Flexible Spending Accounts (FSAs) are one of the more recent additions to federal benefits. Yes, they’ve been around a decade or so, but that is relatively “new” in the world of federal benefits. They allow us to set aside pre-tax money to pay unreimbursed health care and dependent care expenses.
There have been some changes in FSAs in the past (i.e., requiring a doctor’s prescription for over the counter drugs), and a major new change is coming in 2013. As part of the implementation of the Affordable Care Act (or ObamaCare), the amount that can be set aside in a health care FSA will be reduced to $2,500 and will be increased each subsequent year by inflation. There will be no change in the $5,000 that can be set aside in a dependent care FSA.
Another item regarding FSAs that bears mentioning is that any expenses incurred after an employee has left federal service (either by retiring or resigning) cannot be reimbursed, even if the employee had money in the account. Those planning on leaving federal service should pay extra attention to their FSA so that they do not leave money on the table in the year in which they leave.