The IRS recently announced that Flexible Spending Account contribution limits are increasing from $3,050 to $3,200 in 2024. Here, a primer on how FSAs work and why they are an essential way to save money on health care costs.
An FSA allows you to set money aside to pay for approved health care expenses not covered by your health plan. Contributions are made through payroll deductions before taxes are applied, which shelters the contributions from payroll taxes and lowers your taxable income. This produces about a 30% savings on health care expenses paid through the account.
There continues to be increased reimbursement flexibility from the FSA. Paperless reimbursement is now available from most FEHB and FEDVIP plans. Federal employees can choose from either auto reimbursement or pick and process. With auto reimbursement, if you have a participating plan, you will be automatically reimbursed when claim information becomes available, eliminating most paperwork. With pick and process, eligible expenses are loaded to your account, and you can choose which claims you’d like paid through the FSA. Both direct deposit and checks are available for payment.