There are a lot of advantages to flexible spending accounts, but many employees still aren’t convinced FSAs are right for them. Here’s some need-to-know info to pass along to clear up the confusion:
Contribution rates
Many employees need help understanding the advantages of a “pretax benefit,” like an FSA.
Concrete example: Ask them to estimate how much they expect to pay in out-of-pocket medical expenses throughout the year. Then show how much more they would pay with tax. To put it in numbers, $300 placed in an FSA would be roughly equal to $384 worth of taxable income.
Note: Make sure employees are clear on the maximum dollar amount/maximum salary percentage that can be contributed to an FSA.
Eligible expenses
It’s important employees know what expenses their FSAs can be used to reimburse.
In many cases, workers know FSAs reimburse out-of-pocket costs that aren’t otherwise covered, such as copays, deductibles or services like vision and dental care.
But folks may not know certain over-the-counter meds are also eligible for reimbursement.
Combination of benefits
If your company offers additional pretax benefits — such as a 401(k) — encourage employees to contribute to the FSA as well, even if it’s a small contribution.
Reason: With money in multiple pretax accounts, employees reduce their taxable income.
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