You have no control over how much your raise will be in 2006. Federal employees often fuss and fume when they think about the possibility of not getting a 3.1% raise in 2006.
Here is another benefit you may not even know you have. Depending on your income and your situation, you can save more money with this benefit than you would with a 3.1% raise. Despite this, most federal employees do not take advantage of it. That may be because they don’t understand the program or they are not sure it is a worthwhile benefit.
It is worth your while to take the time to figure it out. It can save you money and how you use the program is within your control. Many federal employees can save hundreds of dollars each year with the program.
A Flexible Spending Account (FSA) is a tax-favored benefit that allows a federal employee to set aside pre-tax money from your paychecks to pay for some of your eligible expenses. By using an FSA, you can reduce your taxes while paying for services you would have to pay for anyway. The result can be that you get a discount of more than 40%.
The program is called FSAFEDS. During an open season (which starts November 14, 2005), you can enroll in the program. When you enroll, you elect how much of your paycheck will be deposited into your FSA account. You can later claim this money as you spend money for eligible expenses.
For some people, this is the biggest disadvantage to the program: They are not sure how much money to put into the program. It is an important decision. You will lose any money you have put into the program if you have not used it for eligible expenses and filed for reimbursement. In other words, you need to be conservative in deciding how much money to allocate for your FSA account.
There are two types of FSA’s that you can use as an active federal employee.
The first type is a Health Care Flexible Spending Account (HCFSA).
This health care account covers eligible health care expenses not reimbursed by your health benefits plan. It also covers any other medical, dental, or vision care plan you or your dependents may have.
The “eligible dependents” you can use as part of this benefit are not necessarily limited to you and your spouse. An “eligible dependent” can include anyone you claim on your Federal Income Tax return as a qualified dependent under the U.S. Internal Revenue Service (IRS) definition and/or with whom you jointly file your Federal Income Tax Return, even if you don’t have self and family health benefits coverage.
Beginning in 2006, the Office of Personnel Management (OPM) has increased the amount of money you can allot under this program. Currently, the maximum annual amount that can be allotted for the HCFSA is $4,000. For 2006, the maximum amount will be $5000.
And, if you are married, and you and your spouse are eligible for coverage under the Federal health benefits program, both of you may enroll for this plan up to the maximum of $5,000 each ($10,000 total).
The second type of flexible spending account is dependent care (DCFSA).
This program covers eligible dependent care expenses incurred so you, or your spouse can work, look for work, or attend school full-time.
In short, the Flexible Spending Account program is a benefit for many federal employees that can save you money by allowing you to pay for some of your expenses with pre-tax dollars. The program is available to you at no charge as Uncle Sam pays for the cost. The result is that you can increase your purchasing power without any increase in your salary.
You have to enroll each year and you can do this through the internet at the FSAFEDS site.