in a while.  The amount ChatGPT provided was actually from 2021.  2022 FSA Maximum contribution was $2850 and the max for 2023 was $3050.  In 2024, that number will increase to $3200.

4. Q. What is the deadline for using FSA funds?
   A. The deadline for using FSA funds is usually December 31st of each year. However, some employers may offer a grace period of up to 2.5 months or allow up to $550 in unused funds to be carried over to the next plan year.

   NOTE FROM RYAN – The max rollover is equal to 20% of the max contribution so this will increase as the annual maximum contributions increase, but as mentioned, employers have to update their plans and elect to have the rollover as an option, so make sure you understand how your plan is setup before assuming you will be able to have the money move from one year to the next.

5. Q. Can I use FSA funds to pay for my dependents’ expenses?
   A. Yes, you can use FSA funds to pay for eligible dependent care expenses, such as childcare or eldercare, for your dependents who are under the age of 13 or who require assistance due to a disability.

   NOTE FROM RYAN – Similar to my notes from Item # 3, this is true, however, you need to be sure you are enrolled on a dependent care FSA program in order to be able to pay for these types of expenses.

6. Q. What happens to my FSA funds if I leave my job?
   A. If you leave your job, you may lose any unused FSA funds. However, some employers may offer a grace period or allow you to continue using your FSA funds for a certain period of time after you leave your job.

   NOTE FROM RYAN – This is another area you need to pay close attention to.  If you still have money in your FSA and are contemplating leaving your job or it has happened through no fault of your own, check your plan details.  You might have a grace period to use up the dollars, you may not.  There are different rules for each plan as the employer gets some flexibility on how these are structured, so be sure you know how these work.  You don’t want to see your money go away if there’s any way to avoid that.

7. Q. Can I change my FSA contribution amount during the plan year?

   A. You may be able to change your FSA contribution amount during the plan year if you experience a qualifying life event, such as a change in your marital status, the birth or adoption of a child, or a change in your employment status.

   NOTE FROM RYAN – Good job ChatGPT.  This is like any other qualifying event that may take place during the course of the year.  You CANNOT just arbitrarily make changes whenever you want.  Plan appropriately when first enrolling.  A good rule of thumb is to only contribute what you know your expenses will be for that year.

8. Q. Can I use my FSA funds to pay for over-the-counter medications?

   A. Yes, you can use FSA funds to pay for eligible over-the-counter medications, such as pain relievers, allergy medications, and first aid supplies, without a prescription.

   NOTE FROM RYAN – Another Good job ChatGPT.   A little more context, this is one way people will use up their funds if they are potentially going to lose them.  Time to fill up the medicine cabinet!!

9. Q. How do I submit a claim for reimbursement from my FSA?
   A. You can usually submit a claim for reimbursement from your FSA online or by mail. You will need to provide documentation of the expense, such as an itemized receipt or an Explanation of Benefits (EOB) from your insurance provider.

   NOTE FROM RYAN – This is another instance where it will depend on how your employer setup the plan.  Nowadays most FSA’s operate more like a bank account where they have debit cards and you just pay using that card at the time of service.  Depending on where you are seeking services and their credit card system, you may not always be able to use your card so when this happens you are typically paying out of pocket and then filing for reimbursement to your FSA Plan administrator.  ALWAYS SAVE ALL OF YOUR RECEIPTS THAT ARE FSA ELIGIBLE.  If you get audited on your tax return by the IRS, you will need to show proof of your spending if they ask (and they do!).

10. Q. What is the difference between an FSA and a Health Savings Account (HSA)?
    A. An FSA is funded with pre-tax dollars and is available only through your employer’s benefit plan, while an HSA is available to individuals who have a high-deductible health plan and allows for tax-free contributions and withdrawals. Unlike FSAs, HSA funds can be carried over from year to year and can be invested to grow tax-free.

    NOTE FROM RYAN – Overall, great description from ChatGPT.  A few things I will add some clarity on, FSA’s are funded with pre-tax dollars deducted from your paycheck, so this is why they are also tied to your employer’s program.   Theoretically you can have an FSA with any medical type program but you will be limited to what your employer allows.   FSA’s are use-it-or-lose-it type programs, so don’t over fund.HSA’s on the other hand you can only contribute towards if you are enrolled on an HSA eligible health plan, BUT anyone can open an HSA, it doesn’t have to be tied to an employer so individuals, self-employed, contractors, etc., doesn’t matter, as long as you are on an eligible health plan, you can setup and contribute towards an HSA.  This is a bank account you own and the money that goes in will be yours until you decide to spend it, whether that’s next week or 10 years down the road, your call.

All in all, with this article and these questions and answers, I thought ChatGPT did a pretty good job with all the descriptions, and I know it is somewhat limited to certain timeframes from a historical searching standpoint.

If you personally or your company has any subjects, you’d like some clarity on and would like us to dive into, please let us know.  We’d love to take on a subject matter that YOU would like to learn more about.  Thanks for reading and for your partnership!  If you have any questions on FSA’s, HSA’s or anything else benefits related, please let us know!