How My Flexible Spending Account Works

Hello Money Savers,

I just found out how my Flexible Spending Account (FSA) actually works. Now I just got this account in September of 2008 and since hindsight (and my vision after I got LASIK) is 20/20 I wish I had gotten this earlier.

The FSA is a part of your insurance that allows you to save money for medical expenses. You decide how much money you put into the FSA and it is taken out of your paycheck every month, thereby reducing your income for that month. 

This money is deducted before taxes so you pay less taxes on the reduced amount. The money goes into your FSA account and is set for a certain period of time.

You have to use all the money in your account before the end of the year or you lose the money so be careful what you allocate as your spending amount.

My FSA runs from September to August of the following year, instead of following the calendar year. This means I can claim items that I got after December 31st and still get reimbursed for them.

I am going to increase my contributions  next year because I have to pay copays at the dentist, gynecologist and the optometrist and those three alone come up to the $60.00 that I am currently contributing. This money does not cover the cost of contacts and other things so I will definitely need to have more withheld.

Now FSAs allow you to access the money in one of two ways:

via debit card

via claim form

The easier way (in my mind) is to have the debit card. The  debit card is linked directly to the account that the company set up and you have access to your funds that way.

When you need to make a medical payment you just use the debit card and the money is debited from your account. When all the money is used up you can no longer use the card, just like a regular debit card.

My employer chose not to have the debit card option so we will get reimbursed via claim form. In this case I have to keep receipts of the things I buy using cash (I don’t use cash) or credit card (yaaaay rewards!). I then get to fill out a form requesting reimbursement and that money is taken out of my account and sent to me (magically I guess. Maybe I will get a paper check from the company).

I can fill out the form online and fax in copies of my receipts OR download and print out the form and mail or fax it in. I am going to use the online version and fax from work to save money (bah to all you naysayers about using company stuff for personal use. Bah I say!)

The funds in the FSA can only be used for certain approved medical expenses like


birth control




I am mad about the LASIK use because if I had known about this when I started working I could have put most of the LASIK money into it and then used it for my surgery.

Even if I had not been able to put in all the money for the LASIK I still would have at least been able to put in the amount of the copays. This time around I only put in $60.00 because I was not too sure how I would use the account. Now that I have found all the things that qualify for use under the FSA I know that I have more than enough to use up all the money.

Author: Lulu

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  1. Another good one here Lulu. Never really used FSA before but seems like something to try out. My research starts now. Thanks Monica.

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  2. I deducted money for a patient for service to be rendered. She now elects not to do the treatment. How do I credit back her acct? Do I give her a check?

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    • I am not sure what you mean L Jasso. I am not a financial advisor. I just wrote this post about how MY account works. I think you need to contact your FSA provider or insurance company to get an answer to that question.

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  3. I never seem to have enough money put into my flex account and I’m always coming out of pocket.This year I elected $2600 and It’s only July there are 4 more months ledft in the year there are unpaid doctors bills and there are copays for evey office visit.I’m glad my company has the Flex account beause I have been using it while my daughter was in school. I have been using the Flex account for about 5 yrs. now and it helps with taxes since I now have no dependents but I’m in over my head with prescripton prices,co-pays and doctors bills. I looking for extra dscounts!

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