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Q: How do flex spending accounts work?

Posted November 20, 2013 in Advice Column, Downtown

A: Many individuals with employer-based insurance plans are able to set aside pre-tax money from each paycheck into a flexible spending account (FSA) that can be used toward out-of-pocket healthcare costs. Using pre-tax dollars for these expenses can save you significant amounts of money, but any leftover funds at the end of year are lost. Some employers grant a grace period of up to two and a half extra months, so ask your HR representative if this is available to you.

• What healthcare costs can you use your FSA toward? Insurance deductibles and co-payments (not premiums), lasik surgery, orthodontia, chiropractic services, dental work, acupuncture, prescription co-payments, contact lenses and cleaning solution, home medical equipment (crutches, ace bandages), hearing aids and batteries, prescription glasses, sunglasses, reading glasses, insulin and diabetic supplies, infertility treatments, pregnancy tests, over-the-counter medications with a prescription, home renovation required by a medical condition and  special education required by medical diagnosis.

• How much should you put into your FSA next year? Starting in 2013, individuals are limited to placing a maximum of $2,500 per year into an FSA (annually adjusted for inflation). Spouses can each take out the maximum allowable amount, even if they work for the same employer. Create a list of expected healthcare costs you may have from the list above and estimate how much you should put aside toward your FSA. With adequate planning, you can receive the greatest benefit without risking leftover money at the end of the year.

Information provided by Hammer Pharmacy, 600 E. Grand Ave., East Village, 243-4177

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