By Manisha Thakor | October 8, 2010
As we head into the fall, millions of employees across America have an opportunity to save money on their healthcare. This is because fall is "open enrollment season" when workers have the opportunity to select from a menu of employee benefits that can leave them with more take home pay - if they sign up for them.
Unfortunately, many hard-working Americans don't understand a very important benefit – the flexible spending account, or FSA – and how it can be used to save them money. This is further illustrated by the low enrollment rate – only one out of five Americans with access to this valuable employee benefit signs up.
Why the low enrollment? A recent national survey by Schireson Associates for Save Smart, Spend Healthy and WageWorks, a leading benefits provider, holds some of the answers. It found respondents were confused about the advantages of FSAs, with a whopping 86% of respondents having at least one misconception about how the benefit works. Here are some other interesting results:
If you are new to FSAs, they are a wonderful way for hard-working Americans to pay for routine out-of-pocket qualified healthcare expenses - such as co-pays for doctor visits, prescription drugs, eye glasses, and braces - with pretax dollars. Basically, this allows you to pay for your health expenses with money set aside before Uncle Sam can tax it.� And, more importantly, it means that you are likely to save up to 40% on your reimbursable health care expenditures.
Here's the good news for those looking to sign up: open enrollment, the time of year when you select your suite of workplace benefits, should be here or right around the corner. And what you need to do during open enrollment period is decide how much of your paycheck you'd like to have deposited into an FSA account taken out over the course of a year so that you can take advantage of tax-free spending on over 100,000 eligible items.
Currently, 33 million Americans are using FSA accounts, and they are happy about that decision. Nearly 90% of survey respondents who are enrolled in an FSA plan to do so again next year. And while there is a requirement that you must use all the money in your FSA account by the end of the plan year or risk having it forfeited, 94 percent of survey participants felt their FSA contribution was "just right" or even "too low." A mere 6 percent thought they had set aside an amount that was "too high."
So this open enrollment season, be sure to check in with your HR or benefits department to see if your workplace offers an FSA (more than 80% of employers with 500 or more employees do) and decide how much you want to set aside.
We all have some out-of-pocket healthcare costs - so if you are unsure about what to set aside in an FSA, start small. Even contributing a few hundred dollars can save you cash that will come in handy for dinners out and special occasions throughout the year.
“My FSA is a life saver! Last year I was diagnosed with a malignant tumor and luckily I was able to have the necessary surgeries to remove it immediately since my FSA covered all of the out-of-pocket costs for my deductible and medicines.”
Annual Savings: $816