Savings Tips: Flexible Savings Accounts

Company benefit plans are constantly evolving in many ways to entice the best employees to join a company while saving the business money in the process. One cost efficient strategy that does the trick are flex funds that can be utilized by employees to cover additional health expenses not covered by employee health insurance. With a flexible savings account, (aka flex funds) pre-tax funds are put aside into an account that can be used to pay of a bunch of medical costs such as deductibles, co-payments, cold treatments, and even vitamins.

Those considering opting into their employers’ flexible savings account should be aware that money that is not applied towards qualifying expenses during the course of a year is forfeited. However, with some careful planning, budget skills, and constant account management, a flexible savings account can help save you money.

Flexible spending accounts allow workers to put a portion of their pre-tax income aside. Based on the amount put into the flex fund, you can actually not just lower your income tax for the year, but if you are on the financial cusp of tax brackets, it is a great way to lower your taxes and save even larger amounts of money. The legal limits on flex fund savings is currently limited to  $5,000 annually for Health Care FSAs and $5,000 for Dependent Care FSAs.

If you choose to start a flex fund through your employer, they can provide you with a full list of treatments and expenses that are covered by your flexible savings account (both for yourself and your dependents). More than likely you will need to provide them with receipts proving that the expenses were legitimate, so make sure to create a filing system to properly keep track of all the required documentation.