photo credit: jfcherry
We’ve already started to get open enrollment info in the mail from my husband’s employer. While we won’t be making any changes in our health, dental, or long-term disability coverages, we will be revisting our flexible spending account. (FSA).
We’ve had an FSA for a few years and I like the way it works. It allows us to set aside a portion of our paycheck (using pre-tax dollars) to use for certain health care expenses like clinic co-pays, prescription medications, and deductibles. I’m a stay at home mom, so we don’t have day care, but if we did, we would have an FSA for day care expenses, too.
What I like the most about having the FSA is that it forces me to budget for health care expenses – something that many of us don’t think about until we’re sick. The money goes straight to the account from my husband’s paycheck, so we aren’t tempted to spend the money elsewhere. My plan also uses a debit card – which means we don’t have to worry about paying for co-pays or prescriptions out of pocket when we’re sick. It’s been a huge convenience!
Of course, there are a few downsides. Any money you allocate to a flexible spending account must be completely spent by the end of the year or you’ll lose the money. There is often some additional paperwork to complete in order for expenses to be allowed. You also need to keep all of your receipts for claims you make in case you’re ever audited.
It can be a real challenge trying to figure out exactly how much money to allocate to a flexible spending account.
The first year, I was very conservative and only set aside $500. That didn’t even cover our deductibles for the year – not to mention a surprise surgery and other illnesses we went through.
In year two, we bumped up our contribution to $1,000 ,which covered our deductibles and our prescription co-pays. But one of our sons ended up needing months of speech therapy which quickly wiped out our account.
This year, we budgeted $1,700, and that hasn’t worked so well, either. I had figured my son would still be in speech therapy, but he ended up being done early in the year. While this was a blessing, it meant that we now had too much money in our flexible spending account, and it was frustrating to have that money tied up in an account we couldn’t touch. I think we’ll be able to use up the last little bit in our account (after an eye injury, a lost contact lens, and a series of lung infections), but we’ll be cutting it close.
So now, it’s time for open enrollment again, and I’m trying to decide what the best course of action is. At a minimum, I will want our FSA to cover our deductibles and prescriptions. I may figure out a few clinic visit co-pays into that figure. I’ll be playing with the online calculators at Plan For Your Health and BlueCross of MN before my husband and I decide how much money to set aside for next year.
I do know that I will be putting less into the flex account than we did last year. With the rising cost of gas and groceries, and a few house and car repairs that have decimated our emergency fund, I’d rather have more cash in my savings account than having it tied to health care costs in a flex account.
What are your plans for open enrollment? Are you changing how much you allocate?