A flexible spending account, also known as FSA, allows employees to put aside a certain amount of their pretax salary for medical out-of-pocket expenses. Since the contribution amount is from the pretax dollars, federal and social security taxes will be lower on the resultant salary once the contribution is taken out. Many employees use flexible spending accounts to cover for things like doctor visits for which they are responsible to pay.
Many of us use flexible spending accounts mainly because we want to set aside some money for some predictable medical expenses which may insured at a reduced reimbursement by our health insurance companies. But many of us are not aware that we can also use flexible spending accounts for medical expenses which are not covered by the health insurance companies. For example, if your doctor has told you to get a hot water bottle for your back, you can use the money in your FSA account to pay for the bottle.
IRS provides guidelines on what constitutes to be an eligible medical expense for a flexible spending account, but some of the descriptions are broad and can lead to different interpretations. As a result, employers often impose stricter precise limits than the IRS so that the chance for different interpretations is reduced. So, it is always a good idea to consult your employer in case of any doubt.
There are some ‘non-conventional’ medical expenses which are FSA-eligible for instance, fertility enhancement, birth control pills, condoms and abortions. FSA can also be used for drug addiction treatments and weight-loss programs that are used to treat diseases such as obesity.
For disabled people, FSA can be used for a wheelchair, a guide dog and even Braille books.
What is not covered by FSA? Gym membership fees are not covered. Dancing lessons, yoga classes or swimming lessons are, again, not eligible expenses. Cosmetic surgery such as teeth whitening is not covered as well